Ambuja Cement: Demand Recovering Well

Demand has fared better than expectations. Normalization is likely only by 4QCY20. In order to improve profitability, Ambuja is working on various cost reduction measures combined with focus on increasing trade sales (including Premium products). Commissioning of Marwar-Mundwa was expected by end-2020, but will now be delayed by around 3 months due to the current COVID challenges. The project should assist in driving volume growth/market share. Ambuja resumed operations in the third week of Apr’20, but sales started picking up gradually. Volume growth in May’20 reflected the regional spread of COVID-19 and impact of the lockdown in various Indian states. Market volumes are still down ~20% YoY. However, Ambuja has outperformed due to higher share of trade sales (~80%+) and strong presence in the individual home builders’ (IHB) segment. Ambuja has performed well in the IHB segment in rural/semi-urban areas. Being balance-sheet focused, Ambuja’s emphasis is on cash collections, which has improved substantially. The company has not faced any labor issues. Ambuja believes prices for the industry have held sequentially. In order to increase premium product sales in the mix, Ambuja has launched 3-4 premium products in 2019.