Ambuja Cements Q2 Results Review - Operating Performance Inline; Volume Below Estimate: Motilal Oswal

Motilal Oswal Report

Ambuja Cements Ltd.'s (standalone) Ebitda came in at Rs 7.7 billion versus our estimate of Rs 8.1 billion due to lower-than-expected volume (5% miss). Ebitda/tonne came in at Rs 1,020 (estimate: Rs 1,010) and operating profit margin stood at 19.5% (in line). However, adjusted profit after tax stood at Rs 6.4 billion (22% above our estimate), led by a sharp increase in ‘other income’ (up eight times YoY).

Consolidated sales volume grew by a mere 2% YoY, indicating a market share loss for the group.

The management reiterated its guidance of doubling grinding capacity to 140 million tonnes per annum by FY28. Ambuja Cements outlined its grinding capacity addition plan of 19.2 mtpa, which will largely be commissioned post Q2 FY25 in a phased manner.

The completion of Sanghi Industries’ acquisition (likely to be completed in Q3 FY24) and commissioning of a few capacities (1 mtpa each at Ametha and Dahej) in H2 FY24 are expected to drive volume growth for the company.

We upgrade our FY24 earnings per share estimates by 13%, given the higher ‘other Income’ while maintaining our Ebitda estimates.

Ambuja Cements trades at 14.3 times/13.2 times/11.6 times FY24E/FY25E/FY26E enterprise value/Ebitda.

We reiterate our 'Neutral' rating with a target price of Rs 450 based on 14 times September-25E EV/Ebitda.

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