Buy Ambuja Cement; target of Rs 692: Prabhudas Lilladher

Prabhudas Lilladher's research report on Ambuja Cement

We visited Ambuja Cements’ (ACEM) Marwar Mundwa integrated cement unit and interacted with the senior management. ACEM has added ~28mtpa capacities via the inorganic route over the last three years and has effectively worked on aligning multiple working cultures with the Adani group culture, targeting a ‘one business, one company’ approach. With the planned 140mtpa mark in sight, ACEM is focusing on replicating the most efficient ways of cement manufacturing processes across all its locations. At newer plants, ACEM has increased the usage of digitalisation across functions such as realtime analyzer on OLBC, line cameras at kilns, drone-led internal inspections, and in-plant automation for logistics. The plan is to replicate the success of automation across locations to improve efficiencies and reduce human intervention. With its own target of reducing the cost of production by Rs500- 550/t envisaged in Dec’23, ACEM is working on cutting costs across locations and has effectively put pressure on the entire industry to follow suit.

Outlook

We expect near-term performance to remain strong led by higher cement pricing, strong volume growth and flattish cost structure. Incorporating recent price increases and AR25, we upgrade our EBITDA estimates by 1.4%/3% for FY26/27E. We expect ACEM to deliver 34% EBITDA CAGR over FY25-27E on low base of FY25. At CMP, the stock is trading at 17.8x/14.1x EV on FY26/27E EBITDA. Maintain ‘Buy’ rating with revised TP of Rs692 (Rs658 earlier) valuing the company at 17x EV/Mar’27E EBITDA.