Top Conviction Ideas : Buy Ambuja Cements Ltd for Target Rs. 705 - Axis Securities Ltd
Recommendation Rationale
* The company is expanding capacity from 107 MTPA (including 8.5 MTPA from Orient Cement) to 118 MTPA by FY26. It now targets 155 MTPA by FY28 (earlier 140 MTPA), supported by incremental expansion and debottlenecking initiatives.
* Volume and revenue are projected to grow at CAGRs of 12% each, respectively, over FY24- FY27E.
* During the quarter, EBITDA margin improved to 19.2%, supported by stronger realisation, healthy volume growth, and lower YoY operating cost. The company targets reducing its cost of production to Rs 4,000/tonne by FY26, with an additional reduction of Rs 300–400/tonne by FY28 through multiple levers. We expect margins to improve to 20%–21% by FY27E.
* Strong infrastructure demand and ongoing needs from the housing and commercial sectors are anticipated to boost cement demand in FY26. Strategic investments in roads, railways, and urban and commercial amenities are poised to drive robust growth. The company expects demand for the industry during FY26 to grow in the range of 7-8%.
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