Buy Ambuja Cements; target of Rs 610: ICICI Direct

ICICI Direct's research report on Ambuja Cements

Ambuja Cement (now Adani group conglomerate part) is a large cement player with 31.5 MT capacity spread across north (35%), south (24%), west (~20%), east (~21%) in India. It has a large marketing set-up & pan-India presence. The upcoming new capacity in Punjab (1.5 MT) and eastern region (7.0 MT including clinker 3.2 MT) will enhance its cement capacity by ~8.5 MT to 40 MT. In phase II, the company plans to reach over ~50 MT capacity through capacity expansion in western region along with significant de-bottlenecking • The management plans to double its consolidated capacity to 140 MT (ACC + Ambuja) from current 70 MT in the next five years.

Outlook

With aggressive expansion strategy and focus on cost efficiencies, we expect healthy revenue growth in CY21-23E despite high base. Hence, we maintain BUY rating. We value Ambuja at Rs 610 i.e. 21x CY23E EV/EBITDA.

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Ambuja Cements - 271022 - icici