Ambuja Cements, Just Dial, Indian Hotels & Cipla: Here’s what analysts said on these 4 stocks

Domestic brokerages have come out with updates on a couple of listed stocks. While Ambuja Cements is in news on reports the cement maker and  its subsidiary ACC have shutdown their Darlaghat and Gagal plants, two brokerages met with Just Dial and Cipla managements, respectively, to understand the demand outlook. In case of Indian Hotels, a domestic brokerage has re-looked at the company’s “AHVAAN 2025” strategy, with the recent set of quarterly numbers.  

Ambuja Cements| Nuvama | Buy | Rs 601

Nuvama said, as per media articles, Ambuja Cements and its subsidiary ACC have shutdown their Darlaghat and Gagal plants, respectively, both located in the north-Indian state of Himachal Pradesh. Apart from the articles, interactions with dealers in the region suggest that the steep transportation costs in the state (way higher than market rates) is at the crux of the dispute between management and transporters.

The obvious hit on volumes (due to production loss) is a short-term pain for Ambuja Cements. “Yet, freight rates, if forced down, will indeed be a long-term positive. Hence, we retain ‘BUY’ on Ambuja Cements with an unchanged target of Rs 601. Should the dispute sustain, the cement shortage in the region may help the industry take price hikes,” it said.

Nuvama said the combined clinker capacity at Darlaghat and Gagal is 8 mtpa, i.e. 57 per cent of its capacity in north India and 19 per cent of total clinker capacity of Ambuja Cements (consolidated). The affected capacities are 9 per cent of the overall industry clinker capacity in north India. In cement-terms, the affected capacities are 34 per cent of Ambuja Cements consolidated capacity in the north and 5 per cent of the cement industry’s capacity in north India.

Production loss at Ambuja Cements may drive incremental volume and potential price hikes at regional peers, Nuvama said. If Ambuja Cements achieves success in pulling down the debated freight rates, it will definitely be seen as a long-term positive. Investors will cheer Adani Group’s ability to rationalise the legacy cost structure of Ambuja Cements (consolidated) and will instil confidence of further cost rationalisation in other areas of operations, Nuvama said.

Cipla | Motilal Oswal Securities | Neutral | Target Rs 1,180

Brokerage Motilal Oswal Securities said it met the Cipla management to understand its outlook on the business. It said Cipla is expanding its product offerings (own and in-licensing). It is recalibrating the positioning of products into Prescription, Trade Generics, and Consumer Healthcare categories in India, Motilal Oswal said.

Product development and approvals remain on track for differentiated launches in US Generics, which will drive growth till FY25, it added.

Motilal Oswal said the increased contribution to profitability from US generics is expected to keep the overall valuation multiple under check, given that the generics business trades at a much lower multiple as compared to branded generics.

The regulatory risk in US Generics remains high at the industry level, demanding a better risk-reward ratio, it said adding that valuation provides limited upside from current levels.

“Overall, we expect 18 per cent earning CAGR over FY22-24, led by 5 per cent/22 per cent sales CAGR in the India/US segment and 240 bps margin expansion. We value Cipla at 23 times 12-months forward earnings and add Rs 40 (NPV related to g-Revlimid) to arrive at our target of Rs 1,180. We maintain our Neutral stance, given the limited upside from current levels,” it said.

India Hotels | ICICI Securities | ADD | Target Rs 366

In May, Indian Hotels (IHCL) had unveiled its “AHVAAN 2025” strategy, which essentially focuses on four key pillars including reaching a total of 300-plus  hotels across the portfolio, clocking a consolidated Ebitda margin of 33 per cent by FY26E with 35 per cent Ebitda share from management contracts and new businesses and achieving a 50:50 ratio between owned/leased and management contract room keys. It also talked about retaining a net cash balance sheet while pursuing its growth plans. ICICI Securities said buoyed by industry tailwinds and company’s own brand strength and cost savings initiatives, the company’s H1FY23 consolidated revenue has grown by 23 per cent over H1FY20 (pre-Covid) levels, with H1FY23 Ebitda growing 100 per cent over H1FY20 levels, with H1FY23 domestic ARR up 32 per cent and RevPAR up 35 per cent compared to H1FY20 levels.

“With demand momentum sustaining in Q3FY23 as well with strong leisure demand and increased business travel, we expect IHCL to clock H2FY23 revenue of Rs 2740 crore with an Ebitda of Rs 960 crore (not comparable to H2FY20 owing to Covid impact from February 20 onwards). We retain our ADD rating on IHCL with a revised SoTP-based target price of Rs366 per share (earlier Rs 351) as we roll forward to Dec’24 EV/Ebitda (earlier Sep’24 EV/Ebitda ) at an unchanged EV/Ebitda multiple of 23 times considering strong ARR trajectory,” it said. 

Just Dial | Nuvama | Hold | Target Rs 672

Nuvama Institutional Equities interacted with Just Dial’s CFO Abhishek Bansal to understand the key trends and growth outlook for Just Dial.  The management said growth in active paid campaigns has improved with traction in monthly payment plans. Just Dial has ramped up its sales force, making employee expenses front-ended and leading to lower margins. This will improve as the workforce matures, Nuvama said. 

The company is actively investing in its new product initiatives and new features within existing products, Nuvama said adding that  while the company’s turnaround is visible, consistent growth is crucial for attracting investor interest.

For now, it has maintained ‘HOLD’ with a target of Rs 672.

“Just Dial’s improving performance in the core business has recouped some of the lost confidence. While Just Dial’s metrics inch towards pre-covid levels, we believe the company needs to demonstrate consistent performance in business execution. We are building in 19.8 per cent revenue CAGR over FY22-FY25E and expect margin to improve from minus 0.3 per cent in FY22 to 20.9 per cent in FY25, led by growth and operating leverage. The stock is trading at an attractive 17.7 times FY24E EPS and cash of Rs 450/share constitutes 75 per cent of the CMP (Rs 594),” it said.

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