Ambuja Cement on a roll

Ambuja Cement is buzzing aloud today and the stock price seems poised for a lot of action. Opening 3.5% higher at Rs.654, the stock rose further to Rs.659.70, up almost 4.5%, with more buyers currently on the counter than sellers. Its 52-week high is at Rs.706.85.

The stock rose after a promoter entity, Holderind Investments, owned by billionaire Gautam Adani and his family, plans to divest 2.84% of the of the equity, valuing the deal at Rs.4,197.8 crore at the floor price of Rs.600/share, discount of 5% to last close price.

This stake sale is a part of a strategic group portfolio management move aimed at diversifying the shareholder base and attracting long-only investors, particularly those interested in infrastructure assets.

The stock is on a roll as many analysts, including Mr.SP Tulsian have given a Buy call for the long term.

Mr.Tulsian’s opinion - With Cement sector seen as a sunrise sector, the company is poised for a superlative growth for the next 24 months from here. Current capacity of 89 MTPA (with 21.4 MTPA added in last 18 months) is on track to achieve 140 MTPA by 2028, with 23 MTPA under execution an 28 MTPA at various stages, With 16% cost reduction seen since Sep’22, with target to reach Rs. 3,650 PMT by 2028 MTPA, with aim to improve 14% market share to 20% after 4 years, while expansion will be funded via internal accruals with no debt. Post infusion of entire Rs. 20,000 cr via warrant conversion by the promoters, cash and equivalents stands at over Rs.25k cr, which works out to Rs.100 per share. EBITDA per ton is guided to reach Rs. 1,470 by FY28E, making it one of the higher margin cement supplier. On current o/s equity shares of 246.32 cr (post warrants), current m cap stands at Rs.1.58 lakh cr, but enterprise value (EV) is only at Rs.1.38 lakh cr, leading to an EV of USD 185 per MT only. Company is seen ahead in the race to acquitre 9 MTPA Cement capacity of JP Associates, where IBC proceedings have commenced last month, with the Ambuja’s acquisition of unlisted Penna Cement, having 10 MTPA operational and 4 MTPA under-construction cement capacity, in South, West and North India, at an Enterprise value (EV) of Rs. 10,422 cr, with all these factors make it a growth oriented Portfolio stock.