Prabhudas Lilladher has reiterated its bullish stance on ACC, recommending a ‘BUY’ with a revised target price of Rs 2,543. Despite robust volume growth and sequential improvement in net sales realization (NSR), ACC’s latest quarterly result reflects margin compression due to surging raw material costs. However, improving operational efficiencies, a strategic move towards green energy, and a focus on premium product mixes suggest a positive medium-term outlook. Management’s execution of efficiency projects and integration under Adani Cement Enterprises will be pivotal for margin recovery. The stock currently presents value, trading at an attractive EV/EBITDA multiple.

Brokerage House Endorses ‘BUY’ on ACC

Prabhudas Lilladher (PL), a leading equity research house, maintains its ‘BUY’ recommendation on ACC, listing a new 12-month target price of Rs2,543 from the current market price of Rs1,890. This revision comes after a meticulous analysis of Q1FY26 earnings and operational developments. The research underscores the strategic tailwinds and efficiency roadmaps the company is pursuing, despite interim margin headwinds.

Strong Volume Momentum Anchors Revenue Growth

ACC delivered a significant 13% year-on-year volume surge in Q1FY26, driven largely by the Master Supply Agreement (MSA) and increased demand for premium products. Total cement volumes clocked 11.5 million tonnes, fostering a parallel 17% YoY bump in top-line revenues to Rs60.87 billion for the quarter. The sequential improvement in NSR (up 4% to Rs4,970 per tonne) evidences effective price recovery in key southern and eastern markets.

Margin Erosion Stems from Cost Pressures

While headline sales paint an optimistic picture, ACC’s profitability struggled under the weight of inflated input costs. Raw material (RM) costs spiked 25% YoY to Rs2,140 per tonne, partly offsetting benefits from improved realizations and higher volumes. The company’s EBITDA per tonne nudged up modestly by 2% YoY to Rs677, but trailed estimates due to escalated expenses driven by higher traded volumes.

Cost Rationalization and Green Energy Initiatives

ACC’s cost containment drive delivered meaningful wins, especially in power and logistics. The company slashed power and fuel expenses by 24% YoY, thanks to an optimized fuel basket, reduced energy prices, and a greater tilt toward green energy — renewable sources now account for 26% of the total power mix, up nearly 12pp YoY. Efficient freight operations, notably a 2pp YoY jump in road dispatches to 69%, yielded a 6.5% drop in per-tonne freight charges.

Capital Expenditure and Network Expansion

The Sindri brownfield grinding unit, with a capacity of 1.5mtpa, was successfully commissioned, reflecting ACC’s unwavering commitment to increase operational scale and market presence. The company also expanded its ready-mix concrete (RMX) footprint by adding 12 new plants, bringing the total network to 114 units — a testament to ongoing investments in growth infrastructure.

Premiumization and Product Mix Strategy

Share of premium products in trade sales soared by 7 percentage points YoY to 41%. Such a shift sharpens margins in the long run and aligns with ACC’s strategy to strengthen its brand equity and cater to value-conscious customers.

Operational and Legal Updates

ACC is currently contesting major regulatory litigations, including a disputed royalty charge with Karnataka’s DMG for the Wadi mines (Rs1.25 billion provisionally deposited, with no charge in current results), and two legacy penalties from the Competition Commission of India totaling Rs11.8 billion, both under appeal. Management remains confident of a favorable outcome, based on legal counsel, and has refrained from provisioning for these disputes.

Financial Projections and Valuation

ACC’s medium-term financial trajectory remains compelling:

Valuation Levels and Investment Thesis

The stock trades at 9.6x FY26E and 8.2x FY27E EV/EBITDA, positioning it favorably within the large-cap cement space, especially when juxtaposed against its projected three-year CAGR for revenue, EBITDA, and PAT of 10%, 24%, and 12%, respectively. The revised target price of Rs2,543 offers an upside of about 35% from current market levels. Dividend yield remains modest at 0.4–0.5%.

Risks and Sensitivities

Potential downside risks include prolonged cost inflation, delay in realizing management’s efficiency initiatives, or adverse resolutions in ongoing litigations. Conversely, sharper-than-expected recovery in cement prices or further gains in energy efficiency could accelerate margin improvement.

What Investors Need to Watch

Execution timelines for ongoing cost efficiency projects and green energy adoption.

Progress and clarity on legal disputes and potential liabilities.

Further integration with parent entity Adani Cement Enterprises, which could unlock synergy-driven gains.

Evolving trends in domestic cement demand, especially from infrastructure and housing.

In sum, Prabhudas Lilladher’s bullish view is underpinned by ACC’s robust growth runway, shored up by operational reforms and a focus on premium segments. The stock remains a compelling story for investors seeking value in India’s cement sector, with identifiable triggers for rerating in the next 12–18 months.