Ambuja Cement share price lower in choppy trade post September quarter earnings

Ambuja Cement share price touched 52-week high of Rs 256 in the opening trade on October 23 after the company came out with its September quarter earnings. However, the share price witnessed profit booking and slipped 2 percent intraday.

The company has posted 87.8 percent YoY jump in its standalone net profit at Rs 440.53 crore in the quarter ended September 30, 2020 (Q3CY20) versus Rs 234.61 crore a year ago.

Its revenue was up 8.6% at Rs 2,852.46 crore versus Rs 2,625.78 crore.

The company board has declared an interim dividend of Rs 17 per share on equity shares of Rs 2 each.

Here is what brokerages have to say on the stock:

Prabhudas Lilladher

CY20 marked as company’s strong performance on cost reduction front through 1) logistic efficiencies, 2) higher share of volumes under MSA and 3) sustainable cut in some of the fixed overheads of legacy nature. Broking house remain confident that costs would fall further with rise in share of waste heat recovery plants (WHRP), increased spectrum of MSA covering additional volumes from upcoming new capacities in Rajasthan and Jharkhand and changing work culture.

Backed by attractive valuations and improved quality of operations, it reiterate buy rating with revised target price of Rs 285 (earlier Rs255), EV/EBITDA of 12.5x CY21e.

Motilal Oswal

While commissioning of Marwar-Mundwa capacity (in 2QCY21) should aid volume growth from 2HCY21, broking house expect company’s volume growth to lag industry over the next two quarters due to capacity constraints.

Despite the expansion, it estimate CY19-22E CAGR of only 5% in volume and 8% in PAT (partly due to lower cash-pile post the high dividend payout). It value stock at Rs 235/share based on 9x CY22E EV/EBITDA, but take a 10% holding company discount for its stake in ACC. Maintain neutral.

Dolat Capital

Results were above estimates on all fronts except realizations in line. The recent run up of 26% in stock price in last 3 months leaves limited upside. Thus, Dolat Capital downgraded to accumulate with a revised target price of Rs 257 based on (11x standalone Sep’22E EV/EBITDA) and ACEM’s 50% stake in ACC at 20% holding discount.

Jefferies

Research house Jefferies has kept buy rating and increased target to Rs 330 from Rs 300. The operational performance is overshadowed by an interim dividend at Rs 17 per share and this comes at the time when North expansion project is coming to fruition, said Jefferies.

It raise EPS estimates by 16-26% as stock builds in >6% dividend yield, reported CNBC-TV18.

Citi

Research house Citi has maintained buy call and raised target to Rs 280 from Rs 260. It expect further price hikes on rising demand & producers’ focus on profitability and raise consolidated CY20-22 EBITDA estimates by 11-15%, reported CNBC-TV18.

Morgan Stanley

Morgan Stanley has kept overweight call with a target at Rs 266. There was a positive surprise on financials as well as large interim dividend. The expansion plan of Marwar Mundwa on track to be commissioned in Q2CY21, reported CNBC-TV18.

CLSA

The Q3 standalone EBITDA was in-line with our estimates, said CLSA. Similar to ACC & UltraTech, Ambuja also surprised positively on volumes, while profit in-line as better realisations were partly offset by lower cost reduction, said CLSA.