Buy This Stock For 25% Return, Increasing Its Green Power Mix: HDFC Securities

Brokerage firm HDFC Securities suggested investors buying the stock of ACC Cement for a 25.93% return in 1 year.

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 Outlook
Current Market Price (CMP)	Rs. 2057
Target Price	Rs. 2,570
1 year return	25.93%

Company performance

The upcoming expansions in the central market will boost its volume growth visibility from CY23 onwards. ACC is also increasing its green power mix and alternative fuel usage to mitigate the impact of rising fuel costs. In Q1CY22, consolidated volume, EBITDA, and APAT fell 3%, 26%, and 29% YoY. ACC commissioned 1.6mn MT SGU in UP in mid-Feb-22. It expects to commission 2.7/1mnMT clinker/cement IU in Ametha, MP, in Q4CY22. In H1CY23, it will commission another 2.2mn MT SGU in UP, thus increasing its cement capacity to 39mn MT in CY23.

Comments by HDFC Securities

According to HDFC Securities, "Utilisation remained high YoY at ~90% (vs 93% YoY). On a high base, volume declined 3% YoY. NSR rose only ~1% QoQ, led by price recovery, mainly in the east, and restricted YoY gain to 6%. Opex fell 1% QoQ on fixed cost controls. Higher fuel inventory (in Dec end), rising AFR share, and blending factor also support lower costs QoQ. Thus, unitary EBITDA recovered 9% QoQ to Rs. 779/MT (however, it was down 25% YoY on high energy costs). While RMC revenue rose 10% YoY, EBITDA rose only 2% on account of higher cement prices."

About the company

ACC Limited (ACC) is a leading player in the Indian building materials space, with a pan-India operational and marketing presence. ACC will be spending ~Rs. 18bn Capex on these in CY22 and CY23. In CY22, it will commission 39MW WHRS at its Jamul, Kymore, and Ametha plants. Thereafter, it will add another 29MW at its Chanda and Wadi plants. By CY25, it expects to increase its WHRS capacity to 90MW, thus boosting its margin. In Q1, ACC reduced its specific CO2 emission by ~4% (vs CY21) to 468kg/MT.

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.