Technical & Macro Analysis Of Indian & Global Market----: Ambuja Cement: 205-197 Might Be A Very Good Buying Zone

Sunday, 27 September 2015

Ambuja Cement: 205-197 Might Be A Very Good Buying Zone

Govt's Smart City & Smart Village Theme And Infra Push May Help

CMP: 207

Buy: 205-197;

TGT1: 230-260 (15-60 days)

TGT2: 285-315 (6-12M)

TSL<189

Note: Consecutive closing below 189 for any reason, it may fall to 173-145-135 zone, where it can be again accumulated for better investment buying average.

Key Triggers:

Increase in cement prices and demand, specially in North/West (NW) India, where Ambuja Cement has strong presence.
Many more large infra projects like roads, metros, ports, airports and dedicated freight corridors are likely to come up in next few years in this NW region.
In the key NW market, Ambuja cement was able to increase prices substantially in the last few months, while raw material prices has come down due to depressed prices in commodities. This should help the company in margin expansion and improved bottom line.
We may also see merger of AC-Holcim-Lafrage into one single entity in the coming days, which will ensure better price discovery & other operational synergies amid less competition in India.
Post monsoon season, we may see much better demand recovery.

Thus looking ahead, decreasing capacity additions and improved demand due to expected overall economic/infrastructure boom by FY-16 onward, will be beneficial for all the cement companies and Ambuja Cement may be one of them.

As par BG metrics:

Current median valuation of Ambuja Cement may be around: 220

Projected fair valuations might be around: 250-290-330 (FY:16-18)