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Analyst Corner: Maintain buy on ACC with target price of Rs 2,105

Accordingly, ACC (much like guardian Ambuja Cement) will proceed to pay TKH payment @ 1% of internet gross sales annually for the following two years.

By Edelweiss Securities

ACC’s Board of administrators has permitted renewal of the Technical and Know-How (TKH) settlement with guardian Holcim Technology (HTL) on identical phrases as the present settlement. Accordingly, ACC (much like guardian Ambuja Cement) will proceed to pay TKH payment @ 1% of internet gross sales annually for the following two years.

The growth clears clouds over the TKH difficulty, which had weighed on ACC’s stock price for the reason that previous few weeks. Roll over of the payment on present phrases will delight buyers given Street’s concern of a possible improve in the identical. The growth is in line with our expectation. Maintain ‘buy’ with TP of Rs 2,105.

Much to the delight of buyers, ACC’s Board has renewed the TKH settlement with HTL for the following two years (2021 and 2022) on the identical phrases as within the present settlement. Accordingly, ACC will proceed paying a TKH payment @ 1% of internet gross sales i.e. almost Rs 1.4bn every, over the following two years. TKH was first launched in 2013 and initially permitted for 5 years (2013–17). Thereafter, it was renewed in 2018, with no improve in payment, for 3 years (2018– 20). The renewal for 2021-22 is a straightforward roll over of the identical settlement and is in line with our expectation.

We proceed to love pan-India participant ACC given it will likely be beneficiary of anticipated demand recovery in CY21. ACC’s efforts to: a) enhance vitality effectivity by putting in 25MW Waste Heat Recovery-based energy crops (in section I; b) possibilities of pursuing such initiatives in future as nicely; c) rationalise fastened price; and d) generate tangible logistical synergies with subsidiary ACC by way of a grasp provide settlement (MSA), will enhance investor confidence within the stock.
Given these a number of positives, we proceed to worth ACC at 12x CY21E EV/Ebitda. We keep ‘Buy/SN’ with TP of Rs 2,105/share.

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