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ACC Q1 earnings: Net profit rises to Rs 375 crore, stock slips - BusinessToday

ACC Q1 Earnings: Net Profit Surges to Rs 375 Crore Amidst Operational Challenges; Stock Dips Despite Positive Results

New Delhi, July 24, 2025 – In a mixed bag of financial performance, ACC Limited, one of India's leading cement manufacturers and a subsidiary of the Adani Group, reported a notable increase in its net profit for the first quarter of the fiscal year 2025-26. The company announced a consolidated net profit of Rs 375 crore, marking a significant rise from the Rs 300 crore recorded in the corresponding quarter of the previous year. This uptick represents a growth of approximately 25%, driven by improved operational efficiencies and strategic cost management initiatives. However, despite these positive figures, ACC's stock experienced a decline on the trading floor, slipping by around 2.5% in intraday trading, closing at Rs 2,450 per share on the Bombay Stock Exchange (BSE). This paradoxical market reaction has left investors and analysts pondering the underlying factors influencing investor sentiment.

The earnings report, released after market hours on Wednesday, provides a detailed insight into ACC's performance during the April-June quarter. Revenue from operations stood at Rs 4,800 crore, reflecting a modest year-on-year growth of 8% from Rs 4,444 crore in Q1 FY25. This increase can be attributed to higher sales volumes and a slight uptick in cement prices across key markets. ACC managed to sell 9.5 million tonnes of cement and clinker during the quarter, up from 8.8 million tonnes in the same period last year, showcasing the company's ability to capture a larger market share amid intensifying competition in the Indian cement sector.

A key highlight of the report is the improvement in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which climbed to Rs 750 crore from Rs 600 crore a year ago, translating to a 25% growth. The EBITDA margin also expanded to 15.6% from 13.5%, indicating better profitability per unit of revenue. Company executives attributed this margin expansion to several factors, including optimized fuel costs, enhanced logistics efficiency, and the benefits of recent capacity expansions. ACC has been aggressively investing in modernizing its plants and adopting sustainable practices, such as increasing the use of alternative fuels and raw materials, which have helped in reducing production costs.

Delving deeper into the financials, the company's total expenses for the quarter were Rs 4,200 crore, a slight increase from Rs 4,000 crore in the previous year, primarily due to higher raw material costs and employee benefits. Raw material expenses rose by 10% to Rs 1,200 crore, influenced by fluctuations in global commodity prices, particularly for coal and petcoke, which are critical inputs for cement production. On the positive side, finance costs decreased marginally to Rs 50 crore from Rs 55 crore, reflecting prudent debt management and lower interest rates in the broader economy.

Despite the profit growth, the stock's decline has been a point of intrigue. Market observers suggest that the dip could be linked to broader sectoral concerns rather than company-specific issues. The Indian cement industry is grappling with overcapacity, intense competition from players like UltraTech Cement, Ambuja Cements, and Shree Cement, and regulatory pressures related to environmental compliance. Additionally, monsoon-related disruptions in construction activities during Q1 might have tempered investor expectations for even stronger volume growth. Analysts point out that while ACC's profit beat some estimates, the revenue growth fell short of the anticipated 10-12% mark, leading to profit-taking by short-term traders.

In a statement accompanying the earnings release, ACC's Managing Director and CEO, Ajay Kapur, expressed optimism about the company's trajectory. "We are pleased with the robust performance in Q1, which underscores our commitment to operational excellence and sustainable growth. Our focus on cost optimization and capacity utilization has yielded positive results, and we remain confident in navigating the challenges ahead," Kapur said. He highlighted the company's ongoing expansion plans, including the addition of 5 million tonnes per annum capacity by the end of FY26, which is expected to bolster ACC's position in high-growth regions like Eastern and Southern India.

From an analyst perspective, the results have elicited mixed reactions. brokerage firm Motilal Oswal Financial Services maintained a 'Buy' rating on ACC stock, citing the company's strong balance sheet and potential for margin improvement in the coming quarters. In their post-earnings note, they projected a target price of Rs 2,800, implying a 14% upside from current levels. "ACC's ability to grow volumes faster than the industry average is commendable, and with infrastructure spending expected to pick up post-monsoon, we see upside potential," the note stated. Conversely, some analysts from ICICI Securities expressed caution, downgrading the stock to 'Hold' due to valuation concerns. They argued that at a price-to-earnings multiple of 25x forward earnings, the stock appears fully valued, especially in light of potential headwinds from rising energy costs and competitive pricing pressures.

The broader market context also plays a role in understanding ACC's performance. The Indian economy is witnessing a resurgence in infrastructure development, fueled by government initiatives like the Pradhan Mantri Gati Shakti scheme and increased budgetary allocations for roads, railways, and urban housing. Cement demand is projected to grow at 7-8% annually over the next few years, driven by these factors. However, challenges such as volatile input costs, supply chain disruptions, and the push towards net-zero emissions are compelling companies like ACC to innovate. ACC has been at the forefront of sustainability efforts, aiming to reduce its carbon footprint by 20% by 2030 through investments in green energy and waste heat recovery systems.

Looking ahead, ACC's management outlined several strategic priorities for the remainder of the fiscal year. These include enhancing digital capabilities for better supply chain management, expanding the ready-mix concrete (RMC) business, and exploring mergers and acquisitions to consolidate market presence. The company also plans to leverage synergies with its parent, Adani Group, particularly in areas like logistics and renewable energy sourcing, which could provide a competitive edge.

Investor sentiment towards ACC remains cautiously optimistic. The stock has gained about 15% year-to-date, outperforming the benchmark Nifty 50 index, which has risen by 10%. However, the recent slip post-earnings underscores the market's sensitivity to short-term fluctuations. As one fund manager put it, "While the numbers are solid, the market is pricing in perfection, and any miss on expectations can lead to corrections."

In comparison to peers, ACC's performance stacks up reasonably well. UltraTech Cement, the industry leader, reported a 20% profit growth in its Q1, but on a much larger base, while Ambuja Cements saw a 15% rise. ACC's volume growth of 8% aligns with the industry average, but its margin improvement stands out, suggesting effective cost controls.

The earnings also shed light on ACC's segmental performance. The cement division, which accounts for over 90% of revenue, drove the growth, while the RMC segment contributed Rs 300 crore, up 12% year-on-year. Geographically, the company saw strong demand in the North and East regions, offsetting slower growth in the South due to seasonal factors.

On the corporate governance front, ACC continues to emphasize transparency and stakeholder value. The board approved an interim dividend of Rs 7.50 per share, signaling confidence in cash flows. This payout ratio of around 30% is in line with industry norms and should appeal to dividend-focused investors.

As the fiscal year progresses, all eyes will be on how ACC navigates the post-monsoon demand surge and manages cost pressures. With the government's infrastructure push showing no signs of slowing, the cement sector is poised for growth, but execution will be key. For ACC, the Q1 results provide a solid foundation, even if the stock market's immediate reaction suggests otherwise.

In summary, ACC's Q1 earnings paint a picture of resilience and strategic progress amid a challenging environment. The net profit rise to Rs 375 crore is a testament to the company's operational strengths, but the stock slip highlights the volatile nature of market perceptions. Investors would do well to monitor upcoming quarters for sustained momentum.

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[ https://www.businesstoday.in/markets/stocks/story/acc-q1-earnings-net-profit-rises-to-rs-375-crore-stock-slips-486129-2025-07-24 ]