Adani group stock: Ambuja Cements shares down 31% in 2023. Should you buy, hold or sell?

Ambuja Cements has fallen 31 per cent in 2023 so far, tracking a steep fall in other Adani group shares. The cement maker reported a 46 per cent YoY rise in net profit for the December quarter. Brokerages said the quarterly results beat their expectations on higher volumes and cost optimisation was bearing fruits, but their price targets vary quite a bit. A handful of brokerage have targets as high as Rs 570 and as low as Rs 375 on the counter.

JM Financial, which has a target of Rs 570 on the stock, said group synergies are playing out that that the focus seems to be on cost optimisation. It felt that Ebitda per tonne for Ambuja Cements has formed a base and will start improving materially on account of downward trend in fuel cost on account of coal contract, integration with other Adani group companies, and broad-based demand pick-up.

"With a well-established pan-India network and high capacity utilisation, we feel Ambuja Cements can scale up volume in cement and value-added products through new capacity additions. We maintain a ‘BUY’ rating and a September 2023 target of Rs 570 (48 per cent upside) ascribing a 21 times EV/Ebitda to standalone business (premium to 10-year average; in line with historical multiples of Shree Cement) as we believe growth will be far higher than in the past," the brokerage said.

The Adani group firm clocked a 46 per cent jump in net profit at Rs 369 crore for December quarter compared with Rs 253 crore in the year-ago period. Ambuja Cements said its revenue for the quarter rose 11 per cent to Rs 4,129 crore from Rs 3,740 crore in the corresponding quarter last year.

On Thursday, the scrip fell 5.4 per cent to Rs 363.60 on BSE.

Motilal Oswal said Ambuja Cements' quarterly results beat its estimates on higher volumes, but the brokerage has a target of Rs 375 on the stock. This is because it has reduced its FY25E EPS by 20 per cent due to issuance of convertible warrants to the promoter group entity That Motilal Oswal assumes to be subscribed and converted into equity shares in FY25E. The brokerage values the stock at 15 times September 2024E EV/Ebitda.

YES Securities has an ‘ADD’ rating for the stock with a target of Rs 434. It said the company's focused efforts towards efficiencies will bridge valuation gap with leaders. This brokerage values Ambuja Cements on SOTP based valuation with a standalone entity valuation of 14 times EV/Ebitda and stake in ACC at 10 times EV/Ebitda on FY25E basis.

Emkay Global has cut its target on the stock to R 425 from Rs 480 earlier. B&K Securities has also cut its target to Rs 510 from Rs 590. It maintained its 'Buy' rating on the stock valuing it at 15 times EV/Ebitda on FY25E basis.

Watch! Bank of Baroda says not worried about its exposure to the tumult-hit Adani Group.

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