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Ambuja Cement's standalone EBITDA came in-line with consensus estimates and grew 2.5x YoY on a low base (down 19% QoQ) to Rs7.7bn in Q2FY24. EBITDA/ton stood at Rs1,020 (down 2% QoQ). Mgmt. has reiterated its key focus areas: i) doubling of capacity from ~68mt to 140mt by FY28; ii) determining a target to set up 40mt clinker capacity (~10 lines) with 35 new grinding units to achieve capacity target by FY28; iii) aiming EBITDA/ton of Rs1,450 by FY28 by optimizing manufacturing and logistics costs and through group synergies. The long-term growth prospects and healthy BS along with the recent stock price correction (~15% in the last three months) offer a good entry point. Hence, we upgrade the stock to BUY from Hold. Factoring in the recent cement price hike, we have raised our EBITDA est. by 4-9% in FY24-26E and revised Sep-24E TP to Rs515 (16x EV/E) post the quarterly roll-over.

Ambuja Cement: Financial Snapshot ( Standalone)

Result Summary

Ambuja Cement’s standalone volume grew 7.5% YoY to 7.6 MT, whereas realizations remained flat YoY (+1% QoQ) to Rs5,237/ton. Total cost/ton fell 12% YoY (+2% QoQ) to Rs4,217, marginally above our estimates. Consolidated vol. grew by mere 3% YoY to 13.1mt due to a challenging July month in North and heavy monsoon in the Central region. Standalone FCF generation stood at Rs2.8bn post working capital blockage of Rs2.2bn and capex spend of Rs9.2bn in H1FY23. Management has maintained its capex guidance of Rs75bn in FY24 (Rs25bn in ACC and Rs50bn in Ambuja Cement). Consolidated cash and cash equivalents declined by Rs1.6bn to Rs11.7bn.

What we liked: Unveiling more details on capacity expansion and various cost initiatives.

What we did not like: Lower than the industry's volume growth.

Key takeaways from the earnings callProject updates: 1) As mentioned earlier, Ambuja Cement is setting up 40mt of clinker capacity (10 lines, large part is Brownfield) and 35 grinding units (GUs). For the 4mt Bhatapara clinker line, the GUs earmarked are Sankrail and Farakka; and for the 4mt Maratha clinker line, the GUs earmarked are Jalgaon, Amaravati and SalaiBanwa. On announced expansion, the company is targeting to commission 12mt/7mt grinding capacities in H2FY25/FY26. Sanghi's acquisition is expected to be completed by Q3FY24 (vs. Q4FY24 earlier). 2) Mgmt. is targeting cost saving worth Rs400/ton – Rs100/ton has already been kicked in, while the balance will be span across the next 12-36 months. Mgmt. is targeting to increase WHRS capacity to 175MW by Mar-25 (vs. 90MW currently). Besides, 200MW renewable power generation is expected in Gujarat by Mar-24. Mgmt. is targeting primary lead reduction of ~100km. 3) Mgmt. has maintained vol. guidance of 10-12% YoY going ahead. 4) MSA vol. were ~2.4mt (~1.2mt each in ACC and Ambuja) in Q2FY24.

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