Ambuja Cements - Poised To Become The Highest Ebitda/Tonne Company: Nirmal Bang

Nirmal Bang Report

Well poised for growth: Installed capacity of 93 million tonnes per annum (14 mtpa added in the last 18 months). It is on track to achieve 140 mtpa by 2028-end with 20 mtpa under execution and 41 mtpa at various stages of execution.

Improves cost leadership: Ambuja Cements reported an Ebitda/tonne of Rs 1,081 in FY24 (Rs 753 in FY23), owing mostly to lower power and fuel costs and operating leverage benefits. We expect Ebitda/tonne to increase to Rs 1,433 by FY26E mainly due to ongoing efforts to improve cost efficiency. The management aims to save Rs 500/tonne in total cost by FY28E compared to FY24 with an Ebitda/tonne target of Rs 1,500+. The cost-saving initiatives would be principally led by increasing the proportion of lower cost green power (targets 28%+ of total by FY25E and 60% by FY28E), raising the share of captive coal, further optimising logistics and raw material costs (driven by group synergies) and boosting the share of premium products.

Strategic acquisition to enhance footprint in southern markets: Ambuja’s panIndia capacity market share stands at ~11% as of FY24, with share in South India being the lowest at ~3%. The latest acquisition would strengthen its presence in the highly fragmented but fast-growing southern markets such as Andhra Pradesh/Telangana, where it has limited presence currently. The acquisition will improve market share in South India by ~8% to ~15% and pan-India market share by ~2%.

Ambuja’s major strengths are consistently operating at more than 80% capacity utilisation, robust brand equity with pan-India presence, cost-effective operations and a strong balance sheet. With an ambitious expansion plan and focus on cost savings (direct sales and the establishment of bulk terminals in critical locations will minimise lead distance besides improving market costs, resulting in higher margins), we anticipate solid revenue growth during FY25-FY28 despite a high base. As a result, we reiterate Buy on Ambuja with a revised target price of Rs1,010 d at 12 times March-26 enterprise /Ebitda.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.