The Adani Group cement manufacturing company, Ambuja Cements Ltd reported a four-fold jump in its standalone net profit for the quarter ended September 2023. The same was helped by the good improvement in operating performance, led by lower energy costs and cost-saving measures. The reported Earnings before interest, tax, depreciation and amortization (Ebitda) during the quarter surged to ₹771.5 crore from ₹313 crore, while Ebitda margin improved by 70 basis points (bps) to 11.9% from 11.2%, YoY.
The Operating expenses per tonne declined 12% YoY, led by 8%,6% and 29% YoY decline in variable, freight costs and other expenses as per analysts calculations. Employee costs also declined 3% year-on-year. Hence while the realisations per tonne did not see much improvement however the overall operating performance improved significantly.
Ambuja Cements net profit in Q2FY24 surged to ₹643.84 crore from ₹138.9 crore, in the same quarter of the last fiscal.
However the Brokerage views have remained a mixed bag for Ambuja Cement post Q2 results
One reason for the same remained tepid volume growth. The company’s sales volumes during the quarter at 7.6 million tonne (MT) though improved from 7.1 mt in the year ago quarter , they declined from 9.08 mt in the previous quarter.
Analysts at Antique Stock Broking said that volume growth disappointed owing to floods in Himachal Pradesh, heavy rains in the Central region, and weak demand in the East India.
While the management has guided analysts for double digit volume growth (10-12% CAGR) over next two years, however analysts are concerned over volume growth prospects looking at some delay in the capacity expansions.
Delays in capacity expansion may constrain volume growth as Bhatapara Line 3 (CU) has been delayed by a quarter to 2QFY26 and Maratha Line 2 (CU) has been delayed by nine months to 4QFY26, said analysts at Antique Stock Broking .
Analysts at Centrum Stock Broking also said that capacity expansion largely coming in second Half FY26 will delay volume growth for the company. They also highlighted that weak volume growth of only 2% YoY on a consolidated basis was another reason for disappointment post Q2 results.
Analysts at Jefferies India Pvt Ltd in their post results note highlighted that the consolidated volume growth of 2% is lower than the estimated industry growth rate of 10% plus for 2Q and largely reflects lack of surplus capacity for consolidated Ambuja entity.
Factoring lower volumes and profitability, while analysts at Antique Stock Broking have reduced their FY25 Ebitda estimates by 6% and cut their target price to ₹505 from earlier ₹550, they have maintained BUY rating on attractive valuation of 11x 1HFY26 estimated enterprise value to Ebitda.
Analysts at Centrum Broking however have sharply cut their Ebitda estimates for the company for FY24 and FY25 by 16% and 14% respectively as they believe that reduction in operating costs will be gradual and meaningful market share gain are only possible in FY26. Their revised Target price based on 15x September, Enterprise value to Ebitda now stands at Rs418 (from Rs467 earlier). They maintain our Reduce rating on the stock.
Meanwhile analysts at Jefferies India Pvt Ltd maintain their estimates and price target and Buy rating on the stock while Motilal Oswal Finacial Services Ltd reiterated Neutral rating with a target price of ₹450 based on 14x September’25 EV/EBITDA.
Source Link: Adani-promoted Ambuja Cements share price gains post Q2 results, brokerage views mixed | Mint