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Our view and valuation:

* Ambuja delivered strong set of numbers for Q2CY21, volumes grew +53.2%YoY and absolute EBITDA outperformed by +61.2%YoY which was broadly in‐line with our estimates (‐6% volumes & +4% EBITDA). EBITDA margin came in at 28.5% up by 149bps QoQ/ 112bps YoY on the back of lower clinkerisation cost.  

* We have kept our estimates unchanged but upward recalibration of ACC estimates lead to accretion of higher holding value for Ambuja resulting in estimates inching northward. At CMP of Rs402, Ambuja is trading at EV/EBITDA of 15.1x on CY22E. On the backdrop of robust cement demand scenario along with strong net sales realization and  cost control measures taken by company, we assign an EV/EBITDA multiple of 16x to its standalone business on CY22E and 20% holdco discount to its stake in ACC. Accordingly, we arrive at a TP of Rs422/share for Ambuja, translating into 5% upside. We have an ADD rating on the stock.

Result Highlights:

* Ambuja achieved volumes of 6.42MT for Q2CY21 representing growth of 53.2%YoY while was 6% lower by our estimates. Cement NSR/te grew by 2%YoY to Rs5203/te.  

* Net sales for the company stood at Rs 33.7bn reflecting a growth of 54.9%YoY which was broadly in‐line with our estimates (2% below).

* Company delivered extremely strong outperformance on EBITDA level with absolute EBITDA for the quarter at Rs9.6bn (4% above our estimates) and EBITDA growth stood at 61.2%YoY. Per ton profitability on blended basis came in at Rs1,495 (vs. est. of Rs 1504) translating into healthy improvement of 5.2%YoY and 9.7%QoQ. Better pricing and lower clinker cost led to strong operational performance for the company.

* Net profit for the company stood at Rs7.2bn which grew by 59%YoY while was above our estimates by 18% on the back of higher other income.

* Sales of value‐added products are up by 69%YoY in Q2CY21 and now contributes ~12% of total sales.

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