We maintain a Sell rating on ACEM, citing key concerns such as intensifying competition, low capacity utilisation of acquired companies and longer-than-expected timelines for realising cost savings. 
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AMIT DAVE

Target: ₹453

CMP: ₹531.80

Ambuja Cement’s (ACEM) consolidated Q4FY25 numbers were above our and street estimates, driven by higher incentives included in revenue and supported by strong volumes, particularly from ACC. Volumes were up 12 per cent y-o-y (+13 per cent q-o-q), while cement realisations were down 6.5 per cent q-o-q — the lowest among all large players that have reported so far.

EBITDA/tn stood at ₹999 (-2.3 per cent y-o-y, -3.7 per cent q-o-q), despite the higher incentives and a decrease in opex/tn by 1 per cent y-o-y and 7 per cent q-o-q. We expect a near-term spike in raw material costs due to the recent hike in limestone royalty and anticipate that ACEM’s recently acquired south-based company will face incremental cost pressures.

We maintain a Sell rating on ACEM, citing key concerns such as intensifying competition, low capacity utilisation of acquired companies and longer-than-expected timelines for realising cost savings.

We are factoring in a 14.6 per cent volume CAGR over FY25–FY27E and assuming an avg. realisation decline of -0.7 per cent over the same period.

We value ACEM at 16x Mar’27 EV/EBITDA, arriving at a TP of ₹453 (earlier ₹432). Any significant price hikes, strong demand recovery, or higher-than-expected cost reductions are the key upside risks to our assumptions.

Published on May 2, 2025