Buy Ambuja Cements; target of Rs 450: Motilal Oswal

Motilal Oswal's research report on Ambuja Cements

The key highlights of ACEM’s FY23 annual report: 1) announcing cement capacity expansion of 14mtpa through organic growth; the capacity is expected to be commissioned in the next 24-months; 2) implementing cost-reduction initiatives by increasing its green power share to ~43% by FY24; the objective is being realized through the installation of WHRS and solar power plants; and 3) has given advances of INR9.25b to a related party to secure the rights for raw material/fuel under a long-term supply arrangement for its upcoming cement manufacturing plant at Mundra, Gujarat (likely to commissioned by FY26E).

Outlook

ACEM trades at 17.3x/16x FY24E/FY25E EV/EBITDA. The stock has traded at an average EV/EBITDA of 12.5x over the last 5/10 years. We value it at 15x FY25E EV/EBITDA to arrive at our TP of INR450 and reiterate our Neutral rating on the stock.