Ambuja Cements shares surge over 3% post Nomura’s double upgrade

Above-industry volume growth is expected as the company strives towards its 140MT target as the company has the highest volume growth in industry, stated the global brokerage firm in its note.

Nomura also believes that another round of inorganic expansion is possible. Ambuja is spreading wings across the country as the acquisitions provide brownfield optionality.

“Ambuja (consolidated) is in the process of adding 24MT capacity by FY26F through a series of organic and inorganic expansions. Our FY24-26F volume/EBITDA CAGRs of 13%/28% are slightly above ’s,” said Nomura in its report.

Ambuja is in process of acquiring Penna Cement (unlisted) with a 9MT p.a. capacity, implying a 14% capacity CAGR over FY24-26F against 6% and 9% for the industry and Ultratech, respectively.

After the completion of Penna’s acquisition, Ambuja (consolidated) is set to become the third-largest player in southern India. Sanghi and Penna also provide brownfield optionality to Ambuja with 823MT and 610MT of limestone reserves.

Lower heat consumption and higher share of green power could also result in cost savings for the company.

“We believe a reduction in heat consumption and a higher share of green power mix (30% by FY26F) should result in a minimum of Rs 60/t cost savings, which when coupled with higher share of domestic coal, AFR, group synergies should bring about Rs 200 savings in P&F cost/t by FY26F,” said Jashandeep Singh Chadha, Analyst at Nomura.

Ambuja shares have gained nearly 61% in the last year while in the current calendar year, the stock has gone up by 26.18%.

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