Ambuja Cements shares fall: Should investors buy, sell or hold?

Updated : February 22, 2021 11:08 AM IST

Goldman Sachs maintains a Buy rating with a target price of Rs 320 per share.

Motilal Oswal maintains a Neutral rating due to weak growth visibility beyond CY22.

Cement manufacturer Ambuja Cements reported a 34.06 percent on-year jump in its consolidated net profit at Rs 968.24 crore in the quarter ended December 2020. The company’s revenue from operations during the quarter rose 4.58 percent to Rs 7,452.87 crore from Rs 7,126.44 crore, YoY.

Here’s what brokerages have to say about the company’ December quarter earnings:

Goldman Sachs

The brokerage believes that the company has exposure to markets, where volume trends remain strong. The pricing is relatively stable in the regions where the company has exposure. The risk-reward is attractive at current levels, it said.

Goldman Sachs maintains a Buy rating with a target price of Rs 320 per share

UBS

UBS prefers cement players who gain on capacity market share. It expects the company to lose EBITDA market share over the medium term. UBS maintains a Sell rating with a target price of Rs 190 per share.

Morgan Stanley

Morgan Stanley retained its Overweight call on the stock with a target price of Rs 325 as it is of the view that the company had a strong volume growth, led by the capacity expansion. "The resilient margin and recent underperformance keep us constructive," it said.

Strategic focus areas include market share, cost optimisation and sustainability. The brokerage sees good earnings growth along with room for re-rating.

CLSA

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, CLSA said.

However, CLSA believes that further capacity addition would be key to maintaining the market share. It maintained an Outperform rating on the stock with a target price of Rs 301 per share.

HDFC Securities

Over the next two years, Ambuja Cements’ profitability will benefit from its capacity expansion in the north and low-cost WHRS and solar power expansions. Ambuja Cements also hinted that it is exploring capacity expansion at various locations to drive long-term growth visibility, HDFC Securities said.

The brokerage maintains a Buy rating with a revised SOTP-based target price of Rs 308 per share.

Motilal Oswal

Ambuja Cemets' 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.

The brokerage maintained a Neutral rating due to weak growth visibility beyond CY22.

At 10:15 am, the shares of Ambuja Cements were trading 1.98 percent lower at Rs 269.80 apiece on the BSE as compared to a 0.92 percent fall on the benchmark Sensex.

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