Buy ACC; target of Rs 1445: Choice Institutional Equities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Merger-led synergies: The proposed amalgamation with ACEM is expected to simplify the corporate structure, improve manufacturing and logistics coordination, and unlock operating synergies, supporting long-term growth.
  • Capacity expansion: The commissioning of 3.4 MTPA of additional cement capacity in Q2FY27 is expected to strengthen ACC's presence in key markets and support volume growth.
  • Improving pricing prospects: A price hike of INR 15–20/bag has already been implemented, and further hikes are expected, which could aid cost pass-through and support margin recovery.
  • Cost-reduction initiatives: Management expects cost-reduction initiatives to lead to EBITDA/t increase, driving profitability.

Thesis Validation Checklist

  • Volume growth: Watch for sales volume to reach 49.7 Mnt by FY28E, indicating demand recovery.
  • Realisation per ton: Monitor realisation per ton to remain healthy, supporting revenue growth.
  • EBITDA margin expansion: Track EBITDA margin to expand at a CAGR of 7.3% over FY26–29E, driven by cost-reduction initiatives and improving operating leverage.
  • Merger completion: Await the completion of the ACC-Ambuja amalgamation, expected in FY27, subject to regulatory approvals.