Ambuja Cements Q1: Motilal retains ‘neutral’, Nuvama downgrades stock to hold

Brokerages gave neutral ratings for Ambuja Cements after the cement maker delivered higher volume growth and heightened cost-cutting measures. However, price concerns over increased competition dragged the sentiment.

Motilal Oswal Securities kept its neutral rating on the stock revising its target price to Rs 450 reasoning the strong sales growth and said it will keep tabs on the company’s rising profitability and how long the cement maker can control its cost saving.

Nuvama Institutional Equities downgraded its rating from ‘Buy’ to ‘Hold’, raising concerns about price capping due to elevated competition but, increased the target price to Rs 465 from Rs 458. “The ~17% run-up in the stock over the last quarter and concerns about price realisations in light of heightened competitive intensity in the industry are likely to keep upside capped,” added the brokerage.

The company’s management said they are sticking to its expansion plan of increasing grinding capacity to 140mtpa by FY28,doubling it. It plans to expand capacity of 14mtpa in the next two years. It is also looking to keep cost reductions to Rs 400/t (tonne) through decreased freight, energy and other costs, added Motilal Oswal.

The company plans to add an 8 mtpa clinker at Bhatapara and Maratha to complete its 14 mtpa plan. The company is also looking to add 42 MW WHRS (Waste Heat Recovery System) capacity along with 50 percent AFR ( Alternative Fuels and Raw materials).

In management commentary, the company targets a consolidated volume growth of 10-15 percent in FY24 as cement prices remained unchanged in this quarter.

The cement maker’s quarterly profits declined to Rs 645 crore falling by 38 percent year on year. The standalone operational revenues rose by 18.29 percent to Rs 4729.71 crore from Rs 3998.26 crore. The company’s sales volume increased by 22.97 percent from 7.4 million tonnes (MT) to 9.1 MT.

At 12: 45 pm, shares of Ambuja Cements is trading at  Rs 468.85 up by 1.54 percent from the previous day’s close.

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