ACC hits 5-month high; rallies 14% in 6 days on robust Q1 results

Shares of ACC hit five month high of Rs 2,021.85, up 4 per cent on the BSE in Monday's intra-day trade, extending its previous week's gain amid a robust set of earnings for the quarter ended June 2023 (Q1FY24). The stock of Adani Group was trading higher for a sixth straight day, surging 14 per cent during the period. It was trading at its highest level since February 2023. In comparison, the S&P BSE Sensex was up 0.23 per cent at 66,313 at 11:16 AM.

In Q1FY24, ACC's consolidated profit after tax nearly doubled to Rs 466 crore,  as against Rs 236 crore in the year-ago quarter. Net revenue grew 16.4 per cent year-on-year (YoY) to Rs 5,201 crore. Earnings before interest, taxes, depreciation, and amortization (Ebitda) surged by 77 per cent YoY to Rs 848 core, and Ebitda margin expanded by 5.6 percentage points from 10.7 per cent to 16.3 per cent.

Management expects Ebitda growth to sustain with further improvement expected due to various efficiency and operational initiatives. The volume during the quarter under review increased by 23.2 per cent YoY at 9.4 MioT supported by increase in blended cement and improvement in efficiency parameters. The company said it maintained market leadership across key markets.

ACC has delivered robust quarter, and a big beat on profitability (almost by ~30 per cent) against our and consensus estimates, mainly on account of strong volume, cost savings and operational synergies (after seen four repeated weak quarters in its history), brokerage firm InCred Equities said.

ACC has corrected more than 20 per cent over the past six months due to concerns over the high leverage position of the Adani group vs. 20 per cent positive reaction witnessed in Indian cement stocks and 12 per cent in the Nifty. "We feel the current fears and a sharp drop in the share price is unwarranted. Unlike a few other Adani group companies, ACC has strong cash flow generating assets and a net cash balance sheet," the brokerage firm added.

In the medium-term, analysts at the brokerage expect margin to improve on easing input costs, group level synergies, and strong demand scenario (barring seasonality). "We expect that the Adani factor as well as the aggressive expansion strategy through organic/inorganic route could pave the way for growth as well as margin expansion led by cost synergies and operating leverage opportunities," they said.

Meanwhile, the addition of a new greenfield integrated unit in Ametha (MP) in a demand accretive central region by Q2FY24E, higher cement demand backed by increased spending on infrastructure development, particularly roads, railways, affordable housing and other schemes, and better synergies with other group companies will drive the company’s growth moving forward. Against this backdrop, analysts at Axis Securities remain constructive on the company from a medium to long-term perspective.