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On Thursday, Nomura/Instinet adjusted its outlook on ACC Ltd. (ACC:IN) shares, increasing the price target to INR2,450.00, up from the previous INR2,200.00, while continuing to recommend a Reduce rating on the stock. The firm cited higher volume growth as the primary reason for the adjustment.
The analyst from Nomura/Instinet expects ACC Ltd. to see increased utilization, leading to higher volume growth. As a result, the firm has raised its FY25F/26F volume estimates by 3% to 38.6 and 40.6 million tonnes (MT), respectively. This anticipated volume increase has prompted a 4% rise in the FY26F EBITDA estimate to INR41 billion, up from the previous estimate of INR39 billion.
Despite the positive adjustment in volume and EBITDA for FY26F, the analyst has reduced the FY25F EBITDA estimate by 8% to INR34 billion from INR37 billion. This revision is due to anticipated weaker cement realization in FY25F, which is expected to outweigh the benefits of higher fixed cost absorption.
Furthermore, the net cash estimate for FY26F has been revised upward to INR53 billion, a significant increase from the prior estimate of INR36 billion. The new price target of INR2,450 is based on a valuation multiple of 10.0 times the one-year forward enterprise value to EBITDA (EV/EBITDA), which remains unchanged from previous assessments. According to the analyst's note, ACC Ltd.'s stock is currently trading at a multiple of 12.5 times.
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