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What should investors do with Ambuja Cements post Q4 earnings: buy, sell or hold?

The company reported a 34.06 percent jump in consolidated net profit at Rs 968.24 crore for the December quarter. ICICI Direct has maintained a 'hold' rating with a revised target of Rs 305.

February 22, 2021 / 09:37 AM IST
 
 
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Ambuja Cements share price fell marginally in the early trade on February 22. The company announced its December quarter numbers on February 17 with a 34.06 percent jump in its consolidated net profit at Rs 968.24 crore for the December quarter.

In October-December 2019 period the company had reported a net profit of Rs 722.26 crore.

The company's revenue from operations was up 4.58 percent to Rs 7,452.87 crore during the quarter as compared to Rs 7,126.44 crore in the year-ago period. Total expenses were at Rs 6,434.43 crore, up marginally from Rs 6,372.09 crore in the fourth quarter of 2019.

Here is what brokerages have to say about the stock and the company after the December quarter earnings announcement:

UBS | Rating: Sell | Target: Rs 190

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The research house expects the stock to react positively to Q4 earnings. It prefers cement players who gain on capacity market share. It expects teh company to lose EBITDA market share over the medium term,  CNBC-TV18 has reported.

Goldman Sachs | Rating: Buy | Target: Rs 320

The risk-reward is attractive at current levels. The company has exposure to markets, where volume trends remain strong. The pricing is relatively stable in the regions where the company has exposure, CNBC-TV18 reported the research house as saying.

Morgan Stanley | Rating: Overweight | Target: Rs 325

There was a strong volume growth, led by the capacity expansion. The resilient margin and recent underperformance keep the research house constructive.

Strategic focus areas include market share, cost optimisation and sustainability. It sees a good earnings growth along with room for re-rating, CNBC-TV18 reported the brokerage as saying.

CLSA | Rating: Outperform | Target: Rs 301

The impact of efficiencies has led to cost-savings in CY20, while further benefits are likely to accrue on a ramp-up of capacities.

The recovery in west India and commissioning of capacities augur well for the cement maker. However, further capacity addition would be key to maintaining the market share, CNBC-TV18 reported CLSA as saying.

Prabhudas Lilladher | Rating: Buy | Target: Rs 315

The company took a leap forward by an aggressive addition of Waste Heat Recovery (WHR) and solar power capacity. This would make ACEM rank among India’s top three cement manufactures on renewable energy’s share from current bottom position. The ongoing expansion of 11 mnt (including 6 mnt in subsidiary, ACC) and further potential of 15 mnt capacity with 5 mnt each at ACEM’s Maratha, Bhatapara and Rabriyawas plants, would help address investor concerns on volume growth.

ACEM delivered a solid performance on cost reduction through logistic efficiencies, enhanced volumes coverage under MSA, raw material procurement and sustainable rationalisation of fixed costs.

ICICI Direct | Rating: Hold | Target: Rs 305

Though the company is addressing capacity-constraint issues, it is not enough to expand the market share in light the of the capex announced by other major companies with the macro-environment turning favourable. Hence, we maintain a hold rating with a revised target price of Rs 305 (implying a consolidated EV/t of $162, 12.5x CY22E EV/EBITDA, earlier taget price of Rs 280).

Motilal Oswal | Rating: Neutral

The company's 4QCY20 result highlights a gradual normalisation of fixed costs curtailed due to the COVID-19 pandemic. Capacity constraints resulted in below industry growth in volumes at 8 percent YoY.

Commissioning of Marwar-Mundwa capacity (in 2QCY21) should help volumes grow in line with the industry at 11 percent CAGR over CY20-22E. Maintain neutral rating due to weak growth visibility beyond CY22.

Dolat Capital | Rating: Accumulate | Target: Rs 290

We broadly maintain our CY21E/ CY22E estimates. The full benefit of teh uptick in volumes from planned expansion (3.1mtpa clinker and 1.8mtpa grinding at Marwar Mundwa in Rajasthan) will come in CY22E.

ambuja

At 0916 hours, Ambuja Cements was quoting at Rs 274.60, down Rs 0.70, or 0.25 percent, on the BSE.

The share touched its 52-week high of Rs 290.70 on February 18, 2021 and 52-week low of Rs 136.65 on March 26, 2020.

It is trading 5.54 percent below its 52-week high and 100.95 percent above its 52-week low.

DisclaimerThe views and investment tips expressed by experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​
Moneycontrol News
first published: Feb 22, 2021 09:37 am

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