Financial Daily from THE HINDU group of publications
Sunday, May 15, 2005
Financial Daily from THE HINDU group of publications Sunday, May 15, 2005 |
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Investment World
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Stocks Markets - Recommendation ACC: Buy
AN investment may be considered in the stock of ACC with a one- to two-year perspective. A firm undertone in prices and robust growth in volumes are likely to drive earnings growth. As Holcim of Switzerland - the largest cement producer in the world - gets involved, we also expect improvement in operating efficiencies. Holcim is also likely to raise its stake through the creeping acquisition route over the next three years through Ambuja Cement India in which it has a 67-per cent stake (Gujarat Ambuja Cements holds 33 per cent). It may prefer to exercise this option, especially when the stock rules weak. This cushions downside risk. We also expect a merger between Ambuja Cement Eastern and ACC, which is a positive for the latter; the merger would push Ambuja Cement's (and effectively Holcim's) stake in ACC by a few percentage points. The merged entity, with a capacity of close to 25 million tonnes, would also have a superior geographic footprint. Rising energy and transportation costs over the next two quarters are the principal risks to our recommendation.
S. Vaidya Nathan
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