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UltraTech Cement Ltd vs Ambuja Cement: A detailed comparison

The Indian cement industry is on the cusp of transformation. Two companies can capitalise on this opportunity. Want to know more? Read on.

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The Indian cement industry is on the cusp of transformation. Reports suggest an immense rise in production capacity; an astonishing 150-160 million tonnes per annum (MTPA) is predicted over five years. 

This impressive expansion, fueled by both internal expansion and acquisitions, aims to meet escalating demand from infrastructure projects and housing developments. In a market characterised by high fragmentation and fierce competition, this growth offers a chance to seize a substantial portion of the market. 

Buoyed by strong financials in the past two years, major and established cement players like Ambuja Cement Ltd. and UltraTech Cement Ltd are well-positioned to lead this charge. 

In this article, let’s find out which cement stock has better long-term investment opportunities.

Industry overview

India is a powerhouse in the global cement industry, ranking as the world’s second-largest producer and boasting over 8% of global capacity. This robust foundation positions India perfectly to capitalise on its booming infrastructure and construction sectors. The rising demand for affordable housing in rural areas further fuels the cement industry’s growth, as cement remains a cost-effective building material.

The industrial sector’s robust post-pandemic recovery presents another key driver. Fully back on its feet, this sector significantly boosts cement demand.  

Plus, initiatives like the development of smart cities by the government add another layer of potential for long-term growth. In FY2024, anticipation of a 10-12% jump in demand reflects the combined forces of government spending on affordable housing and pre-election infrastructure projects. The Indian cement industry is primed for an exciting future.

For a better understanding: Exploring Cement industry in India: A comprehensive overview 

UltraTech Cement Ltd

UltraTech Cement Limited, the cement flagship of the Aditya Birla Group, is a colossal entity in the building solutions sector, valued at USD 7.9 billion. UltraTech is recognised as the largest producer of grey cement and ready mix concrete (RMC) in India, and it also ranks among the country’s leading manufacturers of white cement.

UltraTech is the only global cement company (outside of China) that boasts a single-country cement manufacturing capacity of over 100 MTPA. 

Ambuja Cement Ltd 

Ambuja Cement, a part of the Adani Group, is a prominent company in India that specialises in cement production. Their main business is manufacturing and selling cement and related cement products.   

Ambuja Cement is well-known for making it easy for people to build homes. They make special cement products designed for the Indian climate, and their operations and initiatives focus on being sustainable and helping society. At present, Ambuja Cement can produce 31 million tonnes of cement annually.

Earnings  

UltraTech Cement Ltd quarterly results were impressive as their after-tax profit stood at ₹1,777 crore in the third quarter of the current fiscal year, marking a 68% surge compared to the same period in the previous year. 

The company also witnessed a 7.8% year-on-year rise in its consolidated net sales, which reached ₹16,487 crore in the October-December quarter. UltraTech attributed this positive financial growth to increased cement demand, reduced costs for fuel and raw materials and enhanced efficiencies. 

In contrast, Ambuja’s quarterly results announced a standalone net profit of ₹513.69 crore for the third quarter of FY24, marking a 39.2% increase from the ₹368.99 crore reported in the same quarter of the previous year. 

The company’s standalone revenue from operations for Q3FY24 rose by 7.5% to ₹4,439.5 crore, up from ₹4,128.5 crore year-on-year. Furthermore, the sales volume increased to 8.2 million tonnes, a rise from 7.7 million tonnes during the same period last year.

Also read: HUL vs ITC shares – Which FMCG stock is your pick? 

Future outlook 

UltraTech Cement is reportedly transitioning towards utilising 85% green energy by the end of 2030. At present, green power sources fulfil 24% of the power requirements for the cement manufacturer.

In the latest quarter, the company filed for approval with the stock exchanges regarding its intended acquisition of cement assets amounting to 10.75 MTPA from Kesoram Industries Ltd. Once these expansions/acquisitions are completed, the company’s capacity will increase to 195.4 MTPA, including its operations in the UAE.

Talking about Ambuja Cement, it is actively expanding its cement capacity by 20 MTPA, currently in different phases of development. Furthermore, the board has sanctioned an extra expansion of 12 MTPA, setting the stage to achieve 110 MTPA—80% of the planned 140 MTPA capacity by the fiscal year 2028.

Ongoing green power projects with a capital expenditure of ₹10,000 crore will increase green power usage to 60% of the expanded capacity while lowering operating costs. 

Increased domestic coal consumption and strategic purchase of low-cost pet coke are expected to further optimise fuel costs in the coming quarters, contributing to their overall cost reduction journey.

Also read: India’s port dominance: Adani Ports vs. JSW Infra analysis 

Share price trend 

As of 1st April 2024, Ambuja’s share price increased by 66.49% in the past year. On the other hand, UltraTech Cement’s share price increased by 30.31% in one year. 

Financials 

Financial metricUltraTech Cement LtdAmbuja Cement Ltd 
Market cap (In ₹Cr)287479.55123308.50
P/E44.8137.80
Debt to equity0.200.02
5-year Sales CAGR %15.34 10.52
ROE %9.6310.76
1-year returns %27.9167.51
5-year CAGR returns %19.4921.98 

While UltraTech Cement Ltd has a higher sales growth, Ambuja Cement Ltd shows better performance in terms of return on equity and returns. The companies have different levels of leverage as indicated by their debt to equity ratios. 

Bottomline 

Both UltraTech Cement and Ambuja Cement are well-positioned to capitalise on the sector’s growth. UltraTech boasts a larger production capacity, strong financials, and a clear commitment to sustainability. Ambuja Cement, on the other hand, offers impressive recent growth and a focus on social responsibility.

The choice for investors hinges on their priorities. A thorough analysis of financial indicators, strategic projections, and individual investment objectives will steer you to the cement company that resonates most with your investment approach. 

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StockGro Team

StockGro is India’s first and largest ‘Social Investment’ platform aimed at helping you master the art of “Trading & Investment”. Trade, Invest and get rewarded to Learn everything about ‘Investments’ the fun-filled way.

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