Shares of Ambuja Cements Limited closed 3 per cent lower at Rs 371.85 against the previous close of Rs 383.55 on Friday. Market cap of the firm fell to Rs 73,836.22 crore.
Ambuja Cements on Thursday reported a standalone net profit of Rs 495.2 crore for the quarter ended March 2022. It has posted a net profit of Rs 664.6 crore in March 2021.
Net sales came in at Rs 3,855 crore for the quarter ended March 2022 compared to Rs 3,579 crore in the corresponding quarter of the previous year.
According to Axis Securities, the company’s margins were under pressure during the quarter owing to elevated costs YoY.
"We foresee cost inflation to sustain for the next few quarters as well. However, a superior demand environment backed by higher government spending on infrastructure, affordable and low-cost housing, improved real estate demand and focus on the PLI scheme for the manufacturing sector accompanied by price hikes may reduce cost pressure to some extent moving forward," it said.
The brokerage house noted that the stock is currently trading at 17x and 14x its CY22E and CY23E EV/EBITDA. It values ACL at 13x CY23E EV/EBITDA (including Ambuja stake in ACC with no holding company discount) to arrive at target price of Rs 370 per share.
Motilal Oswal believes that Ambuja Cements would continue to gain benefits from efficiency measures such as increasing share of green energy, blended cement, alternative fuel and raw materials.
"The stock trades at 18.8x/14.8x CY22/CY23E EV/EBITDA (v/s its 10-year average one-year forward EV/EBITDA of 12.8x). We value it at 12.5x CY23E EV/EBITDA and 20% HoldCo discount for its holding in ACC to arrive at our target price of Rs 350. We maintain our Neutral rating on the stock," it added.
Prabhudas Lilladher noted that the company delivered material turnaround in earnings over last couple of years. The major contributors to this turnaround were multifold increase in volumes under MSA, optimisation of fixed costs and reduction in specific energy consumption.
"On the incremental basis, we don’t see meaningful scope for further cost reduction. Theme of capacity expansion would get delayed due to likely exit of parent. As the valuations have surged to rich territory, we downgrade rating on stock to Hold with target price of Rs 400 with EV/EBITDA of 14.5x CY23e," it added.
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