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Target: ₹2,625
CMP: ₹2,219.7
ACC Ltd’s Q3-CY22 EBITDA sharply declined year-on-year and quarter-on-quarter to ₹16.4 crore vs our estimate of ₹300 crore (consensus: ₹280 crore), owing to significantly higher-than-expected increase in cost/tonne. Accordingly, blended EBITDA/tonne declined to a multi-year low of only ₹24 (our estimate: ₹425).
The Ametha integrated project (2.7 mt clinker and 1 mt cement grinding) is delayed by a quarter and is expected to be commissioned by March 2023. The ongoing expansion project (including a 2.2-mt grinding unit at Salai Banwa) will increase ACC's grinding capacity to 39 mt (from 36 mt currently) by mid-CY23.
Factoring in the Q3-CY22 miss, the delay in Ametha project commissioning, and a more gradual realisation of group synergy benefits (₹100/tonne over three years), we cut our EBITDA estimates for CY22 by 30 per cent and for CY23-24 by 12-15 per cent.
The stock provides favourable risk-reward, with peaking of cost, discontinuation of royalty payments to Holcim, likely cost synergies with the promoter group and nearly 15 per cent correction in the last one month (vs broader indices largely flat). Accordingly, we upgrade the stock to Buy (earlier Hold) and revise our September23 TP to ₹2,625 (earlier ₹2,970).
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