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TP : Rs140
Investment Rationale
§ Our major concern for Ambuja remains the volume growth which we expect to be around 5.2% for CY11.
§ The demand growth is impacted by slowdown in government led infrastructure projects and rising interest rates &
project clearance affecting private spends and is now one of the major concerns which has also led to
downgrades in our estimates
§ We remain concerned on the demand as this remains the only trigger to sustain cement prices & help recovery
for the sector.
§ Though the realizations helped post better than expected EBITDA for Ambuja in Q2CY11 the sluggish demand
growth has now started impacting prices.
§ The proposed new mining tax could also pose a threat as it would increase the limestone mining costs by
Rs75+80/t.
Valuations
§ We believe Ambuja’s current valuations at PER of 15.6X, EV/EBIDTA of 8.3X & EV/ton of USD143, leaves little
upside with potential of above mentioned risks not completely factored in.
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