X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Gujarat Ambuja: What next? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 22, 2002

    Gujarat Ambuja: What next?

    Gujarat Ambuja Cements Limited (GACL) has the distinction of being the most efficient cement producer in the country. The strategic alliance with ACC has helped the company expand its reach to almost all parts of the country. With consistent improvements in operating margins year on year, the company has portrayed an image of a lean and mean organisation with a ‘cement only’ focus.

    One of the most important strengths of the company is a very proactive management, which is quick to spot new opportunities and to capitalise on existing ones. With focus only on the cement business, the company has managed to gain expertise in all the related fields, from operating efficiencies to project implementation. Having said that it will be interesting to discuss the prospects of the company in the coming years.

    It is important to analyse why GACL has been able to sustain such high levels of operating margins. Captive power production, coal imports, tax concessions and new technologies have enabled the company to function efficiently year after year. However, once the tax concessions go, it will be interesting to see how these high margins will be maintained. Another cause of concern for the company has been the fact that the landed cost of imported coal has already increased by 27% in FY01.

    GACL is a major player in the northern and the western regions where the realisations are high. The issue now is whether the company will be able to sustain the premium it charges on its cement brand in the face of tough competition posed by the L&T-Grasim combine in these regions. Recently this region has witnessed the formation of a fragile cartel of ACC-GACL combine with L&T-Grasim combine. Current trends show that this cartel may breakdown as the individual players are sacrificing margins in order to increase market share.

    The northern and the western regions have witnessed large capacity additions in the recent past. This indicates the thrust by the major players to increase market share in these regions. GACL’s recent capacity addition in Maharashtra shows that even GACL is wary of competitors in this region. Grasim by adding capacities in the Punjab is trying to dislodge GACL from the north. These recent capacities will add to the glut in cement supply in these regions, which will further put pressure on the cement prices. With realisations not seen improving, operating margins of GACL are likely to come under pressure.

    There seems to be limited scope of increase in its profit margins in the short term. Also, though GACL’s exports are growing, weak international cement prices are likely to keep GACL’s pricing power under check.

    However, Gujarat Ambuja may have a way out. It can focus on changing its product mix. Currently, the company focuses on production of Grade 53 and Grade 43 cement, which sell at a premium in the western markets. Higher margins may be realised by increasing the production of blended cement, as raw material costs are lower for this product. Blended cement is a substitute for regular cement. It sells at almost the same price and offers the same strength.

    What Gujarat Ambuja does next in order to maintain operating margins and to expand market share in the present scenario will be a test of its experience and its strategic objectives for the future.

     

     

    Equitymaster requests your view! Post a comment on "Gujarat Ambuja: What next?". Click here!

      
     

    More Views on News

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    Ambuja Cem: Net Profits zoom up 361% YoY During Jan-March Quarter (Quarterly Results Update - Detailed)

    May 8, 2017

    Stock price jumps up on Ambuja-ACC merger talks...

    Ambuja Cem: Heavy Monsoon, Subdued Demand Hit Sales (Quarterly Results Update - Detailed)

    Nov 8, 2016

    Heavy monsoon and subdued demand impact Ambuja Cements' cement sales during the quarter ended September 2016.

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    AMBUJA CEMENT SHARE PRICE


    Aug 21, 2017 02:09 PM

    TRACK AMBUJA CEMENT

    • Track your investment in AMBUJA CEMENT with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    AMBUJA CEMENT - MANGALAM CEMENT COMPARISON

    Compare Company With Charts

    COMPARE AMBUJA CEMENT WITH

    MARKET STATS