Adani Group-owned cement companies, Ambuja Cements Ltd and ACC Ltd have announced their earnings for the quarter ended on December 31, 2023. Both the cement players have delivered better than expect performance, which has left investors to wonder which Adani Group cement stock to opt among the two. According to brokerage firms, Ambuja Cements is set to deliver strong performance in subsequent quarters with a brighter outlook with focus on capacity expansion plans and cost optimization initiatives. On the other hand, ACC continued its consistency on the back of lower fixed costs leading to margin surprise, said analysts and a few have downgraded the stock after sharp run-up. ACC reported a standalone net profit at Rs 527.48 crore in Q3FY24, surged 377.57 per cent on a year-on-year basis (YoY), as against Rs 110.45 crore in the same period last fiscal. Revenue for the quarter inched up 7.44 per cent to Rs 4,918.34 crore. Ebitda surged 140 per cent to Rs 903.2 crore with margins coming in at improved 18.4 per cent. ACC has performed consistently over the last five quarters. Ebitda per ton grew by 105 per cent YoY to Rs 1,015 in 3QFY24 from Rs 498 in 3QFY23. The cost levers of raw material sourcing, network optimization, sourcing of renewable energy and WHRS capacity expansion will continue to improve over the coming quarters but at a gradual pace, said Nirmal Bang Institutional Equities. "The stock has seen a sharp run-up since we recommended it in May 2023. We believe that the near-term upside is capped and therefore we are downgrading it to ACCUMULATE. We value it at 10.6 times December 25E EV/EBITDA with a target price of Rs 2,579," it added. "Any significant occurrence that might have a material influence on the company's profitability." ACC's Ebitda was above estimates, primarily led by lower-than-expected operating cost, said Elara Capital. "We expect ACC to continue to accrue benefit from the master supply agreement with Ambuja Cements and Sanghi Industries. Current international thermal coal prices are down 31 per cent, which will enable ACC to check cost," it said. We roll over to December 2025E from September 2025E and up our target price to Rs 2,813 from Rs 2,421 on 12 times December 2025E EV/EBITDA. As ACC is up 30 per cent since the release of its previous report and has downgraded the stock to 'accumulate' from 'buy' tag. Recent commissioning of 3.3 MT Ametha clinkerization and 1mt grinding unit and acquisition of 55 per cent stake in Asian concrete and MSA with Sanghi Industries (acquired by Ambuja) would drive near term volume growth. Management is targeting Rs 400-500 per ton benefitted by various internal cost efficiencies over the next two years, said Antique Broking. "We increase our FY24-FY26 EBITDA estimates by 6-10 per cent and raise our target multiple to 11 times to factor higher profitability. Maintain a buy rating with a revised target price of Rs 3,000 on the stock as valuations remain attractive and likely factor in concerns around the company's lower expansion plans, in our view," it added. Ambuja Cements, on the other hand, reported 39 per cent year-on-year growth in its standalone net profit at Rs 514 crore in the December 2023 quarter. It was Rs 369 crore in the year-ago quarter. Revenue from operations increased 8 per cent to Rs 4,439 crore, while operating Ebitda jumped 33 per cent to Rs 851 crore in the quarter with margins improving to 19.2 per cent. The company is focused on a new operating business model leading to increased focus on improving business parameters, said Choice Broking. The foundation for long-term economic growth remains sturdy, supported by various key factors. A pivotal role is played by the burgeoning middle class, which is rapidly expanding and driving substantial consumer spending, it said. "We expect revenue and Ebitda to grow at a CAGR of 12.9 per cent and 29.4 per cent respectively over FY23-FY26E. We value Ambuja Cements on a SoTP basis to arrive at a target of Rs 590 by assigning 19 times (modified) on FY26E EBITDA," maintaining our 'add' rating. Ambuja Cement delivered an Ebitda per ton Rs 1,038 aided by a 4 per cent QoQ improvement in realisation. In addition to the already announced capex for 8 MTPA clinkers at Ambuja Cements. The board has approved capex for 2.25MTPA clinker and 12 MTPA cement, which should take the group capacity to 110MTPA, said Nuvama Institutional Equities. "Management expects to announce plans for a new set of clinker lines soon. Factoring in the healthy capex plans that would help sustain volume growth and enhance cost efficiency, we are raising the target," retaining 'buy' with an increased target price of Rs Rs 609 apiece, which was Rs 481 earlier. Ambuja Cements reported higher-than-expected numbers at the consolidated level compared to estimates. Overall revenue came in at Rs 8,128.8 crore. Volume grew by 2.9 per cent YoY, said Nirmal Bang Institutional Equities. It had factored in the impact of lower volume and Ambuja’s planned maintenance in its overall estimates, resulting in higher raw material costs. "The management confirmed the complete phase out of the 'Sanghi' brand and will use ACC and Ambuja branding. Focusing on improving EBITDA and sales, managing warehouse space and balancing rail & road transport will result in lower costs and higher margins," added Nirmal Bang while maintaining its 'buy' rating on the stock with a target price of Rs 915, suggesting an upside of 63 per cent in the stock.
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