Ambuja Cements Leads Gains In Cement Stocks As Nirmal Bang Turns ‘Positive’ On Sector

Shares of Ambuja Cements Ltd. gained after the company said it would consider a fundraising proposal.

“A meeting of the board of directors of Ambuja Cements is scheduled to be held on Sept. 16, 2022 inter-alia, to consider and evaluate proposal for raising of funds by way of issue of equity shares, convertibles and / or any other eligible securities, on a rights/preferential or any other permissible mode/ and/or combination thereof as may be considered appropriate,” the company said in a Sept. 13 exchange filing after market hours.

The Adani family’s open offer to acquire an additional 26% stake in Ambuja and ACC Ltd. had closed on Sept. 9, 2022. The mandatory open offers in cash were made after the Adani family acquired a 63% stake in Ambuja from Swiss cement major Holcim. Ambuja has a 50.05% stake in ACC.

Separately, Nirmal Bang upgraded its view on the cement sector from ‘neutral’ to ‘positive’, citing stable competitive intensity, profitability, improved pricing and lower operational costs.

“ACC and Ambuja operate at higher utilisation levels (80-85%) and meaningful incremental supply from both the firms is likely only after two-three years. Hence, profitability of the industry will be maintained in the near term,” the brokerage said in a Sept. 14 note.

“Moreover, ACC and Ambuja command a significant brand premium in the industry (along with UltraTech), and they do not need to sacrifice pricing to gain higher market share.” A large part of the capacity addition over FY23-25, it said, is being done by industry leaders.

Shares of Ambuja rose more than 5% intraday on Wednesday. The trading volume was five times the 30-day average. The Relative Strength Index of the stock was 87, suggesting it may be overbought.

Of the 47 analysts tracking the company, 18 maintain a ‘buy’, 17 suggest a ‘hold’ and 12 recommend a ‘sell’. The 12-month consensus price target implies a downside of 25.2%.

Other cement makers such as ACC, Heidelberg Cement, JK Cement, JK Lakshmi Cement also advanced.

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