The document provides a discounted cash flow (DCF) valuation for ACC Limited, an Indian cement company. It includes projections for revenue, expenses, profits, capital expenditures, working capital, and free cash flows through 2026. It then calculates the weighted average cost of capital (WACC) of 10.71% and uses a 4% terminal growth rate to determine an intrinsic value per share of INR 2,409.47, higher than the current market price. Sensitivity analysis shows the valuation is robust to changes in the WACC and long-term growth rate.

1. DCF Valuation

2. Contents
P&L Assumptions
About the Company
FCFF
Balance Sheet Assumption
WACC
01
04
02
05
03
DCF Valuation
06

3. About the
Company
ACC Limited (Formerly The Associated
Cement Companies Limited) is one of
the largest producers of cement in India.
It is a subsidiary of the Holcim Group.On
1 September 2006, the name of The
Associated Cement Companies Limited
was changed to ACC Limited. The
company had been established in
Mumbai, Maharashtra on 1 August
1936.

4. P&L Assumptions
Particulars
FY16
Actual
FY17
Actual
FY18
Actual
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Forecast
FY23
Forecast
FY24
Forecast
FY25
Forecast
FY26
Forecast
Revenue 12,877 12,475 13,847 14,477 15,343 13,487 14,620 15,935 17,529 19,457 21,403
Revenue Growth -3.1% 11.0% 4.6% 6.0% -12.1% 8% 9% 10% 11% 10%
Cost of material consumed (4,136) (3,747) (4,697) (5,369) (5,390) (4,248) (9,971) (10,836) (11,920) (13,231) (14,554)
% of Revenue 32% 30% 34% 37% 35% 31% 68% 68% 68% 68% 68%
Employee Benefit Expense (772) (790) (821) (884) (866) (841) (877) (956) (1,052) (1,167) (1,284)
% of Revenue 6.0% 6.3% 5.9% 6.1% 5.6% 6.2% 6% 6% 6% 6% 6%
Other expenses (5,252) (5,109) (2,441) (2,547) (2,496) (2,087) (1,608) (1,673) (1,841) (2,043) (2,247)
% of Revenue 40.8% 41.0% 17.6% 17.6% 16.3% 15.5% 11% 11% 11% 11% 11%
Depreciation And amortisation expenses (663) (615) (644) (603) (606) (639) (307) (335) (368) (409) (428)
% of Revenue 5.1% 4.9% 4.6% 4.2% 4.0% 4.7% 2% 2% 2% 2% 2%
Other incomes 413 107 129 143 318 217 232 248 266 284 304
YOY -74% 20% 11% 123% -32% 7.0% 7.0% 7.0% 7.0% 7.0%
Long Term Debt 0 0 0 0 0 84 84 84 84 84 84
Short Term Debt 0 0 0 0 0 0 0 0 0 0 0
Total Debt 0 0 0 0 0 84 84 84 84 84 84
Finance Cost 64.64 68.91 98.53 87.77 86.27 57.08 46 46 46 46 46
%age of Debt 0% 0% 0% 0% 0% 68% 55% 55% 55% 55% 55%

5. Balance Sheet Assumptions
Particulars
FY16
Actual
FY17
Actual
FY18
Actual
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Forecast
FY23
Forecast
FY24
Forecast
FY25
Forecast
FY26
Forecast
Working Capital
Trade Receivables 484.43 466.35 666.0 867.37 626.65 451.41 1001.4 1047.8 1104.6 1172.8 1231.4
%age of Revenues 3.8% 3.7% 4.8% 6.0% 4.1% 3.3% 6.8% 6.6% 6.3% 6.0% 5.8%
DSO 13.7 13.6 17.6 21.9 14.9 12.2 25.0 24.0 23.0 22.0 21.0
Trade Payables 877.5 1260.2 1813.74 1926.26 1474.98 1422.23 2076.1 2196.9 2351.3 2537.4 2711.4
%age Of COGS 21% 34% 39% 36% 27% 33% 21% 20% 20% 19% 19%
DPO 77.4 122.8 140.9 131.0 99.9 122.2 76.0 74.0 72.0 70.0 68.0
Inventory 1189.43 1224.63 1404.78 1679.39 1141.93 901.27 669.3 712.5 751.1 797.5 877.2
%age of COGS 28.8% 32.7% 29.9% 31.3% 21.2% 21.2% 6.7% 6.6% 6.3% 6.0% 6.0%
DIO 105.0 119.3 109.2 114.2 77.3 77.4 24.5 24.0 23.0 22.0 22.0
Cash Conversion Cycle 41.3 10.2 (14.2) 5.1 (7.6) (32.5) (26.5) (26.0) (26.0) (26.0) (25.0)
Other Current Assets 55.1 61.0 814.2 963.4 1,089.2 1,031.3 687 862 1,092 1,224 1,333
% of sales 0% 0% 6% 7% 7% 8% 5% 5% 6% 6% 6%
Other Current Liabilities 2,269.1 2,183.9 2,927.7 2,752.6 3,199.9 3,366.2 2,950.7 3,284.3 3,703.4 4,110.3 4,596.6
% of sales 18% 18% 21% 19% 21% 25% 20% 21% 21% 21% 21%
Other Equity
Opening Balance 17,580 16,812 18,460 20,371 22,569
Add Profit After tax 1,551 1,772 1,944 2,152 2,378
Less Dividend 1,917 1,917 1,917 1,917 1,917
Closing Balance 8,233 8,454 9,168 10,344 11,356 12,511 17,214 16,667 18,487 20,606 23,029
Profit After Tax 780 522 3,984 5,151 6,232 5,561 1,551 1,772 1,944 2,152 2,378
Dividend Payout Ratio 76.9% 114.9% 15.1% 10.3% 7.9% 8.9% 22% 20% 15% 11% 7%
Dividend 600 600 600 529 492 492 335 351 296 232 159
Dividend Per Share 32 32 32 28 26 26 18 19 16 12 8
No. of outstanding shares 19 19 19 19 19 19 19 19 19 19 19

6. WACC Calculations
Current Market Price(Rs) 2,298.75
Shares Outstanding (in cr) 18.778
43165.9
Debt
Short term debt (in cr) 83.98
Long Term Debt (in cr) 0
330
43495.9
MARKET CAP.
TOTAL DEBT
TOTAL CAPITAL
Total Equity to Capital 99.24%
Net Debt To Capital 0.76%
Risk Free Rate 5%
Equity Beta 0.89
Market risk Premium 6.85%
Cost of Equity 10.75%
Pre-Tax cost of debt 7.5%
Tax Rate 22.00%
Cost of Debt 5.85%
Weighted average cost of equity 10.67%
Weighted average cost of debt 0.04%
Weighted Average Cost of Capital 10.71%
Calculations:
COST OF CAPITAL

7. FCFF
Particulars
FY16
Actual
FY17
Actual
FY18
Actual
FY19
Actual
FY20
Actual
FY21
Provisional
FY22
Forecast
FY23
Forecast
FY24
Forecast
FY25
Forecast
FY26
Forecast
Net Operating Profit After Tax 643 553 4064 5228 5620 5599 1563 1784 1956 2164 2390
Add: D&A 663 615 644 603 606 639 307 335 368 409 428
Gross Cash Flow 1306 1168 4707 5832 6226 6237 1870 2118 2324 2572 2818
Less: CAPEX 450 2783 408 411 545 312 7901 -308 -410 -533 -24
Less: Changes in Working Capital - (275) (164) 688 (648) (587) (265) (189) (248) (347) (413)
FREE CASH FLOW 856 -1,341 4,463 4,733 6,330 6,513 -5,766 2,615 2,982 3,452 3,254

8. DCF
WACC 10.71%
Terminal Growth 4%
Particulars
FY16
Actual
FY17
Actual
FY18
Actual
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Forecas
FY23
Forecas
FY24
Forecas
FY25
Forecas
FY26
Forecas
Net Cash Flows 856 (1,341) 4,463 4,733 6,330 6,513 (5,766) 2,615 2,982 3,452 3,254
Discount Factor 0.90 0.8 0.7 0.7 0.6
Present value (5,208) 2,134 2,198 2,297 1,957
DCF value 3,377
Continuing value 50,429
Present Value of continuing value 30,319
Enterprise Value 33,696
less
Debt 330
ADD
Equity accounted investments in associates
#####
Investments 1949
Loan to employees 53
Security Deposits -
Deferred Tax Assets(net) -
Income tax assets (net) 378
Other non-current assets 63
Investments 6,225
Cash and cash equivalents 275
Bank balances 122
Loans 40
Other Financial Assets 366
Equity Value 45,245
No. of outstanding shares 18.778
INTRINSIC VALUE 2,409.47
Current Market Price 2,298.75
(INR in crs)
33,696 2% 3% 4% 5% 6%
10.0% 29302.3 34693.4 38564.0 45973.3 57087.3
11.0% 25201.7 29223.2 32007.3 37111.5 44257.4
12.0% 21791.9 24844.7 26897.0 30535.9 35377.9
13.0% 19274.2 21706.1 23306.5 26078.7 29643.0
14.0% 17067.9 19018.8 20279.4 22420.3 25096.5
SENSTIVITY ANALSIS
GROWTH
WACC
Undervalued