Ambuja Cements: Strong Financials and Expansion Plans – Target Price Rs. 750

Ambuja Cements Ltd. is one of India’s top cement companies. It is part of the Adani Group, known for its diverse and sustainable businesses. Ambuja Cement has been offering easy solutions for home building with its special focus on sustainable development projects and eco-friendly practices. The company currently has a cement capacity of 31 million tonnes, operating six integrated cement manufacturing plants and eight cement grinding units across India.

Management Meet Update

• Ambuja Cements is poised for growth, with January volumes showing excellent performance.
• The company anticipates high double-digit growth in volumes, with EBITDA/ton set to improve due to cost synergies, including those from the Sanghi plant.
• Promoters plan to infuse Rs. 15,000 crore in April, aiming for a capacity of 140 million tons and Rs. 18,000 crore EBITDA by FY28.

Why should you invest in Ambuja Cements?

• Ambuja Cements is a leading player in the cement industry, offering strong cash flows and a direct play on India’s infrastructure development.
• Recent financial results showed flat standalone EBITDA due to clinker maintenance, which is expected to revert in the next quarter.
• Management is bullish on demand and aims to double capacity to 140 million tonnes by FY28 from the current 77 million tonnes.
• The company is at an inflection point, with upcoming promoter infusion expected to drive capacity growth and improve margins.
• Current pet coke prices have decreased, reducing a key cost component, and initiatives to reduce costs further are underway.
• Ambuja Cements is confident of achieving Rs. 1450 EBITDA/ton on a capacity of 120 million tonnes by FY29E.
• With the government’s infrastructure focus and strong promoter backing, the company’s valuation is expected to improve significantly.