ACC share price declines after Q3 earnings. Should you buy, sell or hold?

Stock market today: Shares of ACC, the cement and building materials company of the diversified Adani Portfolio, extended their decline for the second consecutive trading session on Tuesday, January 28, falling by another 1.3% to ₹1,968 apiece. From today's high of ₹2,028, the stock has fallen by 3%.

During market hours on Monday, the company released its financial performance for the third quarter, which showed healthy growth. This growth was driven by one-time items, including a refund of ₹640 crore related to excise duty expenses from May 2005 to February 2013, which was included in other operating income, and a reversal of ₹530 crore in interest provisions, which was included in other income.

Following the company's Q3 numbers, global brokerage firm CLSA has retained its 'Outperform' rating on the stock with a target price of ₹2,580 apiece, while the Japanese firm Nomura has retained its 'Reduce' rating on the stock with a target price of ₹1,920 apiece.

Investec has continued with its 'Hold' rating and a target price of ₹2,845, and Morgan Stanley has retained its 'Equal Weight' rating with a target price of ₹2,510 apiece.

"ACC Ltd. reported strong financial growth during the quarter, with a 103% increase in PAT compared to the previous year's quarter. The company's business metrics improved due to higher volumes, cost optimization through the use of low-cost imported petcoke, reduced logistics costs, and better operational efficiencies. Additionally, its solar power project at Khavda is expected to reduce power costs in the coming quarters. Strong demand for its premium cement products, strategic partnerships, and the implementation of ACC Certified Technology at customer sites position ACC to maintain its competitive edge and enhance profitability. Going ahead, the company’s performance is expected to improve further, driven by the acceleration of construction activities in the infrastructure and housing segments," said Palak Devadiga, Research Analyst, StoxBox. 

ACC Q3 results 2025 review

The company reported a 103.06% year-on-year (YoY) surge in its consolidated net profit for Q3FY25, amounting to ₹1,091 crore. The company had reported a profit of ₹537.63 crore in the year-ago period. Sequentially, the consolidated net profit was up by 446.8%.

Its consolidated revenue from operations stood at ₹5,207 crore in Q3, compared to ₹4,855 crore in Q3FY24, a YoY rise of 7.25%. This was the highest-ever revenue for the company in the Q3 series over the last five years, driven by higher trade sales volume (up by 11%) and premium product sales as a percentage of trade sales at 32%.

The company said that higher volume, along with improved operational parameters, resulted in growth in all business parameters. On the operating front, the EBITDA came in at ₹1,116 crore, compared to ₹905 crore in Q3FY24, while the EBITDA margin stood at 18.8%, up from 18.4% in Q3FY24.

After adjusting for these one-offs, EBITDA declined by 48% YoY to ₹470 crore and EBITDA per ton declined by 57% YoY to ₹435 Adjusted PAT (profit after tax) declined by 57% YoY to ₹230 crore. 

The company said it optimised its fuel basket with the use of low-cost imported petcoke, improved linkage, and captive coal consumption. Synergies with group companies have resulted in a 10% reduction in kiln fuel cost, from ₹1.86 to ₹1.68 per ’000 Kcal.

The thermal value reduced from 739 kCal to 732 kCal, and company expects further improvements in the coming quarters. Logistics costs were reduced by 9%, to ₹939 per ton, driven by efficiency improvements (secondary lead reduced by 3 km, direct dispatch up by 7 pp at 51%), as per the company's earnings filing.

The cement sector experienced modest growth of 1.5-2% during H1 FY’25. Looking ahead, the company expects cement demand to rebound in Q4 FY’25 as construction activity accelerates in the infrastructure and housing segments.

The pro-infrastructure and housing provisions in the Budget 2025, along with increased government spending on infrastructure and construction activities, are expected to further support this growth. As per the company’s estimates, cement demand is projected to grow in the range of 4-5% for FY25.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.