Accumulate Ambuja Cements For A Target Price Of Rs 448: Hem Securities

Leading brokerage firm Hem Securities has given accumulate rating on Ambuja Cements for a target price of Rs 448 apiece. The stock gained 0.57% in trading today. It is a company with strong financials.

Ambuja Cements Stock Outlook

The current market price of the stock is Rs 418 apiece with a 52-week high of Rs 442 apiece and 52-week low of Rs 274 apiece. According to Hem Securities, investors can accumulate the stock for a target price of Rs 448 apiece with a gain of 8%.

Ambuja Cements Market Capitalization

The company has a market capitalization of Rs 82,999.97 crore.

Ambuja Cements Results Overview

The company improved its ROE from 13.21 in CY20 to 15.34 in FY21. ROCE of the company improved to 21.95% in CY21 from 17.55% in CY20. Revenue increased to Rs.8032.9 cr in Q2CY22 (+15.1% YoY) on improved realizations and strong growth in sales volume.

Ambuja Cements Management Focus

Company ongoing expansion projects include :1) grinding capacity of 1.5 mtpa in Ropar (Punjab), 2) 3.2 mtpa clinker expansion in Chhattisgarh, 3) 7 mtpa grinding capacity in East India (including a greenfield grinding unit in Bihar). The company is also setting up WHRS facility at multiple plants. Total WHRS capacity to reach 87 MW (post commissioning of all projects) from current capacity of 7.5 MW.

The management continues to focus on sustainable growth, with a higher share (89%) of blended cement and a thermal substitution rate of 6%. The company processed the higher ever waste 2QCY22. The timely completion of growth plans and cost-saving strategies by the new management will be the key triggers for the stock's performance.

Sharp Cost Increase Led To 38% YoY Decline In EBITDA

Company standalone revenue/EBITDA/adjusted PAT stood at Rs.40 billion/ Rs.6.8 billion/ Rs.8.5 billion (+18%/-29%/+18% YoY and -1%/ +13%/+13%) in 2QCY22. Sales volume rose 15% YoY to 7.39 mt (in line). Blended realization improved 3% each YoY and QoQ to Rs. 5,404/t (1% below our estimate). Premium cement contributed over 16% of total trade sales in 2QCY22.

Outlook

As a key player in the cement industry with 12% market share, company is poised to capitalize on emerging opportunities. Company delivered material turnaround in earnings over last couple of years. The major contributors to this turnaround were multifold increase in volumes under MSA, optimization of fixed costs and reduction in specific energy consumption. Company is well-placed to pursue growth opportunities with a net cash of Rs.43.4b in CY23E. Company will be commissioning 53MW WHRS across plants in Q3CY22, reducing its power costs.

Valuation

According to Hem Securities, "We have maintained Accumulate rating on stock and value the stock at 25.6x FY23 earnings to arrive at the target of R 448."

About Ambuja Cement

Ambuja Cement was founded in 1983 by Narotam Sekhsaria and Suresh Neotia. Ambuja Cements Ltd, a member of Holcim - global leader in innovative and sustainable building solutions, is among the leading cement companies in India and is known for its hassle-free, home-building solutions.

Disclaimers

The stock has been picked from the brokerage report of Hem Securities. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.