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Result Synopsis

Ambuja Cements (ACEM) performance came as anticipated, Volume & NSR growth of 8% & flat y/y translates in revenue growth of 8% y/y to Rs42.6bn (v/s YSECe of Rs43bn). EBITDA came at Rs7.9bn (flat y/y) translates to Rs973/te against YSECe of Rs938/te). Reported PAT came at Rs5bn up by 2% y/y on account of higher other income (dividend from ACC) and exceptional items (Restructuring cost). For FY23, ACEM reported exceptional item of Rs1.62bn (includes Rs206mn as special incentives to employees, Rs559mn as IT transition cost and Rs807mn as restructuring cost).

In recent years, ACEM narrowed the efficiency gap with its peers by adopting cost- effective measures. Furthermore, the efficiencies are expected to improve with fresh setof investments in; 1) augmenting WHRS & RE capacities 2) Ramp up AFR usage 3)
Installing Fly ash dryers & other debottlenecking measures to improve kiln efficiencies 4) Higher Trade & blending ratio (80 & 85% currently). Therefore, we increased our EBITDA/PAT estimate by 4/10% for FY24 and 6/12% for FY25 on account of improving
efficiencies & higher other income (dividend from ACC). Management guided that all the ongoing & under pipeline expansion to get completed in next 18-24months, totaling the overall capacity close to ~40MTPA; includes a) 1.5MTPA at Ropar b) CAPEX of Rs35bn ($66/te) for ~7MTPA expansion in the east. Therefore, for all the announced expansion &efficiency measures, management envisaged a CAPEX outlay of Rs70bn (console) which can be funded through internal accruals. ACEM is a net cash company holding a significant cash & cash equivalent of Rs90bn as of Mar’23. Further, the promoter group committed Rs200bn towards subscribing share warrants, out of which Rs50bn has already been received. We value ACEM on SOTP based valuation with a standalone entity valued at 14x EV/EBITDA and ACEM’s stake in ACC at 10x EV/EBITDA on FY25E by adding Rs47bn net cash. Thus, we arrived at TP of Rs408 with a NEUTRAL rating.

Result Highlights

* Volume came in-line with YSECe, up by 8% y/y & 5% q/q to 8.1MT supported by an increase in blended cement and higher operational synergies with its subsidiary.
* NSR came flat y/y but lowered by 2% q/q (1% below YSECe) resulted in revenue miss of 1% to Rs42.5bn up by +8% y/y and +3% q/q in Q4FY23.
* EBITDA came at Rs7.9bn (4% above YSECe) in Q4FY23 came flat y/y but up by 26% q/q translates to EBITDA/te of Rs973 in Q4FY23.
* Despite power & other costs corrected by 7% & 22% y/y, the Total cost/te increased by 2% y/y due to surge in RM cost/te 51% y/y in Q4FY23.
* PAT came in-line at Rs5bn registering a growth of 2% y/y and 36% q/q in Q4FY23.

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