The cement industry remains a cornerstone of construction, with global production surpassing 4 billion metric tons annually. India, the world’s second-largest cement producer, accounts for over 8% of the global output. The sector in India is expected to grow at a CAGR of 5-6%, reaching 600 million metric tons by 2025.
With a market capitalization of Rs 1.17 lakh crore, the shares of Ambuja Cements Ltd were trading at Rs 592.90 per share, increasing around 1 percent as compared to the previous closing price of Rs 586.95 apiece.
Looking into Ambuja Cements financial performance, revenue increased by 12 percent from Rs 7,966 crore in Q4 FY23 to Rs 8,894 crore in Q4 FY24. During the same period, net profit increased by 100 percent, from Rs 763 crore to Rs 1,526 crore.
ICICI Direct, one of the well-known brokerages in India, gave a ‘Buy’ call on the cement stock with a target price of Rs 720 apiece, indicating a potential upside of 21 percent from Monday’s closing price of Rs 592.90 per share.
Here is the rationale behind the bullish potential upside of 21%:
● Capacity Expansion Strategy: The company is aggressively expanding its capacity through timely additions in both ACC and Ambuja, along with a master supply agreement with Sanghi Industries. This expansion plan aims to increase the total capacity to 83 mtpa by FY25E and 100 mtpa by FY26E, targeting 140 mtpa by FY28.
● Volume Growth Projections: With the ongoing capacity additions and anticipated increase in demand, the brokerage expects healthy volume growth. The projected volume CAGR of ~11.5% over FY24-26E indicates a significant increase to 73.60 mtpa by FY26E, the company aims to achieve a market share of 20% by FY28, up from the current 14%.
● EBITDA Improvement Strategy: The company has been focusing on enhancing operational efficiencies, leading to a significant improvement in EBITDA per ton from Rs 676 in FY23 to Rs 1081 in FY24. This was primarily driven by reductions in power and fuel costs per ton, along with leveraging operating advantages.
● Future EBITDA Growth Outlook: With a continued emphasis on cost optimization initiatives, the brokerage expects to further boost EBITDA per ton to ₹1360 by FY26E. Their strategic roadmap includes increasing the proportion of lower-cost green power, leveraging captive coal, optimizing logistics and raw material costs through group synergies, and expanding the share of premium products. These efforts are anticipated to result in substantial savings, with a target of ₹530 per ton reduction in total costs by
FY28E, ultimately aiming for an EBITDA per ton of ₹1500+ by FY28E.
Ambuja Cements Ltd. is a significant cement company in India. It is part of the Adani Group. Ambuja Cement now has a cement capacity of 31 million tonnes and operates six integrated cement production facilities and eight cement grinding units around the country.
Written by:- Abhishek Singh
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