Adani Deal Delay Clouds Orient Cement Outlook

The financial performance of Orient Cement in the quarter ending March 31, 2025, has elicited a largely bearish sentiment from brokerage firms tracking the stock.

The company reported a significant 38.31 per cent year-on-year decline in its net profit, settling at Rs 42.07 crore. This downturn was accompanied by a 7.08 per cent year-on-year slump in sales, which stood at Rs 825.19 crore, and a 28.88 per cent drop in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) to Rs 110.68 crore for the reported period. This subdued performance comes amidst a backdrop of anticipated changes in the company’s ownership structure, specifically the delayed transfer of a substantial stake to the Adani Group. Investor reaction to these earnings was muted, with shares of Orient Cement initially declining by 2 per cent to Rs 351.25 before stabilising. The company’s market capitalisation for the day hovered around Rs 7,350 crore. Despite the lacklustre financial results, Orient Cement’s board of directors has declared a dividend of Rs 0.50 per share for the fiscal year ending March 31, 2025, with the payout expected within 30 days of the declaration, although the record date for this distribution is yet to be announced.

Elara Capital, in its post-earnings analysis, suggests a potential for improved performance in the future, contingent upon enhanced demand, anticipated synergy benefits arising from the Adani Group’s involvement, and operational leverage. However, the brokerage firm remains cautious, highlighting Orient Cement’s significant exposure to the persistently oversupplied South Indian cement market, which could continue to exert downward pressure on the company’s overall financial health. While Elara acknowledges that the expected open offer, triggered by the Adani Group’s acquisition of a controlling stake, may establish a near-term floor for the stock price, the current trading levels offer limited arbitrage opportunities for investors. The brokerage firm reiterates its concerns regarding the long-term overhang posed by the oversupplied conditions in the South.

Consequently, Elara Capital maintains its ‘sell’ rating on Orient Cement’s stock with an unchanged target price of Rs 225, implying a substantial downside of approximately 37 per cent from the current trading levels. The brokerage has largely retained its existing earnings estimates for the company. The impending change in ownership dates back to October 2024, when Ambuja Cements, a company under the Adani Group’s umbrella, entered into a share purchase agreement with Orient Cement’s promoter group and certain other shareholders. The agreement outlined the acquisition of a 46.80 per cent stake in Orient Cement at a price of Rs 394.5 per share. This acquisition received the necessary approval from the Competition Commission of India (CCI) on March 4, 2025, clearing a significant regulatory hurdle. However, the actual transfer of the stake is yet to be executed, creating a period of uncertainty and potentially impacting the company’s operational and strategic decisions. In contrast to Elara Capital’s bearish outlook, Antique Stock Broking offers a more optimistic perspective, particularly concerning the potential for improved profitability under the new ownership of the Adani Group. Antique anticipates that Ambuja Cement may announce expansion plans for Orient Cement and will likely focus on enhancing the company’s profitability post the acquisition of the controlling stake. Factoring in the expectation of better profitability under the Adani Group’s management, Antique Stock Broking has revised its EBITDA estimates for fiscal years 2026 and 2027 upwards by 6-7 per cent.

Consequently, the brokerage has also increased its target price for Orient Cement’s stock to Rs 320 (from the previous target of Rs 295), based on an unchanged 10 times its FY27E EV/EBITDA (Enterprise Value to EBITDA). Despite this revised target price, Antique maintains a ‘hold’ rating on the stock, suggesting a more neutral stance. The divergent views from these brokerage firms highlight the uncertainty surrounding Orient Cement’s immediate future, which is heavily contingent on the timely completion of the Adani Group’s stake acquisition and the subsequent strategic direction adopted by the new management. While the potential for synergy benefits and improved operational efficiencies under the Adani Group’s leadership offers a glimmer of hope for investors, the persistent challenges in the crucial South Indian market remain a significant headwind that cannot be ignored. The actual trajectory of Orient Cement’s stock price will likely be determined by the interplay of these factors and the market’s assessment of the Adani Group’s ability to turnaround the company’s performance in a competitive and currently oversupplied regional market, all while navigating the broader economic landscape and infrastructure development trends that influence cement demand.

Adani Deal Delay Clouds Orient Cement Outlook