ICICI Securities
ACC (Buy)
CMP: ₹1,478.6
Target: ₹1,8,43
ACC Limited is engaged in manufacturing of cement and ready mixed concrete. The company’s segments include cement and ready mix concrete. The company manufactures cement, which includes Ordinary Portland cement (OPC), Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC) and Ready Mixed Concrete (RMX). The company’s products include portland cement and premium cements, bulk cement.
ACC’s recent tie-up with third-party in high growth markets of Central and East regions would limit market share loss and seed the market for the announced expansion program, in our view. Higher growth of premium products as well as RMC, improved cost efficiencies, increasing MSA synergies with ACEM coupled with lower costs and better realisation with pan-India presence would drive at least industry-average EBITDA CAGR. ACC has net cash of ₹3,100 crore (11 per cent of mid-cap) and continues to enjoy better than peers’ return ratios. Key investor concern of lower volume growth seems adequately priced-in with valuation at 8x CY21E EV/E or EV/te of US$87/te, in our view. We maintain our CY19-CY21E estimates with an unchanged target price of ₹1,843/share based on 11x March 21E EV/E