Accumulate Ambuja Cement; target of Rs 701: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Ambuja Cement with a target price of Rs 701 in its research report dated August 01, 2024.

Broker Research

August 02, 2024 / 12:34 IST

Accumulate

Prabhudas Lilladher's research report on Ambuja Cement

Ambuja Cements’ (ACEM) 1QFY25 cons. EBITDA was affected by soft cement pricing and weak volume growth. Cons. volume grew 2.6% YoY, while average NSR declined 2% QoQ on muted cement prices across regions. Mgmt. reiterated its target of cost savings of ~Rs500/t by FY28E driven by improving green power mix (incl. WHRS), captive coal mines, long-term procurement of critical RMs, and logistical synergies aided by addition of railway wagons and improving plant network across India. Although significant volume growth would start from incremental 4mtpa clinker capacity being built at Bhatapara and 6.4mtpa GU by 4QFY25, in the near term mgmt. is ramping up recently bought facilities. Penna acquisition is on track and mgmt. expects volumes to flow from 3QFY25 post deal consummation (to increase our TP by ~Rs40). The 1.5mtpa GU at Tuticorin has started receiving clinker supplies from Sanghipuram, while Sanghi facility is undergoing refurbishment, which would drive volume from 3QFY25.

Outlook

We continue to maintain our positive stance on the company for its swift execution and strategic initiatives undertaken to improve volume growth despite the ongoing weakness in cement pricing. We expect ACEM revenue/ EBITDA/ PAT to deliver CAGR of 15%/37%/28% over FY24-26E. The stock is trading at EV of 17.3x/13.6x FY25E/FY26E EBITDA. Maintain ‘Accumulate’ with TP of Rs701 valuing at 17x EV of Mar’26E EBITDA.

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