Buy this stock for a 25% return, boosting its green power mix: HDFC Securities

Target price

The current market price (CMP) of ACC cement is Rs. 2057. HDFC Securities has estimated a target price for the stock at Rs. 2,570. The stock is expected to offer a 25.93% upside in 1 year.

Stock market outlook
Current market price (CMP) 2057
Target price Rs. 2,570
1 year back 25.93%
Business performance

Business performance

Upcoming expansions in the central market will enhance the visibility of its volume growth from CY23 onwards. ACC is also increasing its green energy mix and use of alternative fuels to mitigate the impact of rising fuel costs. In Q1CY22, consolidated volume, EBITDA and APAT fell 3%, 26% and 29% YoY. ACC ordered 1.6 million MT SGUs in UP in mid-Feb-22. It plans to commission 2.7/1mnMT of IU clinker/cement in Ametha, MP at T4CY22. In H1CY23, it will commission an additional 2.2 million MT SGU in UP, increasing its cement capacity to 39 million MT in CY23.

HDFC Securities Commentary

HDFC Securities Commentary

According to HDFC Securities, “Usage remained elevated year-on-year at ~90% (vs. 93% year-on-year). On a high basis, volume was down 3% year-on-year. NSR only increased by around 1% qoq, driven by the recovery in prices, mainly in and limited the yoy gain to 6%.Operating expenses fell 1% qoq thanks to the control of fixed costs. Higher fuel inventories (end-December), higher AFR share and mix factor also support lower costs QoQ As such, Unit EBITDA recovered 9% QoQ in Rs 779/MT (however, it was down 25% YoY due to high energy costs) While RMC revenue was up 10% YoY, EBITDA was only up 2% due to rising cement prices.

About the company

About the company

ACC Limited (ACC) is a leading construction materials player in India with a pan-India operational and marketing presence. ACC will spend ~Rs. 18 billion Capex on these in CY22 and CY23. In CY22, it will commission 39 MW WHRS at its Jamul, Kymore and Ametha plants. Subsequently, it will add an additional 29 MW to its Chanda and Wadi power stations. By CY25, it plans to increase its WHRS capacity to 90 MW, thus increasing its margin. In the first quarter, ACC reduced its specific CO2 emissions by around 4% (vs CY21) to 468 kg/MT.

Warning

Warning

The above stock was selected from HDFC Securities’ brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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