Ambuja Cements Stock Price Updates: Brokerages bullish on Ambuja Cements after Penna acquisition; shares gain over 1%

On the company’s recent acquisition of Penna Cement, a report stated, The acquisition includes PCIL’s 14 million ton per annum (mtpa) grinding capacity, with an additional 3 mtpa grinding capacity supported by surplus clinker at the under-construction Jodhpur plant. The adjusted acquisition cost is estimated at USD80 per ton. PCIL’s location and limestone reserves offer opportunities for capacity expansion through debottlenecking and additional investments. The acquisition, to be funded through internal accruals, is expected to be completed within 3-4 months.

A report by Motilal Oswal stated, “The cost reduction initiatives undertaken by the company have significantly improved its profitability in FY24. Operational expenses per ton (consolidated) decreased by ₹475 to ₹4,523, primarily due to lower input costs, freight costs, and other fixed overheads.”

The report further states, “Additionally, the company has made strides in enhancing its green power capabilities, with the commissioning of approximately 69MW of Waste Heat Recovery Systems (WHRS) capacity, increasing its green power share (consolidated) to around 16% in FY24 from about 7-8% in FY23. Looking ahead, the company aims to further boost its renewable energy capacity, targeting 376MW/1GW of WHRS/Solar & Wind capacity by FY28, with a renewable power share goal of 60%.”

The market share of the top five cement companies has increased sharply to 54 per cent as of last December, against 45 per cent logged in March 2015.

It is expected to further increase to 55 per cent by March 2025, resulting in consolidation in the cement industry, said ICRA in a statement on Thursday. The top five cement companies include UltraTech, ACC, Ambuja, Shree Cement and Dalmia Bharat.

Trivesh D, COO of Tradejini, said, “The performance of the Indian cement industry has been impressive over the past few decades. Industry consolidation in the cement sector is often driven by the need for operational efficiencies, cost reductions, and market share expansion. Key triggers for consolidation can be competitive pressures, regulatory changes, and economic cycles.

Mergers and acquisitions have become common as companies strive to optimize resources, reduce costs, and increase profitability. This consolidation has not only strengthened the financial health of cement companies but also enhanced their competitive edge in both domestic and global markets.

The synergy between the cement industry’s growth and the evolving stock market infrastructure is essential for sustaining economic progress and enhancing competitiveness.”

Analysts of Emkay Global have retained their ‘buy’ call on the stock and Mar-25E target price at ₹700 per share, based on implied consolidated EV/E of 17x. Regarding Penna acquisition, they said, “The deal is pegged at a favorable valuation of $89/t, which may decline to $79/t with potential grinding capacity addition of 3mt.” 

Tushar Chaudhari, Research Analyst of Prabhudas Lilladher stated, “With acquisition of PCIL, Ambuja Cements would ramp up ailing PCIL capacity similar to recently acquired Sanghi assets. With strong balance sheet and remarkable execution speed, we believe Ambuja Cements’ consolidated performance would improve substantially going forward.” The brokerage has maintained ‘accumulate’ rating on the stock.

Vinod Jhaveri, an independent analyst from Pure Technicals, Vadodara, Gujarat, said, “Ambuja Cement is making new ATH and monthly charts are still favouring bullish moves. After crossing the monthly double top at 600, the stock is silently moving into new highs and the cement sector is showing a good comeback. This stock has good potential for testing 750 odd levels soon.”

Shares of Ambuja Cements hit a new high on Friday’s trade following the acquisition of Penna Cement.

As of 9.59 am, the stock traded at ₹677.20 on the NSE, higher by 2.22 per cent.

Shares traded at ₹677.50 on the BSE, up by 1.99 per cent as of 10.10 am.

Additionally, ACEM is aggressively expanding its green energy portfolio with an investment of ₹100 billion, planning to increase its green energy share to approximately 60% by FY28, up from the current 16%. A report by Motilal Oswal maintains a positive outlook on the Indian cement industry, projecting demand growth of around 8-9% YoY in FY25. ACEM anticipates a capacity addition of 150-160mtpa in the industry over the next five years, with demand CAGR of 8-9% over FY24-28E expected to surpass the supply CAGR of 6-7% during the same period. - write some headlines in 8 to 10 words.

ACEM’s FY24 annual report highlights initiatives aimed at driving growth and improving its cost structure. The company has initiated capacity expansion projects totaling 20mtpa across various regions, aiming to reach a capacity of 100mtpa by the end of FY26. .

Ambuja Cements’ recent acquisition announcement of Penna Cement has sparked varied reactions from leading brokerages. The move, aimed at expanding Ambuja’s regional footprint in South India, has drawn different assessments from analysts.

Macquarie has maintained a neutral stance on Ambuja, setting a target price (TP) of ₹608. They view the expansion positively, noting the deal’s value at $125 per tonne, which aligns with Ambuja’s growth ambitions.

CITI has also adopted a neutral position with a TP of ₹675, seeing the transaction as a positive indicator of Ambuja’s growth trajectory.