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Ambuja Cements Ltd. Q2FY25 volumes came at INR8.7mnt, up 14.8% YoY but down 6.5% QoQ, driven by high acceptance of premium products and Offering value added solutions beyond cement. Revenue for quarter came at INR42,132mn, up 6.1% YoY but down 6.7% QoQ. EBITDA/t for the quarter came at INR782/t, down 23.3% YoY but up 12.6% QoQ. The YoY decline in EBITDA/t was mainly led by Raw material cost. PAT for quarter stood at INR5,007mn, down 22.2% YoY and 12.3% QoQ. EPS for the quarter was INR2.0.

* Capex Plan: Management has guided a capex of INR70,000-80,000mn for FY25E, with INR35,000mn spent in H1FY25 and the remaining to be deployed in H2FY25E. The company is expanding its cement capacity by 17 MTPA, with ongoing projects expected to complete by FY26E. Additionally, the board has approved the installation of 14 Cement Grinding Units (2.4 MTPA each) across 14 locations, with land acquisition and statutory approvals in progress, targeting completion by FY28E, bringing the total capacity to 140 MTPA. Key developments include the commissioning of a 4 MTPA clinker line (Line 3) at Bhatapara, Chhattisgarh, and a 4.8 MTPA grinding facility split between Sankrail and Farakka by Q4FY25E. Brownfield expansions at Bhatinda (Punjab), Marwar (Rajasthan), Kalamboli (Maharashtra), Dahej (Gujarat), Jodhpur Penna, and Krishnapatnam units are expected by Q3FY26E, increasing the cement capacity to 115MTPA. Additionally, the 4 MTPA Maratha clinker unit in Maharashtra and the Warisaliganj grinding unit in Bihar will be commissioned by FY26E, raising the total capacity to 118 MTPA by the close of the next financial year.

* Synergies of Orient Acquisition- Ambuja Cements has acquired a 46.8% stake in Orient Cement Limited for INR81bn (INR395.40 per share), fully funded through internal accruals. This strategic acquisition will enhance Ambuja’s operational capacity by adding 8.5 MTPA of cement production and 8.1 MTPA of projects ready for execution. The inclusion of a high-quality limestone mine in Chittorgarh, Rajasthan, offers the potential for an additional 6.0 MTPA of cement capacity in North India, all acquired at zero premium due to the pre-auction status of these reserves. With this acquisition, Adani Cement’s total capacity will reach 97.4 MTPA, aiming to exceed 100 MTPA by March 2025. Significant synergies are expected, including improved operational efficiencies through a 95 MW captive power plant and renewable energy sources, along with an 18% usage of alternative fuels. Logistics optimization will further reduce costs, such as a projected INR150/t decrease in clinker rail freight to the Jalgaon unit. Overall, this acquisition strengthens Ambuja’s market position while promoting sustainability and cost-effective operations through enhanced infrastructure and resource availability.

Valuation and Outlook: Management anticipates a demand growth of 4-5% in FY25E, with Ambuja Cement expected to outperform this at a growth rate of 8-9%. The company has set an ambitious target to reduce its total cost per ton by INR530/t by FY28E, driven by significant investments in green power initiatives, including WHRS, solar, and wind energy. In addition, improvements in AFR management, railway infrastructure, and fly ash handling systems are also part of this strategic approach, which is projected to enhance profitability significantly. Moreover, strong demand for infrastructure and ongoing needs in the housing and commercial sectors are expected to further bolster cement demand in the H2FY25E. These combined efforts position Ambuja Cement for robust growth and increased efficiency in an evolving market landscape. We expect Volume/Revenue/EBITDA to grow at a CAGR of 8.0%/4.9%/7.2% respectively over FY24-FY27E. We value ACEM on a SoTP basis to arrive at a TP of INR634 by assigning 23.0x on Sep-26E EBITDA, upgrading our rating to BUY.

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