Neutral Ambuja Cements; target of Rs 207: Motilal Oswal

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Motilal Oswal 's research report on Ambuja Cements

Ambuja Cements’ (ACEM) 2QCY20 results were a surprise, led by sharp cost reduction owing to significant curtailment in discretionary costs. Volumes declined 29% QoQ due to the COVID-19 led lockdown but EBITDA declined just 1% QoQ. We have raised our CY20 EBITDA/PAT estimates by 17%/20%, after factoring in lower costs for the year. We expect EBITDA to turn positive from the current quarter. However, our CY21 estimates remain largely unchanged as discretionary costs should normalize next year. Maintain Neutral.

Outlook

We value ACEM at 9x CY21E EV/EBITDA and value its stake in ACC at a 10% discount to the target price. We maintain our Neutral rating, with a target price of INR207.

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