Cement stocks surge up to 9% after acquisition news of Ambuja, ACC – Brokerage sees up to 35% upside in these two scrips

Cement stocks in focus: Shares of the most cement companies have jumped up to 9 per cent on the BSE intraday on Monday, except for UltraTech Cement and Shree Cement, after the Adani group announced the acquisition of controlling stakes in Ambuja Cements and ACC Limited for $10.5 billion on Sunday.

Individually, Ambuja Cements shares jumped 3.5 per cent to Rs 371.4 per share, while ACC Ltd shares gained over 7 per cent to Rs 2265 per share on the BSE intraday. Conversely, heavyweights such as UltraTech and Shree Cement shares tumbled by 6 and around 4 per cent respectively.

In the broader markets, almost all cement companies’ shares gained, as India Cements soared most by over 9 per cent, followed by Mangalam Cement up over 7.5 per cent. While JK Lakshmi Cement, Dalmia Bharat, and Ramco Cement each surged by around 3, 2 and 1.5 per cent intraday today.

The Adani group announced that it had entered into definitive agreements for the acquisition of Switzerland-based Holcim Ltd`s entire stake in Ambuja Cements Ltd and ACC Ltd through an offshore special purpose vehicle.

The value for the Holcim stake and open offer consideration for Ambuja Cements and ACC is $10.5 billion, which makes this the largest ever acquisition by Adani, and India`s largest-ever M&A transaction in the infra and materials space.

Domestic brokerage firm Philip Capital being bullish on both Amubja and ACC, keeps estimates unchanged for both the stocks and upgrades target multiples for ACC from 13x to 15x and Ambuja to 18x from 16x.

The brokerage upgrades Ambuja to a Buy rating with a target price of Rs 440 per share, which implies an almost 23 per cent upside in the stock from Friday’s closing price, and maintained a Buy stance on ACC with target of Rs 2850 per share, upside almost 35 per cent.