Dolat Capital Market has given Accumulate recommendation for Ambuja Cement with a target price of Rs. 290 in its research report issued on Feb 19, 2021

Dolat Capital Market’s research report on Ambuja Cement

Revenue, APAT and volumes were above estimates whereas realizations and EBITDA/tn in line. ACEM posted 12.1% YoY growth in revenue to Rs35.2 bn due to 7.2% YoY volume growth to 7.0 mt and +4.6% YoY (-0.3% QoQ) realization growth to Rs5,014. EBITDA increased by 40.3% YoY to Rs7.7 bn and APAT increased by 65.7% YoY to Rs5.0 bn. ACEM has declared dividend of Rs1/ share along with an interim dividend of Rs17/sh in Oct’20, resulting in huge cash outflow Rs36.6 bn in CY20. Cash on books as on Dec’20 stood at Rs29.2 bn. We expect 9.4%/ 8.2%/ 5.7% revenue/ EBITDA/ APAT CAGR over CY20-22E led by 13.8%/ 4.5% volume growth and -0.3%/ 1.0% cement realization growth in CY21E/ CY22E. We broadly maintain our CY21E/ CY22E estimates. The full benefit of uptick in volumes from planned expansion (3.1mtpa clinker and 1.8mtpa grinding at Marwar Mundwa in Rajasthan) will come in CY22E.

The stock has run up 11% since our Q3CY20 result update note dated 22 Oct’20 thus leaving limited upside. Thus, we maintain Accumulate with a revised TP of Rs290 based on (12x standalone CY22E EV/EBITDA) and ACEM’s 50% stake in ACC at 20% holding discount.