Better pricing, with expanded capacity. With increased demand, moderation in commodity prices and better synergies with other Adani group companies, brokerage and research firm Axis Securities expect ACC to report revenue/EBITDA/APAT CAGR of 10%/50%/40% respectively over CY22-CY24E Will report.
“The stock is currently trading at 14x and 11x CY23E/CY24E EV/EBITDA. We recommend to buy the stock for a target price of 2,760 per share,” the note said while sharing it as top pick for the week. ACC Limited – a part of Adani Cement is one of India’s leading producers of cement and ready-mix concrete.
The company is expanding its cement grinding capacity from the current 36.1 MTPA to 39.2 MTPA to cater to the high growth market of Central India. These capacities are expected to be commissioned in phases of CY22-CY23.
“The central region is showing promising growth potential by boosting housing and infra activities, as the per capita cement consumption of the region is among the lowest in India. We expect the company to deliver volume growth of 7% CAGR over CY22-CY24E and clock revenue CAGR of 10% over the same period,” the brokerage house said.
According to Axis Securities, the company exhibits a strong financial position with debt free balance sheet, high interest coverage ratio and healthy cash flows. While the company may finance its ongoing capacity expansion through internal resources, it will continue to have sufficient liquidity to meet any capex requirements going forward. It expects the capital structure of the company to remain healthy in the medium to long term perspective.
“Over the years, the company lost its market share to other large players in the industry due to delay in capacity expansion, resulting in underperformance of the stock. However, this is expected to go ahead as the new management is known for its aggressive approach. In addition, several levers of growth with cost savings ( 250-300/t) are expected to emerge in terms of raw material sourcing, network optimization, renewable energy sourcing and WHRS capacity expansion,” the brokerage said.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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