Ambuja Cement Q4 Preview: Robust demand, Sanghi buyout to boost revenue, but pricing to hit profit

Ambuja Cements

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Adani group company Ambuja Cement is set to announce Q4 FY24 earnings on May 1, with revenue and volume seen rising on the back of continued demand and Sanghi Industries’ contributions, but profit for the quarter will likely fall due to weak pricing.

According to the consensus estimate of eight brokerages, Ambuja Cement may report a revenue of Rs 8,843 crore for Q4FY24 against Rs 7,966 crore in Q4 FY24, rising about 11 percent on year. On the other hand, net profit for the period is expected to fall 16 percent on year to Rs 910 crore from Rs 1,090 crore a year ago.

Most analysts estimate consolidated volume for the quarter to increase due to contributions post the Sanghi Industries acquisition. Prabhudas Lilladher analysts estimate a 13 percent on-year increase in sales volume to 16 million tonnes during January-March.

Also read: ICICI Securities retains 'buy' tag on Ambuja Cement, raises target to Rs 831 a share

Boost to Ambuja volumes from Sanghi Industries

Ambuja Cement acquired a 56.74 percent stake in Sanghi Industries at an enterprise value of Rs 5,000 crore in August 2023. At the time of acquisition, Ambuja Cement management had said that through the deal, they expect the acquisition of Sanghi Industries to enable it to increase Sanghi Industries’ aggregate cement production capacity to 73.6 million tonnes per annum.

Ambuja is currently the second-largest cement company in India. In an April 1 report, analysts at HDFC Institutional Research had noted that the company currently had 78 million MT cement and 53 million MT clinker capacities. “The ramp-up of Sanghi Industries will only increase inter-company sales as Ambuja has announced selling cement from Sanghi plants under the Ambuja and ACC brands,” the report had noted.

Building up warchest for next phase of growth

Analysts also expect Ambuja Cement’s cash reserves to rise after the Adani Group infused the last tranche of Rs 8,340 crore through warrant conversion. The group company had earlier infused Rs 5,000 crore. With this latest infusion, the promoter stake has increased from 63.2 percent to 70.3 percent.

ICICI Securities' analysts said in a recent report that the fresh fund infusion is likely to have bulked up Ambuja Cement's cash reserves to more than Rs 23,000 crore from Rs 8,560 crore in the previous quarter. They said it is enough ammunition to usher in the 140-mtpa capacity target well ahead of its FY28 guidance.

Ambuja Cement's stock has gained around 180 percent over the last five years and around 57 percent in the last one year. Currently, the stock has around 23 ‘buy’ calls, 9 ‘hold’ calls, and 8 ‘sell’ calls from analysts.

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