Ambuja Cements Ltd’s volumes surged 5.28% year-on-year to 6.37 million tonnes (mt) in the June quarter. In comparison, volumes of peers UltraTech Cement Ltd and ACC Ltd’s stood at 16.8mt and 7.24mt, respectively, in the same quarter. On a stand-alone basis, Ambuja Cements’ net profit rose 27% year-on-year to 499.27 crore. This figure includes a dividend of 141 crore from material subsidiary ACC. But even after excluding the dividend, the company exceeded Bloomberg analysts’ net profit estimate of 333.3 crore. Standalone revenue also beat expectations, thanks to improved sales of premium products.

However, like its competitors, the company’s operating margins too took a hit on account of higher power and fuel expenses.

While Ambuja Cements’ financial performance is better than expected, the performance of its stock continues to be unimpressive.

On a year-to-date basis, the Nifty Commodities index has posted negative returns of 13.39%, but the Ambuja Cements stock has seen a steeper decline.

Most large-cap cement stocks have been underperformers during the same span, but the return on Ambuja Cements stock is much worse (see chart).

The stock is trading at a one-year forward price-to-earnings multiple of 22, the lowest valuation among its peers. Also, out of the 38 brokerage houses tracking the stock, 10 have recommended a “sell" rating—the highest among pan-India cement firms.

Apart from sustained input cost pressures, lack of expansion plans puts the company on a weaker footing.

Meanwhile, the National Company Law Appellate Tribunal has upheld the 6,300 crore fine imposed on 11 cement companies by the Competition Commission of India for cartelization. A penalty of 1,163.91 crore has been imposed on Ambuja Cements.

While the penalized cement companies will challenge the verdict in the Supreme Court, this is a near-term overhang for cement stocks.