Prabhudas Lilladher's research report on Ambuja CementsAmbuja Cement (ACEM) reported Q4CY15 earnings below our expectation due to higher than expectation costs, negating the benefit of better realisations. Current valuations with an EV/EBITDA of 11x and EV/T of US$130 CY17E provide an attractive long term play on efficient operations and strong balance‐sheet. We maintain our Accumulate rating with TP of Rs230, EV/EBITDA of 14x CY17E. Admittedly, demand growth in CY15 has been disappointing at 3‐4% YoY against our expectation of 5‐6%. However, we believe that demand would revive with growth in the range of 7‐8% in CY16 on the back of govt’s strong focus on infrastructure spending (manifested by robust ordering activity) and low cost housing. Demand improved strongly in North and Eastern markets (constituting ~75% of its total markets) in past couple of months. However, prices fell sharply in these markets due to addition of new capacities. We believe that pressure on pricing would recede with the settling of new capacities and continued strength in demand. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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