Ambuja Cement Q4 Results Review - Strong Volume Growth At The Expense Of Prices: Systematix

Systematix Research Report

Ambuja Cements Ltd. came out with a mixed bag where revenue and profit after tax were largely in line with expectations but missed Ebitda estimates due to substantially high purchases of stocks. With the successful conclusion three acquisitions (Sanghi Industries Ltd., Asian Cements and grinding unit in Tuticorin), Adani group's cement capacity increased by 11.4 million tonner per annum taking total capacity to 78.9 mtpa.

Standalone revenue up by 12.3% YoY (+7.7% QoQ) to Rs 47.8 billion versus our estimate of Rs 45.7 billion. This growth was supported by healthy volumes as realisations slipped. Volume up by 17.3% YoY (+15.9% QoQ) to 9.5 million tonne (our estimate 8.8 mt).

Blended Realisation/tonne declined 4.2% YoY and 7.1% QoQ. Ebitda was up a marginal 1.2% YoY (-6.3% QoQ) to Rs 8.0 billion; 6.6% below our estimate of Rs 8.5 billion. Ebitda/tonne dipped 13.7% YoY to Rs 840 due to exceptionally high purchases which rose 31% QoQ.

However, other cost items like plant and fuel, freight, employee, and other expenses witnessed a good 11%,1%, 17%, 18% decline sequentially on a per tonne basis. Adjusted profit after tax was down 6.0% YoY (+6.7% QoQ) to Rs 5.5 billion versus our estimate of Rs 5.1 billion.

Capacity utilisation improved from 84% to 95% YoY. We keep our FY25 estimates largely unchanged but raise our FY26E Ebitda/PAT estimates to factor in higher P&F and freight cost reduction.

We raise our SOTP based target price to Rs 652 from earlier Rs 583 where we value its core standalone business by 16 times enterprise value/Ebitda on FY26E (Rs 550/share) and its stake in ACC by giving 30% holding discount which gives a value of Rs 103/share. We maintain a Hold on the stock owing to rich valuations.

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