Ambuja Cements Ltd’s speedy addition to capability – which surpassed 100 million tonnes every year (mtpa) after integrating Penna Cement, Sanghi Industries, and most not too long ago Orient Cement – has secured it among the many world’s main cement corporations. However whereas scale is increasing quickly, margins proceed to path, protecting traders centered on profitability.
The outcomes introduced earlier this week confirmed that Ambuja’s Ebitda (earnings earlier than curiosity, tax, depreciation and amortisation) per tonne, a key profitability metric for the cement sector, dropped virtually 30% to ₹789 in FY25, highlighting persistent strain on margins. Nonetheless, Ebitda per tonne in This fall rose for the primary time sequentially after three straight quarters of decline, coming in at ₹1,001, virtually double the ₹537 in Q3.
That was accompanied by a 12.6% year-on-year rise in consolidated volumes to 18.7 million tonnes within the quarter, together with 1.6 mt from newly built-in belongings. The advance in profitability was led by sequential positive factors in cement realisations (up 2.4%) and decrease variable prices.
However not all is hunky dory.
“Whereas the margin hole has narrowed versus that for business chief UltraTech Cement, it nonetheless lags by 110 foundation factors (bps). Additional margin restoration stays key for Ambuja to hunt outperformance vis-à-vis UltraTech,” ICICI Securities Ltd analysts stated in a report on 30 April.
Ambuja’s push to carry margins hinges on its cost-saving plan. The corporate has focused ₹500 per tonne in value reductions by FY28 and has achieved ₹150-175 per tonne up to now. Banking on these effectivity positive factors and improved pricing, Ambuja’s last purpose is to carry the Ebitda per tonne to ₹1,500 by FY28.
Enlargement plan
Inexperienced power is a key a part of the plan. Ambuja goals to fee 1,000 MW of renewable capability by mid-2026, which is predicted to carry its inexperienced energy combine to 60% from 26% now. Moreover, logistics optimisation is beneath manner, with the goal of decreasing the first lead distance by 100 km by FY28 and increase dispatches through sea routes to trim transport prices. Major lead distance refers back to the common distance from a plant to the market and is a key issue of logistics prices.
The corporate’s capital expenditure displays its aggressive enlargement roadmap. Ambuja has earmarked about ₹9,000 crore for FY26, with two-thirds allotted to new capability and the remaining to effectivity upgrades.
Enlargement work is beneath manner at a number of places: the Bhatapara clinker unit (4 mtpa) and related grinding models in Sankrail and Sindri are anticipated to be operational by Q1FY26, whereas models in Uttar Pradesh, Maharashtra and Bihar are scheduled for commissioning by FY26-end. If all goes as per plan, Ambuja will hit 118 mtpa by FY26, en path to its 140 mtpa purpose by FY28.
Premium merchandise provide a further margin lever. Premium cement accounted for 29% of commerce volumes in This fall, up from 27% in Q3. The corporate targets 35% by FY26. These merchandise usually fetch ₹200-300 extra per tonne than common cement.
Importantly, how demand shapes up is vital. Trade cement demand grew 6.5–7% in This fall and 4-5% in FY25 total, with the administration guiding for about 8% progress in FY26.
As Motilal Oswal Monetary Providers notes, “Over the following few years, demand is projected to rise at a 7-7.5% CAGR, seemingly outpacing provide progress of about 6%.”
Nonetheless, dangers stay. The business’s sturdy provide addition can maintain a verify on costs. ICICI Securities revised its FY26 Ebitda per tonne estimate downwards to ₹1,080 from ₹1,140, citing slower-than-expected capability addition and weaker pricing dynamics. The broking agency identified that Ambuja’s earnings have traditionally been extra risky than these of its friends.
The valuation story hinges on whether or not Ambuja can shut the margin hole with UltraTech.
As ICICI places it: “Additional uptick to deliver margins at par or greater versus UltraTech (as demonstrated in no less than 4 quarters beneath the brand new administration) stays key to hunt inventory outperformance.”
With the constructing blocks of capability and a cost-cutting technique in place, traders will watch if Ambuja can flip scale into sustainable profitability. Analysts worth the inventory at about 17-18 instances EV (enterprise worth)/Ebitda, primarily based on FY27 estimates.
