Buy Ambuja Cements; target of Rs 283: Motilal Oswal

Motilal Oswal's research report on Ambuja Cements

1QCY17 revenue of INR 25.33b (+5% YoY) came in below estimate of INR 25.6b, led by higher-than-expected decline in realizations and in-line volumes. Realizations of INR 4,208 (+4.4% YoY, -2.5% QoQ) missed estimate of INR 4,266 due to weak prices in the western market. Volumes declined 1% YoY, but grew 18% QoQ (in-line) to 6.02mt due to normalization of volumes in the month of March 2017.

Outlook

While ACEM’s growth potential remains muted due to its limited expansion, we believe better utilization headroom in the faster growing regions (north and east) should offer some resilience. ACEM’s core strengths are intact, and its presence in north and west could lead to meaningful realization improvement. Stock trades at 17x CY18E EV/EBITDA and USD151/ton. Maintain Buy with a TP of INR 283/share (15% upside).