Ambuja Cements shares: Why brokerage has upgraded this Adani Group stock's rating to 'Buy'
1 min read . Updated: 21 Feb 2023, 03:31 PM IST
Premium- The brokerage house has upgraded Ambuja Cements shares' rating to Buy given the recent stock price correction
Ambuja Cement's Q4 performance was better and largely in-line to consensus, results are firm, strong and ahead of our estimates, said analysts at brokerage firm PhillipCapital who remain convinced about their call of better efficiencies coming in at ACC and ACEM with Adani group’s takeover.
The brokerage house has upgraded Ambuja Cements shares' rating to Buy given the recent stock price correction. “Infact after the disappointment in Q3, ACC and Ambuja have recouped the most in Q4. In our view, this clearly validates that they are adapting to some structural changes in their business policies. We roll over to FY25 and value at 16x EBITDA (vs. 20x FY24 earlier). Given the stock price correction, we upgrade to Buy with a revised target price of ₹410 (vs. Neutral view with PO of ₹460 earlier)," the note stated.
Q4 numbers of ACC and Ambuja Cements, in the brokerage's view, is only offering a teaser of efficiency roll-out that can happen in these two companies in the longer term. Having said that, this is structural and directional journey and there would significant headwinds in this path of search of better efficiency.
“We are convinced and optimistic of several cost efficiencies playing out at ACEM largely driven by the takeover of Adani Group and their intent to become one of the most efficient cement manufacturers within the industry. We have been writing about these said efficiencies exhaustively through our supply-chain thesis," it added.
“We are happy to see an in-line realisation performance and 2% lower than expected costs which in our view, indicates that what we are writing about is directionally correct. We reiterate that, in our view, ACEM and ACC are turnaround stories in the longer term and their turnaround will benefit the sector at large as well," the note stated.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.