Accumulate Ambuja Cement; target of Rs 697: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Ambuja Cement with a target price of Rs 697 in its research report dated June 19, 2024.

Broker Research

June 19, 2024 / 14:43 IST

Accumulate

Prabhudas Lilladher's research report on Ambuja Cement

Ambuja Cement (ACEM) is set to acquire 100% shares of South based unlisted Penna Cement Industries Ltd (PCIL) at an EV of Rs104.2bn. Incorporated in 1991, PCIL has 10mtpa operational cement capacity in Andhra Pradesh (5.8mtpa IU), Telangana (3.2mtpa IU) and Maharashtra (1mtpa GU) along with 7.3mtpa clinker capacity. It also has 2mtpa under construction capacities at AP and Jodhpur each along with 3mtpa clinker capacity which can be commissioned over next 6-12 months. As this EV includes cost of completion of under construction projects, considering unspent capex of ~Rs16bn, EV/t works out at ~USD76/t. The deal will give ACEM an entry into new Southern markets - mainly AP and Telangana where ACEM has no material presence and both states are expected to benefit from recent regime change. It also complements ACEM’s portfolio with five port based bulk terminals in South & East India which would aid ACEM to supply undersupplied markets immediately.

Outlook

We have not yet incorporated PCIL into ACEM estimates however with Proforma P&L, ACEM FY26E EBITDA gets upgraded by 11% with ~6mt volumes and TP can see additional ~Rs40 hike. We have tweaked our estimates post incorporating FY24 annual report and maintain Accumulate with revised TP of Rs 697 (Rs683 earlier) on the stock. Stock trades at EV of 17.2x and 13.6x FY25E/26E EBITDA.

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