CLSA Upgrades Ambuja Cements And ACC On Merger Talks

Ambuja Cement Ltd. and ACC Ltd.'s decision to consider a possible merger has prompted brokerage house CLSA to upgrade their ratings. While Ambuja Cement's ratings have been upgraded from ‘sell' to ‘buy', ACC's has been upgraded to ‘outperform' from a ‘sell' call.

The brokerage house has increased Ambuja Cements' target price by more than 40 percent to Rs 310 per share. Target price on ACC has been revised upwards by nearly 50 percent to Rs 1,925 apiece.

Terming the merger as a logical move, the brokerage house said it would help drive synergies and lead to savings across the board. It also upgraded its earnings-per-share estimates by 5-11 percent for both the companies, citing higher volumes and realisations.

ACC and Ambuja Cements had informed the exchanges about evaluating a potential merger between the two companies, “with a view to combine the strengths of both businesses.” A special committee comprising largely independent directors has been constituted to commence the evaluation, ACC and Ambuja Cements said in separate statements on Friday.

CLSA had downgraded both the stocks post demonetisation, raising concerns over demand and pricing power, but now says there has been a quicker-than-anticipated recovery.

Ambuja Cement shot up as much as 8.15 percent on Monday to a level last seen in September 2016, while ACC rose as much as 5.82 percent, its highest in more than two years.