Arihant Capital has given Accumulate recommendation for Ambuja Cements with a target price of Rs. 449 in its research report issued on Oct 27, 2021

Arihant Capital’s research report on Ambuja Cements

Ambuja Cement Limited reported weak set of numbers for Q3CY21. Revenue from operations grew by 14% YoY, however declined by 4% QoQ to INR 3237 cr above our estimates of INR 3070 cr. YoY growth was backed by good growth in volumes & realization. Sales volume grew by 5.3% YoY, however declined by 5.2% QoQ to 6.0 mn tons in line with our estimates of 6.0 mn tonnes. Growth in YoY sales volume was backed by increase in demand for urban housing and infrastructure. YoY and MSA agreement has also led to volume optimization. Realization/ton grew by 7.8%% YoY, and 1.3% Q0Q to INR 5395 per tonne against our expectation of INR 5117 per tonne. Growth in realization was mainly supported by volume growth and increased share of value added products EBIDTA grew mutedly by 3.4% YoY however declined by 26.7% QoQ to INR 703 cr below our estimate of INR 720 Cr. EBIDTA margin contracted by 213 bps YoY and 673 bps QoQ to 21.7% led by rise in operating costs notably in fuel. However the operational efficiency programs at plants along with logistics efficiency partly mitigated the impact. EBIDTA /ton declined by 1.8% YoY and 22.7% Q0Q to INR 1172/ton against our expectation of INR1200/ton. Power and fuel cost per tonne rose by 23% YoY to INR 1245/ton.


We value the standalone business to 15.5x to its CY22E EBITDA of INR 4187 cr and arrive at a fair value of INR 367/share while Ambuja’s 50% stake in ACC has been valued at INR 82.1 per share (based on our ACC’s TP of INR 2479). Our SOTP valuation yields a fair value of INR 449 per share. We maintain Accumulate rating on the stock.

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