Stocks

Broker's call: Ambuja Cements (Buy)

| Updated on February 23, 2021 Published on February 24, 2021

Centrum Broking

Ambuja Cements (Buy)

Target: ₹311

CMP: ₹264.70

Ambuja Cements Q4-CY20 revenue was in line with CBL estimates however, earnings were ahead of estimates driven by better than expected cost control. The revenues were 12 per cent higher y-o-y at ₹3,520 crore backed by 7 per cent volume gains to 7 million tonnes and 4.6 per cent higher realisation at ₹5,014/tonne.

Further, cost control measures (1 per cent y-o-y decline) helped EBITDA gain by 40 per cent to ₹770 crore and effectively PAT climbed up to ₹497 crore (₹350 crore in Q4-CY19). EBITDA margins improved to 21.8 per cent versus 17.5 per cent.

Pan-India presence (ex-South India), presence in retail segment (nearly 80 per cent), expected clinker capacity addition by Q2-CY21 and strong balance sheet will help Ambuja Cements equip for the expected growth momentum.

We have revised CY21/CY22 EBITDA (SA) to ₹2,950 crore/₹3,310 crore (earlier ₹2,690 crore/₹3,150 crore ) and value the stock on SOTP basis assigning 11.7x EV/EBITDA (SA) (earlier 10x) CY22 earnings and Ambuja Cements's 50 per cent holding in its subsidiary ACC. We arrive at a fair value of ₹311/share (revised from ₹261). At our TP the stock trades at a replacement cost of ₹1,150 crore CY22 capacities (SA).

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on February 24, 2021
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.