Ambuja Cement - Focused On Expansions, Cost Reductions: HDFC Securities

HDFC Securities Institutional Equities

We met with the CFO of Ambuja Cements Ltd. The management outlined its various projects and how these would lead to its consolidated operating cost reduction by Rs 530/million tonne to Rs 3650/mt by FY28 (over Q4 FY24). Ambuja Cement estimates major savings from energy cost reduction, followed by logistics and raw material costs decline, gradually till FY28.

Ambuja Cement has also worked out its organic expansion plans that will expand its cement capacity to 140 million metric tonne in FY28E (75% increase over FY24 end).

We have detailed the key takeaways in the subsequent paragraphs. Most capacities should come on stream in FY27/28E, while major benefits from cost reduction programs should materialise from FY26E onwards, in our view.

Ambuja Cements has guided for a total capex of ~Rs 650 billion in these four years. We maintain our Add rating on the company with an unchanged target price of Rs 620/share (16.5 times consolidated FY26E Ebitda).

We estimate Ambuja will deliver 13.5% volume CAGR during FY24-26, driven by Sanghi ramp-up and upcoming expansions. Supported by gradual savings from ongoing cost reduction programs, we estimate unit Ebitda will expand to Rs 1,290/mt in FY26E.

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