Diwali 2024: Ambuja Cements To Reliance Industries Among Top 10 Mahurat Stock Picks By PL Capital

PL Capital Report

Ambuja Cement

Current market price: Rs 555 | Target price: Rs 756 | Mcap: Rs 1,219.3 billion

Ambuja Cements Ltd. is focused on led by-

1. Maximizing throughput from existing facilities,

2. 17.6 million tonnes per annum addition via inorganic route in past two years and

3. Organic capacity addition of 6mtpa by end FY25 and another 33mtpa by end FY27 to achieve targeted 140 mtpa by FY28E.

Ambuja Cements is working towards cost savings of ~Rs 500/tonne to be achieved by FY28E led by-

1. Improving green power mix (incl. WHRS),

2. Captive coal mines,

3. Long term procurement of critical raw material, and

4. Logistical synergies aided by addition of railway wagons and improving plant network across India.

Ambuja Cement seems well placed given strong balance sheet and excellent execution. We estimate 25%/21% Ebitda/PAT CAGR over FY24-27E. Stock trades at enterprise value/ Ebitda of 10.4 times and 9.3 times on FY26E/27E.

Cipla

Current market price: Rs 1,487 | Target price: Rs 1,680 | Mcap: Rs 1,200.9 billion

We continue to remain positive on key segments growth including India and U.S. given-

1. Strong traction in respiratory & other portfolios,

2. Potential of double-digit growth in domestic formulations and

3. Sustainability of current US revenues.

We believe delay in some key launches like gAdvair and gAbraxane will be offset by ramp-up in gRevlimid and gAlbuterol while new launches like gLanreotide are likely to further aid US revenues.

We expect 10% EPS CAGR over FY24-26E. At current market price, stock is trading 23.5x FY27E EPS. Any further FDA escalation to Indore unit and price erosion in key products in the US will be the main risk to our call.

Reliance Industries

Current market price: Rs 2,677 | Target price: Rs 2,942 | Mcap: Rs 18,112.9 billion

While Reliance Industries Ltd.’s core business is likely to remain muted with weak refining and petchem outlook in near term, gas production is expected to remain stable at ~28-30 mmscmd with a realization of ~$10/metric million British thermal unit. Jio’s average revenue per user rose 7% QoQ to Rs 195 and should improve over the next two quarters too due to the tariff hike undertaken by the company.

Retail is also likely to continue its steady performance. On a consolidated basis, we estimate an Ebitda of Rs 1,538/1,700/1,836 billion for FY25/26/27E with 12% EPS CAGR over FY25-27E.

Our estimates are not factoring in numbers of new energy business where RIL is investing Rs 750 billion. Demerger of Retail/ Jio Platforms and more clarity of new energy businesses will improve outlook.

Click on the attachment to read the full list of Diwali Picks by PL Capital:

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