Recently, there has been significant attention on the stock of Ambuja Cement Ltd due to the decline in the Adani Group shares. On Thursday, the stock experienced a 5% drop in early trading. In the current calendar year, it has seen a 31% decrease in value.

During these challenging times, the company’s financial results for the final quarter of the year provide little solace. The company’s standalone revenue and earnings before interest, taxes, depreciation, and amortization exceeded predictions, with sales volumes reaching 7.7 million tons, an increase from the previous quarter and compared to the same period in the previous year. However, the future ahead for the company is expected to be challenging.

During an earnings conference call, the company’s management restated their aim to reach a capacity of 140 million tons per year within the next five years, up from the current capacity of 67.5 million tons per year. Some experts believe this is an audacious goal, and a clear plan to achieve it has not been outlined at this time.

It should be noted that Ultratech Cement Ltd and Shree Cement Ltd have also announced plans to expand their capacities in recent quarters. This implies that the competition to gain market share is expected to intensify.

Additionally, despite an increase in construction activities, the prices of cement companies are India has not experienced significant growth in recent months. This has led to a reduction in the company’s expected earnings.

According to analysts at Jefferies India Pvt Ltd, a clearer perspective on expansions would have provided confidence in the volume estimates, considering that Ambuja/ACC are already operating at over 85% utilization. Furthermore, the industry pricing has been weak in recent weeks despite the peak construction season, leading the analysts to revise their fiscal year 2024 and 2025 estimates by 12-14%, as reflected in the report

Additionally, analysts at Motilal Oswal Financial Services have reduced their earnings per share estimate for Ambuja for the fiscal year 2025 by 20%, as a result of the issuance of convertible warrants to the promoter group entity. The brokerage firm anticipates that these warrants will be subscribed and converted into equity shares during the fiscal year 2025.

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