Brokers cut price targets on Adani Ports, Ambuja and ACC

Brokerages have trimmed their price targets on three Adani Group stocks — Adani Ports, Ambuja Cements, and ACC — in the range of 2-15% after their third-quarter results. A reason for the price target cuts by some analysts is the uncertainty over the group’s growth plans in the wake of the severe sell-off in the stocks triggered by the Hindenburg Research report on January 24.

ADANI PORTS
While analysts retained their bullish calls on Adani Ports, they cut price targets after the company reported a 16% year-on-year drop in consolidated net profit for three months ended December 2022.


“The December quarter results were in-line, and the near-term focus is on deleveraging which is a poeven after the company surprised the Street with better-than-expected third quarter earnings. This translates into an upside of 28% over Ambuja’s Thursday closing price of `357.90 on the NSE. It has also lost 30% of its value in the previous two weeks.

“While the management spoke on huge capex spends for the next 18 months, there was no clear update to determine progress/outlook on expansions in near term,” said Jefferies, retaining its buy rating. “Given Ambuja/ACC are already operating at 85%+ utilisation, a clearer outlook on expansions would have driven comfort on volume estimates.”

Of the 23 analysts who reviewed the Q3 earnings, nine of them had a buy rating and 10 remained neutral. Four analysts had a sell call on the stock. Continued on ??Smart Investing sitive sign,” said Goldman Sachs after cutting its price targets. Of the 14 analysts who reviewed the Q3 earnings, 13 had a buy rating on the stock. However, analysts cut consensus price targets by 15% to `802.88 per share to reflect weak Q3 performance, showed a Bloomberg poll of analysts.

The price target implies an upside of 38% over its Friday closing price of `581.65 per share on the NSE “Q3FY23 results were weak due to higher consolidation expenses, and we lower FY23-25 EPS estimates by 5%. Adani Ports’ share price is more linked to group issues currently,” said Kotak Institutional Equities in a client note. “`450-650 is the implied range, though we believe as fundamentals come back to focus it should re-rate to our target price.”

AMBUJA CEMENTS
On aggregate, analysts cut consensus price targets by 11% to `457.94 even after the company surprised the Street with better-than-expected third quarter earnings. This translates into an upside of 28% over Ambuja’s Thursday closing price of `357.90 on the NSE. It has also lost 30% of its value in the previous two weeks.

“While the management spoke on huge capex spends for the next 18 months, there was no clear update to determine progress/outlook on expansions in near term,” said Jefferies, retaining its buy rating. “Given Ambuja/ACC are already operating at 85%+ utilisation, a clearer outlook on expansions would have driven comfort on volume estimates.”

Of the 23 analysts who reviewed the Q3 earnings, nine of them had a buy rating and 10 remained neutral. Four analysts had a sell call on the stock.

“There needs to be better clarity on capex (both for capacity enhancements and operational efficiencies improvement), which is missing,” said Motilal Oswal Financial Services, while cutting its target price citing rich valuations.

The brokerage cut its FY25 earnings estimate by 20% citing issue of convertible warrants to the promoter group entity, which could be subscribed and converted into equity shares in FY25

ACC
Half of the 34 analysts who reviewed ACC’s Q3 ratings gave a buy rating on the stock. Two had a sell call while 15 of them stayed neutral.

However, analysts cut the consensus price target by 1.8% to `2,281.35 per share after Q3 earnings. This shows an upside potential of 19% from Thursday’s close of `1,914, down 3% from the previous close.