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Axis Securities Report
Financial Performance
Ambuja Cements Ltd. reported volume/revenue/Ebitda growth of 23%/18%/39% YoY (above expectations), led by higher volume and efficiency gains during the quarter.
The company reported a profit of Rs 645 crore (above expectations), down 38% YoY owing to higher dividend income from subsidiary ACC Ltd., but up 28% on a QoQ basis.
Operational excellence initiatives are aiding in the reduction of operating costs, logistics costs, and expansion of Ebitda margins.
Ambuja Cements recorded an Ebitda margin of 20.1% (expectation of 20.3%) against 17.1% YoY. The quarter's volume stood at 9.1 million tonnes per annum, up 23% YoY and 12% QoQ.
Ambuja Cements' Ebitda/tonne stood at Rs 1,042, higher by 13%/7% YoY/QoQ and it reported blended realisation/tonne of Rs 5,197 against Rs 5,404 YoY, down 1%/4% QoQ/YoY.
Ambuja Cements' cost/tonne declined by 3%/7% QoQ/YoY to Rs 4,155 on account of operating leverage benefit, lower power/fuel costs, and lower staff costs.
Outlook:
Given the company's superior positioning in key markets of North, West, and East regions along with cost-saving initiatives it has undertaken and synergies with other group companies of Adani, growth momentum is expected to continue moving ahead.
Furthermore, factoring in the government's keen focus on developing infrastructure and low-cost affordable housing , revival in rural demand and increasing private capex, we expect Ambuja Cements to improve its performance going forward.
We expect the company to grow its volume/revenue/Ebitda/adjusted profit after tax at compound annual growth rate of 11%/11%/36%/19% over FY23-FY25E.
Valuation and Recommendation
The stock is currently trading at 16.5 times and 15.5 times FY24E/FY25E enterprise value/Ebitda.
We change our rating from 'Buy' to 'Hold' on the stock with a target price of Rs 455/share, (including Ambuja stake in ACC), implying a downside of 1% from the current market price.
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