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Hold Ambuja Cements; target of Rs 221: Arihant Capital

Arihant Capital recommended hold rating on Ambuja Cements with a target price of Rs 221 in its research report dated July 27, 2020.

July 30, 2020 / 05:50 PM IST
 
 
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Arihant Capital 's research report on Ambuja Cements


Ambuja Cement reported a rather better than expected set of numbers in Q2CY20 despite a more than month long lockdown across the country. The standalone revenue stood at Rs 2,177 Cr, down by 27.0% YoY/23.0% QoQ, EBITDA fell by 14.8% YoY/1.3% QoQ to Rs 595 Cr and Net Profits stood at Rs 453 Cr, declining by 10.0% YoY/13.6% QoQ. EBITDA margins improved to 27.3% during the quarter from 21.3% in Q1CY20 and 23.4% in Q2CY19. Sales volume during the quarter de-grew by 29% YoY to 4.19 MT (million tonnes) while realization per tonne increased by 2% YoY. Total operating cost of the company fell sharply by 30.0% YoY/ 26.2% QoQ. Both Power & Fuel and Freight expenses per tonne fell by 5% YoY while raw material and other expenses per tonne fell by 16% YoY leading to the sharp uptick in EBITDA margins. EBITDA per tonne improved by 19% YoY to Rs 1,422 per tonne.



Outlook


We believe the domestic cement industry will revive by the last quarter of CY20 and hence maintain our positive expectations considering the experienced management & low debt levels. Our SOTP valuation yields a fair value of Rs 221 for the stock. We continue to maintain our ‘Hold’ rating on the stock.





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first published: Jul 30, 2020 05:50 pm

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