Prabhudas Lilladher recommended hold rating on Ambuja Cement with a target price of Rs 205 in its research report dated May 02, 2019.
Prabhudas Lilladher's research report on Ambuja Cement
Ambuja cement (ACEM) reported weak Q1CY19 earnings as profitability goes missing on account of lower realisations. Realisations fell 1%/Rs41 QoQ per tonne (t) (+0.7%/Rs32/t YoY) to Rs4,469/t, below our estimate of Rs4,563/t. In contrast to the better performance delivered by its peer companies, ACEM reported lowest EBITDA/t of Rs601 (v/s Rs961/Rs616 by UTCEM/ACC) below our estimates of Rs705. Company continues to lose its business excellence with the rising Fixed costs, pressure on realisations (due to intense competition and rising pace of capacity addition) and continuous contraction in market share.
Outlook
However, revival of industry's pricing power would mask these issues for a next couple of years and would drive the earnings for company. In this backdrop, we maintain Hold rating with TP of Rs205; EV/EBITDA of 13.5x CY20e.
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