Ambuja Cements Q2 Review - Beats Estimates; Focus Remains On Cost Optimisation; Maintain Buy: Motilal Oswal

Motilal Oswal Report

Ambuja Cements Ltd.’s Q2 FY25 earnings beat estimates, led by higher volumes (4% above estimates) and higher incentive incomes. Consolidated Ebitda declined 15% YoY to Rs 11.1 billion (38% beat; however, Ebitda adjusted for incentive income of Rs 1.4 billion was ~21% above our estimates). Ebitda/tonne stood at Rs 780 (versus estimate Rs 584; Ebitda/tonne at Rs 684 adjusted for higher incentives). Adjusted profit after tax declined 33% YoY to Rs 5.3 billion (estimate Rs 3.7 billion).

Ambuja Cement’s consolidated grinding capacity will increase to ~97 mtpa (versus 89 mtpa at present) after completion of acquisition of Orient Cement. Further, ongoing brownfield expansions of 4.0 mtpa/6.4 mtpa of clinker/grinding in the east region are expected to be completed by FY25-end. The company’s aims to increase its market share from ~15% currently to ~20% by FY28E.

We reduce FY26/27E Ebitda by 4% each on lower cement price assumptions and EPS estimates are getting cut by 11%/8% for FY26/27 (5% for FY25 on higher depreciation).

We expect the company to benefit from recent acquisitions (Penna Cement and Orient Cement). Ambuja Cements trades at 18x/14x FY26E/FY27E EV/Ebitda (consolidated). We maintain our Buy rating with a target price of Rs 710, based on 20 times Sep’26E EV/Ebitda.

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