Ambuja Cement Share Price Target at Rs 625: Choice Equity Broking
Ambuja Cement Limited has emerged as a frontrunner in India’s cement sector, bolstered by robust quarterly performance, margin expansion, and ambitious cost-reduction targets. In its latest report, Choice Equity Broking reaffirmed its ‘BUY’ recommendation on the stock, setting a revised target price of Rs 625, implying a potential upside of 17.1% from the current level of Rs 534. The brokerage is optimistic about Ambuja’s execution on its margin-enhancing strategies, capacity expansion, and premiumization drive, all while maintaining operational prudence. Here's a structured breakdown of the key takeaways and future outlook for investors.
Q4FY25 Performance Beats Street Expectations
Ambuja Cement delivered a stronger-than-expected set of numbers for Q4FY25, outperforming consensus EBITDA forecasts.
Revenue stood at Rs 56,814 million, up 18.8% YoY and 12.7% QoQ.
EBITDA rose to Rs 10,382 million, a massive 72.9% sequential and 30.1% annual growth.
EBITDA margin improved to 18.3%, gaining 159 basis points YoY.
PAT surged by 74.5% YoY, clocking in at Rs 9,289 million.
Volume for the quarter was 11.6 million tonnes, exceeding expectations.
The earnings beat was primarily led by lower-than-expected costs and operational efficiencies, including lead distance optimization and energy mix improvements.
Cost Efficiency Targets to Drive Margin Expansion
Choice Broking forecasts Ambuja’s cost per tonne to fall by Rs 300 by FY28, driven by green energy usage and logistics reforms.
Ambuja has already reduced Rs 175/t, with targets of reaching Rs 3,650/t by FY28.
WHRS (Waste Heat Recovery Systems) share is projected to reach 30% of capacity by FY28, helping slash power and fuel costs by ~Rs 150/t.
Long-term raw material sourcing contracts are anticipated to cut input costs by 8–10%.
Freight cost reduction is targeted via railroad mix optimization, warehouse footprint trimming, and increased usage of sea transport (target 10% by FY28).
These initiatives are expected to propel EBITDA/tonne to Rs 1,157/t by FY28, up from Rs 747/t in FY25, representing a CAGR of 24.5%.
Premiumization and Capacity Expansion: Key Growth Levers
Ambuja plans to expand cement capacity from 100 million tonnes in FY25 to 140 MTPA by FY28.
Near-term capacity target is 118 MTPA by FY26.
Share of premium products is expected to rise to 35% by FY26, up from 29% currently.
Realization per tonne is expected to grow modestly, supported by product mix enhancements.
Supported by these tailwinds, Ambuja's projected top-line growth stands at:
FY26 Revenue: Rs 221.1 billion
FY27 Revenue: Rs 242.3 billion
FY28 Revenue: Rs 265.4 billion
EV/CE Valuation Framework Suggests Undervaluation
Choice Broking introduces an EV to Capital Employed (EV/CE) approach to better reflect Ambuja’s improving fundamentals.
Assigned EV/CE multiple: 2.3x for both FY27E and FY28E.
Implied EV/EBITDA multiple on the target price is a conservative ~10–11x, which reflects Ambuja’s improving Return on Capital Employed (ROCE) from 3.9% in FY25 to 7.7% in FY28.
This method allows a more rational basis for valuation amid operational visibility, compared to traditional EV/EBITDA metrics alone.
Financial Highlights and Forecasts
Here’s a snapshot of the financial trajectory from FY24 to FY28:
| Metric | FY24 | FY25 | FY26E | FY27E | FY28E |
|---|---|---|---|---|---|
| Revenue (Rs Bn) | 179.2 | 194.5 | 221.1 | 242.3 | 265.4 |
| EBITDA (Rs Bn) | 33.7 | 29.7 | 40.0 | 49.7 | 61.1 |
| EBITDA Margin (%) | 18.8 | 15.2 | 18.1 | 20.5 | 23.0 |
| Adjusted PAT (Rs Bn) | 23.3 | 37.5 | 31.4 | 38.5 | 47.0 |
| EPS (Rs) | 11.7 | 15.3 | 12.7 | 15.6 | 19.1 |
Strategic Asset Consolidation Could Be a Game Changer
Ambuja’s ongoing merger with Sanghi and Penna Cement could unlock synergies and simplify its corporate structure.
Management hints at future consolidation of all cement entities under Ambuja’s umbrella.
Such a structural shift would be seen as a rerating catalyst and bring operational and valuation benefits.
Moreover, utilisation levels at Sanghi and Penna are on the rise, with Penna achieving 75–80% clinker capacity utilization.
Key Investment Levels and Outlook
Stock CMP: Rs 534 | Target: Rs 625 | Upside Potential: 17.1%
Forward PE for FY28 is estimated at 28x, which appears reasonable for a company of Ambuja’s scale and efficiency.
Dividend Yield: 0.4%
Total Return Potential (including yield): 17.5%
Choice Broking's base case scenario assumes successful execution of cost and capacity targets, along with stable pricing. Risks to watch include raw material inflation, construction slowdown due to climate, and volatility in petcoke prices.
Firm Fundamentals and Execution Visibility Make Ambuja a Solid Long-Term Bet
Ambuja Cement continues to display strategic discipline backed by execution clarity. With earnings visibility through cost reduction, premiumization, and inorganic growth, the stock offers a compelling investment case. The firm’s forward-looking valuation framework, steady ROCE improvement, and sector leadership make it well-positioned for sustainable upside. For long-term investors seeking quality exposure in India’s infrastructure and cement space, Ambuja remains a strong “BUY”.
