Whalesbook
1. THE SEAMLESS LINK
The brokerage's recalibration of its rating hinges on Ambuja Cements' post-correction valuation, which presents a more appealing entry point for its long-term growth prospects. Dolat Capital anticipates a robust compound annual growth rate for revenue and Ebitda through FY28, supported by projected volume expansion and strategic operational improvements.
Valuation Re-Rating Amid Correction
The approximate 12% stock price decline observed since the Q2 FY26 results has created a more favorable valuation environment for Ambuja Cements. In response, Dolat Capital has upgraded its rating to 'Buy' from 'Accumulate', establishing a new target price of Rs 617. This target implies a valuation of 15.5 times the brokerage's projected consolidated FY28 Enterprise Value to Ebitda, incorporating 50% of the estimated FY28 capital work-in-progress. The firm has also adjusted its financial model to reflect the increased share count stemming from the amalgamation of ACC, Orient Cement, and Sanghi Industries, with no minority interest to be accounted for from FY27 onwards.
Mixed Q3 Performance Meets Growth Outlook
Ambuja Cements announced its highest-ever quarterly revenue, reaching ₹10,277 crore in Q3 FY26, a figure that surpassed analyst estimates. Volume growth also marked a record, with 18.9 million tonnes dispatched, representing a 17% year-on-year increase and double the industry average expansion. However, consolidated net profit saw a significant 90.5% year-on-year decline to ₹204 crore. This sharp drop was attributed to a high base effect from Q3 FY25, which included substantial one-time income, coupled with increased depreciation charges and other exceptional items. On a normalized basis, the company's profit after tax demonstrated a considerable year-on-year increase. Ebitda per tonne figures presented a mixed picture compared to previous periods. Dolat Capital noted that Ebitda and Ebitda per tonne lagged projections, leading to downward revisions in its FY26-28 Ebitda estimates by up to 15.9%. Nevertheless, the brokerage forecasts significant volume expansion, projected between 11% and 17% annually through FY28, alongside modest revenue growth.
Sectoral Context and Strategic Initiatives
The Indian cement sector is maintaining its growth momentum, with an estimated 8% industry-wide expansion anticipated for FY26, buoyed by robust infrastructure development and sustained housing demand. Ambuja Cements' recent amalgamation with ACC and Orient Cement is a strategic move to forge a unified 'One Cement Platform,' intended to enhance operational efficiencies, streamline corporate structures, and bolster market presence across India. The company is actively pursuing premiumization strategies, with its share of premium cement in trade sales sustained at 35%, and is implementing cost management initiatives targeting a reduction in costs to ₹3,650 per metric tonne by March 2028. Competitors such as UltraTech Cement and JK Cement have also reported positive volume growth, but Ambuja's expansion rate, at twice the industry average, indicates effective market execution. The company continues its capacity expansion drive, having recently commissioned its Marwar Grinding Unit and aiming for a total capacity of 115 MTPA by March 2026.