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Choice Institutional Equities has sharply lowered its price target for ACC Limited to INR 1,810 from INR 2,200. This adjustment reflects analysts repricing near-term risks. The firm cited earnings estimates cut by up to 7.2% for FY27 and 5.6% for FY28, driven mainly by rising input costs. Demand growth is now projected to slow to around 5% for FY27. The broker also reduced its EBITDA per tonne assumption for FY26 by INR 100 and lowered the valuation multiple (EV/CE) to 1.6x from 1.9x, showing increased caution about profit margins.
Analyst Slashes Valuation
The cut in ACC's target price to INR 1,810, an 18% decrease from its previous INR 2,200 target, shows a significant re-evaluation of the company's short-term outlook. The lower valuation multiple signals that investors are less willing to pay as much for the company's capital. This new target is below the general analyst consensus, which is typically between INR 1,865 and INR 1,950. For instance, Jefferies maintains a higher target of INR 2,465. Choice Institutional Equities' revised target sits at the lower end of analyst forecasts, suggesting a more conservative view.
Profit Pressure and Slower Demand
The main reason for the downgrade is ACC's falling profits amid softening demand. The expected earnings drop is directly due to higher input costs, a major issue for the Indian cement sector. With demand growth for FY27 now expected to slow to about 5% from previous forecasts, ACC faces rising expenses and slower sales volume. The INR 100 per tonne reduction in the FY26 EBITDA assumption means lower profit for each tonne of cement sold.
Company's Long-Term Plans
Despite current pressures, Choice Institutional Equities remains positive on ACC's long-term prospects due to its strategic plans. Strengthening its market presence in South India is a key initiative to capture regional growth. The company also aims to reduce costs by INR 250 per tonne by FY27, a plan expected to add value and help counter rising costs. The brokerage forecasts ACC's EBITDA could grow at a compound annual rate of about 15.8% between FY26 and FY29, supported by annual volume growth of 6.0% to 8.0% and moderate price increases.
Industry Challenges and ACC's Place
The Indian cement industry faces a mixed environment. Government spending on infrastructure, which increased by 26% year-on-year to nearly Rs 2.3 trillion by February 2026, is boosting demand. However, a slowdown in housing starts, with volumes down 28% in January-February 2026, is creating a counter-trend. Rising costs for fuel and packaging continue to squeeze profit margins, even with price increases. ACC's price-to-earnings (P/E) ratio of 10-12x is notably lower than peers like Shree Cement (72.4x as of April 2026) and UltraTech Cement (56.1x in March 2025). This valuation discount might reflect market concerns about ACC's execution or competitive position.
Key Risks and Investor Concerns
ACC's operating profit margin has fallen sharply, dropping to 8.77% in Q4 FY26 from 13.58% a year ago, signaling significant margin compression. This resulted in a 68.28% year-on-year decrease in net profit, despite record quarterly revenue. Mutual fund holdings in ACC have also reduced substantially, from 15.21% to 7.84% between December 2024 and December 2025, indicating a loss of confidence from domestic institutional investors. Key risks include potential challenges in achieving ambitious cost-reduction targets. Ongoing input cost inflation could also outpace the industry's ability to raise prices, further damaging profitability. The stock has been trending downwards, losing about 21% since December 2025.
Outlook and Analyst Consensus
Choice Institutional Equities forecasts ACC's EBITDA to grow by a compound annual rate of 15.8% from FY26 to FY29. This forecast is based on volume growth of 6.0% to 8.0% annually from FY27 to FY29. This optimistic outlook contrasts with current valuation concerns. Although the brokerage maintains a 'BUY' rating, the sharp target price reduction suggests caution is warranted in achieving this future growth. The broader analyst consensus remains mostly 'Buy' or 'Moderate Buy', with average 12-month price targets typically higher than the current revised target. This shows a difference between immediate challenges and longer-term expectations for the cement company.