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Axis Securities Bets On This Stock With Consistent Dividend Track Record Of 5 Years
Leading brokerage firm Axis Securities has given a buy call to the stock of Ambuja Cements for a potential gain of 11% with a target price of Rs 405.
Leading brokerage firm Axis Securities has given a buy call to the stock of Ambuja Cements for a potential gain of 11% with a target price of Rs 405. Recently, the company has unveiled capacity expansion plans comprising a brownfield expansion of 1.5 mtpa at Ropar (Punjab) by 2023. It intends to undertake further expansions in Eastern and Western India by setting up the plant to reach a capacity of 50 mtpa in the next few years.
It continues to strengthen its market reach along with improving its sale of premium products. The company continues to enhance its share of green power through significant investments in WHRS (Waste Heat Recovery System) and Solar power plants. It has undertaken ESG (Environmental, social, and governance) initiatives to reduce carbon emissions with a focus on sustainable production.
1. Stock Outlook
The current market price of Ambuja Cements is Rs 365.30 apiece. It has touched 52-week high of Rs 442 apiece and 52-week low of Rs 274 apiece, respectively. The broker has recommended investors to buy the stock for a target price of 405 with an upside of 11%.
| Current Market Price | Target Price | Potential Gain |
|---|---|---|
| 365 | 405 | 11% |
2. Company's performance
Company's performance: The Net sales grew by 23% on a YoY basis to Rs 13,794 Cr. The growth can be attributed to robust market demand, improvement in realisations, and a favourable product mix. With an installed capacity of 31.5 mtpa of cement, Ambuja Cements continues to be a leading cement player in India with the retail segment contributing approximately 80% of the sales.
Share of premium products in revenue, too, increased healthy by 170bps during the year. The company incurred a Capex of Rs 580 Cr to expand capacity and strengthen its market position in core markets through low-cost brownfield and greenfield expansions.
3. Key Strengths
Key strengths: It includes a) Pan-India presence (except South); b) Sustainable business model; c) Robust Financial strength; d) Experienced management bandwidth, and e) Higher proportion of trade and blended cement sales.
4. Growth drivers
It includes a) Flagship affordable housing scheme (Pradhan Mantri Awas Yojana); b) Increased urbanization creating more demand for new homes; c) The government's push to the Infrastructure sector; d) Increasing rural income levels, and e) Increasing demand driven by improving standards of living. Its key focus areas moving forward.
It includes accelerating growth and strengthening market position through capacity expansion in the core markets; b) Focus on sustainability c) Focus on improving the contribution of premium products along with undertaking cost efficiency projects; d) Expanding solution and products business, and e) Digitalization of system and processes.
5. Company Outlook
According to Axis Securities, "With its recent acquisition by Adani Group, we foresee the release of significant synergies in terms of logistics, renewable power, and raw materials, among others, post full integration with other Adani group companies moving forward. The company is well-positioned to grow owing to favourable attributes such as its focus on selling premium products along with sharp cost optimization, new capacity expansion, higher sales of blended cement, and its existing synergies with ACC under MSA. We expect the expansion program to support further growth under the new regime.
6. About Ambuja Cements
Ambuja Cements is one of the leading and responsible cement manufacturers with a presence across Northern, Eastern, Central, and Western parts of India. The company's present cement manufacturing capacity stands at 31.45 mntpa with 6 integrated and 8 grinding units, 5 bulk cement terminals, and captive power plant capacity (MW) spread across its operating regions.
The company has a 7-8% market share in the Indian Cement Industry. The market cap is Rs 72793 crore.
Disclaimers
The above stock was picked from the brokerage report of Axis Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. 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.
