Ambuja Cement (ACEM IN) – Q2FY26 Result Update – Getting benefits of inorganic integration – BUY

Ambuja Cements (ACEM) delivered a strong cons operating performance in Q2FY26 with 20% YoY volume growth (16.6mt ex-clinker), driven by ramp up of recently acquired assets. Cement NSR declined 1% QoQ due to softer prices during the quarter. ACEM benefited from higher contribution from 100% integration of Orient & Penna volumes into Adani brands as major maintenance is also completed. Decline in RM costs due to lower purchase of goods and improved logistics efficiencies resulted in ACEM delivering EBITDA/t of Rs1,045 (Rs1,060 ex-clinker). Mgmt. reiterated its focus on cost optimization, targeting exit FY26 cost of Rs4,000/t and further reduction by 5% each year to Rs3,650/t by FY28 end, driven by higher green power usage (c. 33% share, target 60%) and group synergy benefits. Integration of acquired assets has been largely completed along with major maintenance which is expected to drive volumes and profitability. Although there are delays in organic expansion, ACEM has enough capacity to grab incremental market share (c. CU% ~65%). With planned aggressive capacity expansion and consistent efforts to engage pan-India dealer & retailer network, ACEM is well poised to outpace industry growth. We remain positive on ACEM as it continues to strengthen its cost competitiveness, scale, and market leadership. We tweak our estimates assuming lower prices in near term and expect ACEM to deliver ~14% volume CAGR and 26% EBITDA CAGR over FY25–28E. Stock is trading at EV of 14.7x/12.5x FY27/28E EBITDA. Maintain ‘Buy’ with revised TP of Rs718 (Rs701 earlier) valuing at 17x EV of Sep’27E EBITDA.