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PAT growth owing to one offs, core business remained in line with expectations

* Q3FY25 revenues reported at INR50,432 Mn, (vs CEBPL est. INR 48,192 Mn), the revenue includes the government grants of INR 1,931 Mn, up 13.6% YoY and 19.7% QoQ. Total volumes for Q3 stood at 10.1 Mnt, was up 23.2% YoY and 16.1% QoQ.

* EBITDA for Q3FY25 reported at INR6,006 Mn, (vs CEBPL est. INR6,632 Mn), down 29.4% YoY and 11.7% QoQ. EBITDA/t for Q3 came at INR595/t, down 42.7% YoY and 24.0% QoQ. EBITDA Margins for the quarter was 11.9% (vs CEBPL est. 13.8%), was down 726bps YoY and 424bps QoQ.

* PAT for Q3FY25 reported at INR17,580 Mn, (vs CEBPL est. INR4,687 Mn),driven by higher other income of INR 7,717 Mn and tax credit of INR (6,740) Mn, up 242.2% YoY and 251.1% QoQ. EPS for Q3FY25 was INR7.1.

Expecting volume to grow at a CAGR of 8.7% driven by focus on capturing All India market share through capacity expansions: Ambuja Cement's consolidated capacity is projected to grow at a CAGR of 16.1% from FY24 to FY28, reaching 140 Mnt by FY28, up from 77 Mnt by the end of FY24. The company has already completed the acquisition of 27 Mnt of capacity, including the Orient acquisition, which will increase its total capacity to 102 Mnt by the end of Q4FY25, with allocated capex of INR 80,000 Mn in FY25. We believe this capacity expansion, along with increased market share, will drive a volume CAGR of 8.7% from FY24 to FY27.

Strengthening EBITDA/t via operational efficiencies: We believe the management is on track to achieve its total cost target of INR 3,650/t by FY28, from INR 4,232/t currently. The investment in 1,000 MW of renewable energy, expected to be commissioned by FY26, is anticipated to contribute approximately INR 100/t in cost reduction for power and fuel. Additionally, the company plans to add 40 new grinding units, which will result in benefits in lead distance and an expected INR 120/t reduction in overall costs. Furthermore, company is entering in long term agreements with raw material suppliers. We believe these cost reduction initiatives will enable the company to grow its EBITDA/t above INR980/t by FY27.

View & Valuation: We revise our FY26/27 EPS estimates by 1.8%/3.0% while upgrading our rating to ‘BUY’ with a revised TP of INR600, valuing on SOTP with a holding company discount of 25% and EV/EBITDA multiple of 22x. We believe ACEM is well-positioned to capitalize on the government's increased capex on infrastructure spending. With its capacity expansion plan, strategic focus on acquisition opportunities, and a positive cement market outlook, the company is expected to grow faster than the industry.

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