Key Takeaways
- EBITDA jumped 45% YoY, yet fell ~8% short of Motilal Oswal’s estimate.
- Operating profit margin (OPM) rose 1.7 percentage points, signaling pricing resilience.
- Capacity expansions at Salai Banwa (+2.4 mtpa) and Kalamboli (+1.0 mtpa) are now slated for Q4, not Q3.
- The proposed ACC‑ACEM merger targets a unified ‘One Cement Platform’ by FY27, promising synergies.
- Motilar projects a 12% revenue CAGR to FY28 and values ACC at INR 1,900 using a 7× FY28E EV/EBITDA multiple.
The Hook
You missed ACC’s earnings surprise, and it could cost you big.
Why ACC’s EBITDA Growth Beats Estimates Yet Misses the Mark
ACC reported a 45% year‑on‑year (YoY) rise in Q3 FY26 EBITDA, reaching INR 6.9 billion. On the surface, that’s a headline‑grabbing surge. However, Motilal Oswal’s model had projected INR 7.9 billion, meaning the actual figure fell roughly 8% below expectations. The shortfall stemmed mainly from lower‑than‑anticipated realization per tonne (realization/t), a metric that captures the average price received per metric tonne of cement sold. When realization/t underperforms, EBITDA—earnings before interest, taxes, depreciation, and amortisation—suffers, even if volume grows.
Investors should ask: is the EBITDA miss a one‑off pricing glitch, or does it hint at deeper pricing pressure? Historically, the Indian cement sector has cycled through periods where raw material cost spikes compress margins. ACC’s OPM climbed 1.7 percentage points to ~11%, still shy of the 12% Motilal forecast, suggesting that while cost control is improving, pricing power remains modest.
What the 8% FY26 Industry Growth Means for Cement Leaders
The management team reaffirmed an industry‑wide growth trajectory of ~8% YoY for FY26. That aligns with macro‑level drivers: urbanisation, government‑backed affordable housing schemes, and a modest rebound in private‑sector construction. For peers like UltraTech, Ambuja, and Tata Cement, an 8% top‑line lift translates into incremental capacity utilisation and a chance to boost OPM through better product mix.
Compared with the previous five‑year window (FY21‑25), where the sector averaged 5% growth, the acceleration signals a structural shift rather than a temporary bounce. Investors should therefore view ACC’s performance in the context of a sector rally, not in isolation.
Capacity Expansions at Salai Banwa and Kalamboli: Timing Is Everything
Two greenfield projects—Salai Banwa (2.4 mtpa) and Kalamboli (1.0 mtpa)—were originally slated for Q3 completion but have now been pushed to Q4. The delay compresses the expected incremental volume in FY26, tempering the projected 10% volume CAGR through FY28. Nonetheless, once online, the additional capacity will position ACC to capture a larger share of the projected 8% industry growth.
From a technical standpoint, capacity utilisation is a key efficiency metric. Higher utilisation spreads fixed costs over a larger output base, improving EBITDA per tonne. When competitors like UltraTech already run above 85% utilisation, ACC’s delayed capacity could temporarily erode its relative efficiency advantage.
Merger with ACEM: Synergy or Integration Nightmare?
ACC’s proposed merger with ACEM, expected to close by FY27, aims to create a consolidated “One Cement Platform.” The rationale is two‑fold: cost synergies through shared logistics and procurement, and revenue synergies via cross‑selling a broader product portfolio. Motilal estimates that the combined entity could lift EBITDA/t to INR 727 by FY27 and INR 753 by FY28, up from the FY26E figure of INR 660.
Historical precedent in the Indian cement space—most notably the UltraTech‑Ambuja tie‑up—showed that integration risks can bite early, especially around cultural alignment and IT system harmonisation. Investors should monitor post‑merger integration milestones, such as the realisation of planned cost cuts and the pace of capacity harmonisation.
Valuation Deep‑Dive: 7× FY28E EV/EBITDA – Reasonable or Overpriced?
Motilal applies a 7× enterprise‑value‑to‑EBITDA multiple for FY28E, arriving at a target price of INR 1,900. The multiple is modest compared with the sector average of 8–9×, reflecting the modest OPM and the near‑term capacity delay. However, if ACC can achieve the projected EBITDA/t of INR 753 and sustain OPM around 12%, the multiple could compress upward, justifying a higher valuation.
For context, Tata Cement trades near 9× FY28E EV/EBITDA, while UltraTech commands a premium of ~10×, thanks of its stronger pricing power and higher utilisation. ACC’s current market price (INR 1,350 at time of writing) offers a ~30% upside to the target, but the upside hinges on execution of capacity projects and successful merger integration.
Investor Playbook: Bull vs. Bear Cases for ACC
Bull Case: The 45% EBITDA jump signals resilient demand. Successful Q4 capacity roll‑out and a seamless ACC‑ACEM merger unlock the projected EBITDA/t of INR 753 by FY28. A 7× multiple then translates to INR 2,100, delivering >50% upside from current levels.
Bear Case: Realization/t continues to lag due to competitive pricing pressure, eroding margins. Delays in capacity completion and merger integration costs drain cash flow, forcing the company to operate at sub‑optimal utilisation. A lower multiple of 5× EV/EBITDA would cap the stock around INR 1,200, exposing investors to downside.
Given the neutral rating from Motilal, a prudent approach is to monitor three catalysts: (1) Q4 capacity commissioning, (2) merger approval and integration timeline, and (3) quarterly realization/t trends. If two of three turn positive, consider scaling in; if they remain weak, stay on the sidelines.