JM Financial recommended hold rating on Ambuja Cement with a target price of Rs 235 in its research report dated October 23, 2018.
JM Financial's research report on Ambuja Cement
Ambuja Cement (Ambuja)’s 3QCY18 EBITDA missed the expectations primarily on higher other expenses. Revenues rose 13% YoY on volume growth of 9%. Realisations improved by 3.6% on a YoY basis; sequential growth of 1%. EBITDA grew by 15.6% on a YoY basis. EBITDA/t was reported at INR 648/t (vs. INR 609/t in 3QCY17), grew as realisation improvement and lower other expenses was partially offset by increase in operating costs. 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.
Outlook
While the recent correction improves the risk reward profile of the company, we maintain hold (TP INR 235/share) primarily on limited earnings growth.
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