ICICI Securities has maintained the 'buy' rating on Ambuja Cement and raised its target price to Rs 831 a share, up 35 percent from current market price.
Brokerage ICICI Securities said in its latest report that April 2024 was eventful for Ambuja Cement. First, its owners infused Rs 8,340 crore, completing the pledged Rs20,000 crore. Second, Ambuja's reserves surpassed Rs 23,000 crore, potentially accelerating its production target of 140 million tonnes per year.
Lastly, Ambuja acquired a 1.5 million tonnes per annum (MTPA) grinding unit in Tuticorin, Tamil Nadu, aiming to boost its subsidiary Sanghi Industries (SIL) cement transportation through sea and expand in South India. SIL contemplates raising funds on April 22, which could signal positive growth intentions. Ambuja appears poised to kickstart its ambitious expansion plan, it added.
"Ambuja has every recipe to deliver sector outperformance, given that (a) the company is walking-the-talk towards capacity creation, (b) its cushion of rising cost-efficiency (which may give a leg up vs peers), and (c) its core RoE (excluding cash) is seen sustaining at 11-14 percent," ICICI Securities said.
The Adani Group completed its commitment by infusing the final tranche of Rs 8,340 crore towards warrant conversion, totaling Rs20,000 crore. This raised the promoter stake in Ambuja from 63.2 percent to 70.3 percent, signalling strong commitment to the cement enterprise. The increased funds likely bolster Ambuja's cash reserves to over Rs 23,000 crore, providing ample resources to achieve its annual production target of 140 million tonnes ahead of schedule, analysts said.
Ambuja's recent acquisition of a 1.5 MTPA grinding unit near Tuticorin port in Tamil Nadu aims to facilitate coastal movement of clinker from SIL plant in Gujarat. Additionally, SIL's consideration of a fund raise plan, particularly for growth capital expenditure, could be viewed positively for Ambuja's expansion strategy, analysts added.
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