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: Above all else - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 11, 2003

    Gujarat Ambuja: Above all else

    If the mood in the stock markets is any indication, cement stocks are finding takers even at the current levels. In this article, we will try to analyse strengths, weaknesses and the future growth prospects of Gujarat Ambuja.

    Gujarat Ambuja is the third largest player in the Indian cement industry with a total capacity of 12.5 MT (10% of total capacity). The company has a significant presence in the western, northern and eastern markets.

    STRENGTHS

    • The company has an excellent track record of outperforming the industry due to its foresightedness. Being a late entrant into the cement business, the management of the company was quite clear that in order to compete with the depreciated plants of its major competitors, it will have to make its operations highly cost efficient. The efforts have paid rich dividends over the years and as a result, the company enjoys the status of being the lowest cost producer of cement in the world. Not only this, the company currently operates at operating margins (30% in FY03) which are almost double the industry average.


      * Gujarat Ambuja is June ending

    • The management of the company is believed to be the best in the industry and has time and again proven its credentials. It has been innovative by transporting cement through ships that has proved to be a competitive advantage compared to its peers in the domestic market. When compared to other cement majors in the country like L&T, Grasim and ACC, Gujarat Ambuja has stuck to its core competence of manufacturing cement. This highlights the focus as well.

    • The company acquired a 15% stake in ACC, which is the second largest player in the sector (12% of capacity). The management has shown interest in increasing stake in ACC further to fully utilise synergies between both the majors. ACC’s operating margins have already improved significantly in the last three years. If the company were to increase its stake in ACC, ACC’s pan-Indian presence and Ambuja’s expertise in manufacturing cement efficiently will create a win-win situation in the long-term.

    • Barring short-term increase in industry capacity, Gujarat Ambuja’s presence in the ‘less-fragmented’ eastern and northern markets offers the pricing advantage as well. With industry moving towards a more favorable demand-supply situation in the long-term, the company is likely to benefit.

    WEAKNESSES

    • The caveat to hiking stake in ACC is that Gujarat Ambuja will have to shell out in excess of Rs 10 bn to have a management control. This could adversely impact the balance sheet of the company. The company would be in the position to unlock value in ACC if it can increase its stake. This increases the risk profile of the stock.

    • On a more short-term note, cement prices have weakened in the western markets due to new capacity expansion.

    The stock is currently trading at Rs 232 implying a P/E multiple of 16x annualised FY03 earnings. The industry scenario is looking good. The sector has grown consistently at over 9% in the past decade and the trend in expected to continue in the next five years. Strong demand from infrastructure and housing sector form the basic premise of such healthy projections. Given this backdrop, the outperformance over the years by Gujarat Ambuja that we had mentioned earlier in this article is likely to continue in the future. But it is a matter of looking beyond one or two years.

     

     

    Equitymaster requests your view! Post a comment on "Gujarat Ambuja: Above all else". 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 (Close)

    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 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE AMBUJA CEMENT WITH

    MARKET STATS