This Adani Group stock gets ’Buy’ tag from brokerages post in-line Q3 results

Cement maker ACC Ltd's Q3 FY23 EBITDA declined 32% from the year ago quarter, with blended EBITDA/ton also declining similarly, both being broadly in line with analysts estimates. The company reported a net profit of ₹113 crore during the December 2022 quarter, down 60% year-on-year (YoY), on higher costs, flat cement prices and stagnant volume growth, whereas its revenue was up 7% from the same quarter previous year at ₹4,537 crore.

“Factoring-in the slow pace of price hike, higher cost/ton and delay in project commissioning, we reduce our FY24E25E EBITDA by 11-12%.. Given the strong balance sheet, likely FCF generation of > ₹20 bn p.a. over the next couple of years and favorable valuation at CMP, we maintain BUY from a medium-term perspective with a target price of ₹2,300,” said brokerage Emkay in a note.

Diversifying its business, Adani Group last year bought cement firms ACC and Ambuja Cements after announcing acquisition of Holcim's stake in Ambuja (63.19%) and stake in ACC (4.48%; Ambuja directly owns around 50% stake in ACC). ACC stock down over 19% in a year's period.

"We maintain BUY on ACC shares, with a target price of ₹2,630/share, owing to its attractive valuation. ACC margin recovered due to realisation recovery and opex cool-off. The integrated plant at Ametha in MP is delayed by a year to Q2FY24. The upcoming expansion in the central market will boost its volume growth visibility from H2FY24 onwards. ACC is also increasing its green power/fuel mix to mitigate the impact of rising fuel costs," said brokerage HDFC Securities.

Another brokerage ICICI Securities has upgraded the cement stock's rating to BUY (from Add) with a target price of ₹2,460 per share. Key risks, as per the brokerage, could be lower demand/prices and continued cost escalation. “Cement and clinker volumes were flat YoY (up 12% QoQ) at 7.7mnte. Factoring-in slow transmission of price hikes in the industry and sticky input costs, we cut our CY23E-CY24E EBITDA by 4%-5%,” the note stated.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.