Ambuja Cements: 3 factors that could trigger a fresh rally in this Adani Group stock | Rare Techy
The company’s Q2 results remained below estimates with reported net revenues 13.4% higher year on year (YoY) at Rs 3670.4 crore but down sequentially. EBITDA margin fell 885 basis points (bps) quarter on quarter (QoQ) to 8.3% (below our estimate of 12.3%), led by higher electricity & fuel costs (up 63% YoY, 17.5% QoQ). PAT declined 68.7% YoY, 86.8% QoQ to Rs 137.9 crore due to lower margins, the brokerage said.
However, as the company commands a strong brand, cost efficiency as well as a healthy balance sheet, the brokerage sees the main cement to post healthy revenue growth in CY21-23E despite the high base.
Next, the stock’s performance in the future will be triggered by 3 factors:
The capacity expansion plan is around 140 MT in the next five years. New clinker capacity in Rajasthan’s Marwar (1.8 MT cement, 3 MT clinker) and GU in Punjab (1.5 MT) are likely to come on stream by the end of CY23 while capacity expansion (7 MT cement, 3.2 MT clinker) in east (capex Rs 3,500 crore) is likely to be completed by Q4CY24E.
A strong balance sheet will also drive the company’s future growth. Also, the group’s exposure to energy and logistics will help them improve cost dynamics and gain supply chain efficiency.
The brokerage valuing the stock at 21x CY23E EV/EBITDA has set a target price of Rs 610 per share.
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