Adani Group has presented a big masterplan in the Indian Cement Sector. The proposed merger of ACC and Orient Cement with Ambuja Cements is being considered as the biggest shake-up after the UltraTech era.

ACC shareholders will get 328 shares of Ambuja for every 100 shares, Orient Cement will get 33 shares, Sanghi Industries will get 12 shares and Penna Cement shareholders will get ₹321.5 per share cash. The group wants to increase cement capacity from 107 MT to 155 MT by FY28.

The Ambuja and ACC brands will remain with separate identities. Record date has not been announced yet. The merger will be completed after SEBI, shareholders and NCLT approvals, which may take about 12 months. This can be a big game-changer for investors.

Shares of Ambuja Cement Limited closed in red mark in the market on Friday, May 2. The company’s shares closed at Rs 531.75 on NSE, which shows a decline of about 3 percent in a week. However, despite this weakness, the attitude of brokerage firm Axis Securities is very positive about this stock. The firm has issued a BUY rating on Ambuja Cement and has kept its target price of 635 per share. That is, an upside potential of about 23 percent from the current price has been shown.

Why is Axis Securities trust in Ambuja Cement?

Axis Securities released its report on 30 April. In this report, this rating has been given on the basis of the company’s better fundamentals, future expansion plans and cost reduction. According to the report, Ambuja Cement currently produces 100 million tonnes of cement annually, in which 8.5 MTPA Orient comes from cement. The company aims to increase it by 2026 to 118 MTPA, and by 2028 to 140 MTPA. This increase is expected to boom in the company’s sales and profits. Brokerage estimates that there may be an annual increase of 11 per cent in sales between 2024 and 2027.

Ebitda will increase with cost cuts

The company is not only increasing production, but is also working on a huge cut plan in cost. At present, Ambuja has saved a cost of up to Rs 150 on every ton of cement and wants to increase it by Rs 300-350 per tonne by 2028. This savings will be mainly by reducing the consumption of clinker, reducing transport costs, adopting green energy and promoting mixed cement sales. The company aims to bring the cost of cement production by Rs 3,850 per tonne by 2028. This is expected to reach the Ebitda margin 20-21 percent.

Cement industry demand boom

Due to the demand of infrastructure, roads, bridges and affordable houses across the country, there is a tremendous rise in demand of cement sector. Investment in real estate projects from private companies has also increased. Due to these reasons, cement demand is expected to increase at the rate of 6-7 percent annually between 2024 and 2027.

How was the share performance?

However, the company’s stock has been under pressure in recent times. In the last one week, a negative return of 3 percent has been seen. In the last three months, the company has given a return of about 6 percent, but within a year the stock has given a loss of 15.62 percent. That is, investors have suffered a decline of about Rs 98.40 per share in a year.

What is a chance for investors?

Axis Securities believe that the current decline can be seen as a good long -term investment opportunity. Strategies of strong fundamentals, production expansion and cost management of the company can make it a better return company. If you want to invest for the next 12 to 18 months, then Ambuja Cement can be a better option.

Disclaimer: (The information provided here is being given only for information. It is necessary to tell here that the investment in the market is subject to risks. Always consult expert before investing as an investor. Abplive.com is never advised to invest money here.)

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