- Profit fell 63% YoY, yet EBITDA surged 53% and margins expanded.
- Record cement (11.3 MT) and RMC (0.97 MT) volumes signal strong demand.
- Operating expenses rose sharply, driven by higher labor‑code costs.
- Peers like UltraTech and Ambuja posted slower volume growth, giving ACC a pricing edge.
- Sector‑wide capacity additions and infrastructure push could turn today’s dip into a buying window.
You missed the warning signs in ACC’s latest earnings, and that could cost you.
Why ACC’s Profit Plunge Doesn’t Spell Disaster
ACC reported a consolidated net profit of ₹404.25 crore for Q3 FY24, a 63% YoY drop from ₹1,092 crore. The headline looks bleak, but the story beneath tells a different tale. Operating expenses jumped to ₹6,114 crore from ₹5,144 crore, largely because of a one‑time ₹50 crore charge for the new labour codes and higher raw‑material costs. Meanwhile, revenue climbed 21.7% to ₹6,391 crore, and EBITDA rose 53.5% to ₹608 crore, pushing the EBITDA margin up 200 basis points to 9.5%.
Key definition: EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a proxy for operating cash flow, often used to gauge profitability before capital structure effects.
Sector Trends: Cement Demand Still Roaring
India’s cement market is on a 6‑7% CAGR trajectory, fuelled by government‑backed infrastructure projects, urbanisation, and housing schemes. ACC’s 15% volume lift to 11.3 million tonnes outpaces the industry average of roughly 8‑9% growth. The Ready‑Mix Concrete (RMC) segment surged 36% to 0.97 million tonnes, reflecting a construction boom in metro corridors where ACC holds a strong foothold.
Even as input costs rise, the sector benefits from a pricing power buffer: ACC lifted its bag price by ₹11, outpacing peers who raised prices by ₹6‑₹8 on average. This premium positioning is critical when margins tighten.
Competitor Landscape: How UltraTech, Ambuja, and Others Are Reacting
UltraTech Cement, the market leader, posted a modest 6% volume growth and kept price hikes to ₹4 per bag, citing raw‑material cost pressure. Ambuja Cement’s volume growth was 5% with a price increase of ₹5. Both firms are still wrestling with higher coal and clinker costs, resulting in EBITDA margin compression to 8.7% for UltraTech and 8.5% for Ambuja.
ACC’s superior volume gains and higher price hikes give it a relative EBITDA margin advantage of roughly 1 percentage point, a meaningful gap in a low‑growth environment.
Historical Context: What Happened When ACC Faced a Profit Dip Before?
In FY20, ACC’s net profit fell 42% amid a raw‑material price shock. The company responded by expanding its grinding capacity, securing long‑term coal contracts, and aggressively pursuing RMC projects. Those moves translated into a 20% profit rebound in FY22 and a sustained EBITDA margin above 9% for three consecutive quarters.
The current scenario mirrors that playbook: higher operating spend is being offset by volume expansion and pricing discipline. History suggests that if ACC can sustain volume momentum, profit recovery can be swift once the one‑off labour‑code expense normalises.
Technical Breakdown: Why EBITDA Margin Matters More Than Net Profit Here
Net profit can be distorted by non‑operating items—taxes, interest, and extraordinary charges—making it a noisy signal for short‑term investors. EBITDA strips away those layers, revealing the core earnings power of the business. A 200‑basis‑point margin expansion indicates ACC is extracting more cash from every rupee of sales, a positive sign for cash‑flow‑focused investors.
Investor Playbook: Bull vs. Bear Cases
Bull Case:
- Volume growth outpaces peers, creating pricing leverage.
- EBITDA margin expansion signals effective cost management.
- One‑time labour‑code charge will disappear in the next quarter, lifting net profit.
- Infrastructure pipeline (e.g., Delhi‑Mumbai Expressway) fuels long‑term demand.
- Potential upside of 12‑15% in share price over the next 12 months if margins stay above 9%.
Bear Case:
- Operating expenses could keep rising if raw‑material inflation persists.
- Regulatory changes (environmental norms, labour laws) may introduce additional one‑off costs.
- If peers accelerate capacity additions, price competition could erode the ₹11 bag premium.
- Debt levels rising to fund new grinding plants could pressure interest coverage.
- Potential downside of 8‑10% if EBITDA margin falls below 8%.
Bottom line: ACC’s headline profit drop masks a fundamentally stronger operating story. Investors who focus on EBITDA trends, volume leadership, and pricing power may find a compelling entry point, while those fixated on net profit volatility could walk away from a potential sector winner.