BofAML said ACC traded at 9.4x CY20 expected EBITDA, which is 11 percent below historical average and Ambuja Cements traded at 9.9x CY20 estimated EBITDA which is in-line with historical average.
The global brokerage house upgraded ACC to neutral from underperform rating and raised price target to Rs 1,695 from Rs 1,586, implying 9 percent potential upside from current levels.
It also upgraded Ambuja Cements to buy from neutral and raised price target to Rs 261 from Rs 238, which implies 23 percent potential upside from current levels.
BofAML said ACC traded at 9.4x CY20 expected EBITDA, which is 11 percent below the historical average and Ambuja Cements traded at 9.9x CY20 estimated EBITDA which is in-line with the historical average.
The brokerage feels recent price hikes should lead to higher unitary profit growth for ACC and Ambuja Cements, and capacity additions in CY20/21 will ease capacity constraints.
"We expect continued roll-back of price hikes in the second quarter. Cement demand is expected to moderate to 5.6 percent CAGR over FY19-22," said BofAML which expects subdued 4 percent cement volume growth in FY20.
The brokerage said a 5-6 percent QoQ increase in realisation in Q1 should drive (8-60 percent) EBITDA growth, while volumes were flat to down 3 percent for the quarter YoY largely due to muted construction activity.
ACC was up 1.22 percent at Rs 1,569.80 and Ambuja Cements up 1.04 percent at Rs 213.75 on the BSE at 1100 hours IST.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.