Ambuja Cement stock price: Ambuja is a good buy with a 5-10% correction; 12-15% increase possible in pharma: Hemang Jani
After Adani Group took a stake in Ambuja and became the second largest cement player, there was a lot of talk about the consolidation that there could be in the cement pack and share prices of smaller companies surged a little. How do you view the cement sector?
We have seen a dramatic turnaround in sentiment towards the cement sector given this development in which a) there was an acquisition followed by an open and posted offer, further infusion into the business and type of plans aggressive that the Adani Group needs to take the capacity to nearly about 140 million tons from nearly about 65 million odd tons means that eventually the company should put in place both the inorganic acquisition and biological acquisition and that’s why we’re seeing renewed action on some of the names.
We must understand that this is not an action based on the price trends of the immediate few quarters or on the trend of profitability. It’s more about which company might be a possible acquisition target and what kind of replacement value it will get when that happens. I’m not too comfortable going into some of these names that have been around like India Cement, Sanghi and a whole host of other companies.
But I think if we see a minor correction in names like Ambuja that would be a good entry because after seeing this type of capital injection and the expansion plans due to huge interest in this name so many the share of institutional investors as well as retail, another 5-10% correction in Ambuja would be a good entry point for short and long term investors.
How do you see this space? Some of the pharma names are coming back into the limelight and we are seeing some traction integrating into the pharma pack. In the field of health, what is your preference?
It’s a good thing that we finally see some action in the names of healthcare and pharmaceuticals, as the focus was more on domestically focused banks, cement, autos, etc. . Within health,
is something that we really like and we think that both in terms of the current capability and the new capability that they’ve added, the essential part of healthcare is doing pretty well with two or three other verticals.
“ Back to recommendation stories
We see a case for a 12-15% upside there and in the pharma pack we like names like Sun Pharma and Dr Reddy’s and we think even if he wasn’t in favor and there was some negative news on the pricing front in the US, overall at the current price some of these names, especially Sun Pharma, offer great risk reward.
What do you think of the news of M&M and the acquisition of shares of Swaraj Engines at a price of around Rs 1400, almost a discount of 17.5%?
The Mahindra Group has a substantial stake there and they are trying to buy out the remaining stake. This is going to be a small thing from an overall M&M perspective and we’ve loved the stock for some time and recently at our AGIC conference the CEO gave a very nice presentation on overall growth plans, investments and capital allocation. We like the name and think it offers good upside potential from the current price.
India’s footwear market penetration stands at a meager 2%. Global giants like Nike don’t even make their own shoes. Everything is outsourced. What could be the potential of the particular shoe market that Metro is about to capitalize on?
Interestingly, the average penetration is less than two pairs and nowadays we see people having multiple pairs for formal, semi-formal, party options and your normal body condition. The market is dominated by foreign brands like Nike, Adidas, Sketchers, etc.
Some of the companies like Campus and Metro have both done a great job in terms of creating good brands and manufacturing as a solution for themselves. They came out very strong after Covid. We believe that due to the kind of potential that exists both in terms of Tier 2, Tier 3 and Metros, some of these businesses will benefit.
For Campus and Metro, we see growth of around 20-25% in stock price and around 25-30% CAGR over the next two to three years. They present a great opportunity, especially in the midcap space.
Hospital stocks are reassessed. What is the underlying theme here? What excites the markets?
Some things; The first is that if you look at some of the major hospital chains, it takes them a bit of time to reach a certain level of maturity in terms of revenue and EBITDA level. When you look
they have done this successfully over the past three to four years.
Other than that when you see occupancy levels and post Covid the kind of awareness and visibility that exists both pre-illness and post-illness there is a definite amount of visibility and traction that is evident in the numbers. Also, some of these companies, particularly Apollo, have created other businesses, whether it’s their chain of pharmacies and a whole host of other businesses that could possibly create some sort of shareholder value . So I think healthcare as a space is underrepresented across the country and in market cap and at some point the top three to four hospital chains will have a significant market cap and we think that Apollo Hospital presents an excellent opportunity to participate.