Ambuja Cements (AMBUJACEM)

FairStock Score: 51/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• Very low leverage with debt-to-equity ratio of 0.02, giving strong financial stability.
• Promoter holding of 67.33% aligns management interests with minority shareholders.
• Piotroski F-Score of 7/9 suggests decent operational health despite the profit decline.
• Recent sales growth of 16.65% and 5-year revenue CAGR of 7.41% show demand resilience.
• Book value of ₹216.21 provides a tangible asset base for the company.

Concerns

• Profit growth is negative at -23.76%, and ROE of only 7.04% is inadequate for a business trading at 32.19 times earnings.
• Valuation is expensive: price of ₹450.35 is far above the Graham Number of ₹295.01, leaving no margin of safety.
• Free cash flow is deeply negative at ₹-5,292 Cr, indicating heavy capital consumption.
• Negative EV/EBITDA of -39.98 raises a red flag about earnings quality or one-offs.

AI Analysis

Ambuja Cements is a business I respect, not one I would buy at today's price. The balance sheet is strong—debt-to-equity of just 0.02, and promoters own 67.33%, so their interests are aligned with mine. Cement is also a necessary product, and Ambuja's established position gives it some stability. But my investment test is not comfort; it is margin of safety. At ₹450.35, I am being asked to pay 32.19 times earnings and 2.08 times book for a company earning only 7.04% on equity and 10.50% on capital. Those are average numbers at best for a capital-intensive, cyclical business. Profits have fallen 23.76%, while sales rose 16.65%—that tells me margins are being squeezed, even if demand has grown. The 5-year revenue CAGR of 7.41% confirms a steady, not spectacular, grower. The negative free cash flow of ₹5,292 Cr is another red flag. In a healthy business, growth should not consume this much cash. The latest quarter, with ₹10,277 Cr sales and just ₹367 Cr net profit, reinforces the margin pressure. The Graham number, a conservative measure of intrinsic value, is only ₹295.01. At the current price, the market is offering me no margin of safety—the negative 69.62% figure says that plainly. A dividend yield of 0.40% is unconvincing, and the negative EV/EBITDA needs an explanation. On a positive note, the Piotroski score of 7 suggests the underlying operations are not badly managed, and the Altman Z-score of 2.34 is acceptable but far from robust. Cement cycles may turn, but I do not gamble on cycles paying an expensive price. I would prefer to wait for either a much lower price or proof that profitability and cash conversion have durably improved.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer