JM Financial recommended hold rating on Ambuja Cement with a target price of Rs 260 in its research report dated May 04, 2018.
JM Financial's research report on Ambuja Cement
Ambuja Cement (Ambuja)’s 1QCY18 EBITDA beat our expectations primarily on lower costs. Revenues rose 12% YoY primarily on realisation improvement of 8%. On a sequential basis, realisations remained flat. Volume growth for the quarter remained muted (+3% YoY) but EBITDA grew 29% YoY and exceeded expectations primarily on lower expenses. EBITDA/t was reported at INR 806/t (vs. INR 647/t in 1QCY17), as realisation growth and lower raw material costs more than offset freight and power/fuel cost escalations. We believe Ambuja’s long-term growth is constrained by its clinker capacity and limited expansion plans (phase 1 expansion of 1.7MTPA of clinker at Marwar Mundwa expected by 2HCY20). As a result, we expect Ambuja’s market share to decline in the interim and see limited upside from current levels.
Outlook
We continue to value the existing assets at 12x EVE and incorporate INR 10 on account of its expansion potential. Our TP is INR 260 (Mar’19) and we maintain HOLD.
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