Add Ambuja Cements, target price Rs 417: Choice Equity Broking Private Ltd

Choice Equity Broking Private has add call on Ambuja Cements with a target price of Rs 417. The current market price of Ambuja Cements is Rs 362.7.

Ambuja Cements, incorporated in the year 1981, is a Large Cap company (having a market cap of Rs 71354.16 Crore) operating in Cement sector.

Ambuja Cements key Products/Revenue Segments include Cement, Other Operating Revenue and Scrap for the year ending 31-Dec-2021.

Financials
For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 8036.46 Crore, up 10.93 % from last quarter Total Income of Rs 7244.78 Crore and up 4.24 % from last year same quarter Total Income of Rs 7709.61 Crore. Company has reported net profit after tax of Rs 481.58 Crore in latest quarter.

The company’s top management includes Mr.Mahendra Kumar Sharma, Mr.Praveen Kumar Molri. Company has Deloitte Haskins & Sells LLP as its auditors. As on 31-12-2022, the company has a total of 199 Crore shares outstanding.

Investment Rationale
The new management kept its first concall post acquisition of company by new promoters (The Adani Group) and remained positive on outlook. The brokerage is willing to accept the management’s assertion that Ambuja Cement will engage in business activities on an arms-length basis from promoter-related counterparties. However, the brokerage sees some uncertainty that the new management will be able to ensure the extra-ordinary operational improvements and capacity growth that current valuations seem to require.

The brokerage values the company on SoTP basis to arrive at a TP of Rs 417 (assigning 18x of CY24 EBITDA of ACEM’s standalone business to arrive at Rs. 347/share and ascribing a discounted holding company value of ACC investment of Rs. 70/share). While company may have ambitious plans, the brokerage is of the opinion that the current price reflects the probability of these bright prospects to a large extent- however, some limited upside may be there at current price levels.

Promoter/FII Holdings
Promoters held 63.22 per cent stake in the company as of 31-Dec-2022, while FIIs owned 10.66 per cent, DIIs 16.65 per cent.