Ambuja Cements Ltd share Price Today

The Nifty Infra index is on the cusp of breaking above last one year range and witnessed a faster retracement of the last nine month’s decline in just five months, indicating a structural turnaround. Within the infra space, we expect cement stocks to witness catch up activity after multi-month underperformance as many negatives now look priced in. Further sharp decline in crude oil prices and other commodities would work as tailwinds for the sector. Within large cap cement space, Ambuja cement stands out basis its relative strength and remains our top pick
 
Share price of Ambuja cement is seen consolidating its September 2022 gains after a strong breakout and current consolidation offers fresh entry opportunity to ride the structural uptrend
 
Key observation has been that a) the breakout above CY21 highs in September 2022, was backed by strong volumes supporting longivitiy of uptrend, b) Since June 2022, every time when stock pulled back to its rising 50-day EMA it resulted in elevated buying demand making a case of continuation of uptrend
 
We expect share price to head towards ₹660 over next few months where current upmove  from October lows of 471 would achieve equality with August-September upmove (395-585=190 points)

Ambuja Cement (Now Adani group conglomerate) is large cement player with capacity of 31.5MT spread across North (35%), South (24%), West (~20%), East (~21%) in India. It has large marketing set-up & pan-India presence.
 
The Company, with effect from 16th September 2022, has terminated its agreement with Holcim Technology Limited for payment of technology and know-how fees@ 1% of eligible net sales.
 
While the Q2 performance was weak, it was mainly led by monsoon and higher fuel cost impact. With fuel prices now lower by 30-40% from their peak and onset of busy construction season, we expect margin profile to now improve from December quarter onwards. 
 
The new management plans to increase consolidated capacity to ~140MT in next 5 years (ie. at 16% CAGR). Keeping this in mind, the new board of Ambuja (parent of ACC) has approved fund infusion of ₹20,000 crore by issuing warrants to promoter entity on a preferential basis at price of ₹419. Post conversion of these warrants, promoter’s shareholding in Ambuja will increase to 70.3% v/s 63.2% at present.
 
Company is investing of ₹3,500 crore for expansion of 7.0MT GUs across their existing units at Sankrail and Farakka and at a greenfield location at Barh, in Bihar, supported by a 3.2MT brownfield clinker expansion at existing integrated plant in Bhatapara, Chhattisgarh.
 
By 2025, the company expects eastern region utilisation to move to over 85% as per capita consumption currently remains very low at 216 kg vs. all India average of 242 kg. This is expected to improve significantly supported by major infra & housing projects
 
It has strong BS. Also, the group’s exposure into energy and logistics will help them to improve cost dynamics and gain supply chain efficiencies

Ambuja Cements announced Q2FY24 & H1FY24 results:

• Q2FY24:
  • Revenue grew by 4.1% at Rs 7,424 crore.
  • EBITDA stood at Rs 1,302 crore (up by Rs 975 crore), driven by operational excellence and cost-saving projects
  • EBITDA margin expanded by 12.9 pp from 4.6% to 17.5%.
  • Clinker & Cement sales volume growth of 2.3% YoY at 13.1 Mn T
  • Kiln Fuel cost reduced by 34%, (Rs 2.72/’000 kCal to Rs 1.79/’000 kCal) expected to further come down through mix and source optimisation
  • WHRS power mix has gone up by 11.2 pp to 15%
• H1FY24:
  • Revenue grew by 6.4% at Rs 16,137 crore.
  • EBITDA up by Rs 1,531 crore, at Rs 2,969 crore.
  • EBITDA margin expanded by 8.9 pp from 9.5% to 18.4%.
  • Clinker & Cement sales volume growth of 5.9% YoY at 28.5 Mn T
  • Kiln Fuel cost reduced by 26% (Rs 2.59/’000 kCal to Rs 1.92/’000 kCal), expected to further come down through mix and source optimisation
  • WHRS power mix improved to 15%, Expected to reach 17 % by end of FY’24

Ajay Kapur, Whole Time Director & CEO, Ambuja Cements said, “Continuing our transformation journey, we are pleased to report a strong performance (standalone) in the second quarter of FY‘24, with a 8% increase in revenue, 147% increase in EBITDA at Rs 773 crore and 364% increase in PAT at Rs 644 crore compared to the previous year same quarter. Along with strong demand for our premium cement products, our business performance improved due to operational excellence, supply chain management and sales & marketing excellence, Adjacencies benefits with Group companies are lowering input costs which is boosting EBITDA & Margin growth.

Operational efficiencies helped in reduction in Kiln fuel cost from Rs 2.72/’000 kCal to Rs 1.79/’000 kCal & CPP fuel cost from Rs 2.27/’000 kCal to Rs 1.65/’000 kCal.

Logistics efficiencies has resulted in Direct dispatch up from 48% to 58%.

Our commitment to sustainability remains strong. We are consistently taking measures to benefit our communities and reduce our carbon footprint. These include diminishing energy intensity, implementing Waste Heat Recovery Systems, and augmenting renewable energy generation.

For the new facility of 4 MTPA at Bhatapara apart from Equipment which has been ordered, civil execution work has started. Expected completion by Q2 FY’26 For its corresponding Grinding unit at Sankrail and Farakka order has been placed on EPC vendor and piling work has also started. Expected completion of these units by Q3 FY’25.

For the new facility of 4 MTPA at Maratha LOI has been placed on EPC vendor, Site development and Pre project has also been started. EC and CTE approval are expected in this quarter. Expected completion by Q4 FY’26”

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