Motilal Oswal has given Neutral recommendation for Ambuja Cements with a target price of Rs. 530 in its research report issued on Oct 21, 2022
Motilal Oswal’s research report on Ambuja Cements
ACEM’s performance was impacted by continued cost pressures. EBITDA stood at INR3b (est. INR4.1b). EBITDA/t stood at INR433 (est. INR594) – the lowest after Dec’04, as OPEX/t came in 2% above our estimate due to a sharp rise in other expense. Adjusted PAT fell 65% YoY to INR1.5b (est. INR1.9b). We have adjusted our estimates to account for the change in the accounting year (March from December). On a like-to-like basis, we reduce our CY22/ CY23 EBITDA estimate by 7%/9% and profit estimate by 3%/14%. We maintain our Neutral rating as we await clarity and the roadmap for capex plans and expected cost savings.
Considering the group’s growth ambitions and rising confidence after the fundraising, we have discounted our CY26-based assumptions at a WACC of 12% to arrive at our TP of INR530. Assuming a cost benefit of INR300/t, our TP will increase to INR680. We await clarity on the management’s growth plans. We maintain our Neutral rating on the stock.