The most recent investor presentation from Ambuja Cements Ltd (ACEM), which outlines its medium-term growth ambitions for capacity expansion and efficiency improvement, has been made public. The company has stated that internal accruals from ACC and Ambuja are sufficient to increase the company’s capacity from 67.5 million tonnes to 140 million tonnes.
“We think the company’s assumption of capital expenditures is aggressive in nature, and that overall capital expenditures would be lower because greenfield units will require more time to deploy. Moreover, we think that ambitious growth strategies will increase competition for market share, resulting in weaker cash flow generation than anticipated. The brokerage Centrum has retained its buy rating on the Adani Group shares with a target price of $453. “Overall, we expect the company to produce excellent volume growth coupled with margin expansion over the next 4–5 years, and the stock is now accessible at attractive prices,” it said.
With a roadmap for ACC/Ambuja Cements’ future growth and profitability, the Adani Group reiterated its goal of doubling cement capacity to 140 MT (16% CAGR) by FY28, with all funding coming from internal accruals.
“We think the majority of these announcements followed expected patterns and were routine business. Our estimates for FY23–25E are unchanged. The company is valued at 13x FY25 EV/EBITDA with a target price of 470, maintaining the buy signal. According to Antique Stock Broking, any announcement of inorganic growth that enables a group to increase its market share will continue to be a key trigger for the stock.
The Adani Group has been expanding its line of business, and last year it paid $10.5 billion to acquire ACC and Ambuja Cements from Swiss company Holcim.
Disclaimer: The opinions and suggestions listed above are not Currency Veda’s rather, they represent the opinions of certain analysts or brokerage firms.