Pick Of August 2023: This Adani Stock Is Hot, Seen To Rise Over 13% Ahead

Indian markets are set to conclude the July month's trading sessions on Monday. With August just around the corner, Religare Broking has already recommended the pick of the month. And this time it would be an Adani stock, more specifically in the cement sector. That being said, Religare selects Adani Group-backed Ambuja Cements shares as the top pick in August with double-digit percentage upside ahead. Ambuja Cements ended the trading week from July 24-28 on a bullish note.

On BSE, Ambuja Cements shares ended at Rs 454.65 apiece, up by 1.06% on Friday. But its weekly performance is robust with gains of at least 8.4% on BSE.

At the current market price, the stock's market value is at Rs 90,277.36 crore as of July 28, 2023.

It needs to be noted that Ambuja is also scheduled to announce its financial results for the quarter ending June 30, 2023, on August 2nd which will further make the stock in focus.

Ambuja stock is probably among the least impacted shares that are backed by Adani after the Hindenburg report in late January 2023. This cement stock's year-to-date performance is a drop of nearly 14% on BSE, however, the stock has improved significantly in the past six months with an upside of over 17%. In a year, Ambuja shares have gained by over 21% on the exchange.

Billionaire Gautam Adani-backed Group acquired Ambuja Cements in September last year from Swiss cement major Holcim. The port-to-energy empire currently holds 63% stake in Ambuja which in turn owns 50.05% in ACC Limited. Adani directly owns a 6.64% stake in ACC.

Here's why Religare recommends Ambuja as the pick of August 2023:

In its pick of August 2023 report, Religare Broking has picked leading cement stock Ambuja Cement which is also a part of Adani Group. The brokerage has set a target price of Rs 515 apiece on Ambuja, which is an upside of over 13.3% ahead from the current market price.

In its rationale, Religare said, "cement space has around 4% OI value to entire market wide & AMBUJACEM has a weightage of around 32% in Cement sector as Open Interest value." It highlighted the following factors in Ambuja Cements stock:

- 97% of Open Positions rolled to the next series (~96% on the last expiry)

- OI of 36k contracts as against 31k previously with decent delivery in cash.

- With Long addition & Carry forward of these bets; Stock may move higher.

In its technical review, Religare's note said, "Ambuja Cement has been gradually inching higher after a sharp selloff from the life highs." The stock also registered a breakout from the base while holding above the support zone of the moving average band.

Hence, the recent price action combined with an uptick in volumes indicates up move to continue, the brokerage added.

Religare has recommended to 'Buy' Ambuja Cements stock with an initiation range of Rs 445 to Rs 450 and stop loss of Rs 412. The risk-reward ratio is 1:2.

In the June 2023 quarter, Kotak Institutional Equities expect Ambuja Cements' volume at 8.5 million tons (+15% yoy, +4.9% QoQ), factoring in strong growth in April-May 2023 and seasonal tailwinds. We estimate blended realizations to increase by 0.8% QoQ (-2% yoy) on account of favourable geo-mix versus peers.

Further, Kotal expects Ambuja's costs/ton to decline sequentially (-6.7% yoy, -2.4% QoQ), largely led by power-fuel costs. Also, it estimates cement EBITDA/ton to increase to Rs1,121/ton (+21% yoy, +15% QoQ), led by lower costs and better realizations.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.