Prabhudas Lilladher (PL Capital) has reiterated a BUY recommendation on Ambuja Cement (ACEM) with a target price of Rs640, compared with the current market price of Rs452, implying meaningful upside potential for investors. Analysts from Prabhudas Lilladher highlight the company’s Sanghipuram plant in Gujarat as a critical engine for future growth. With large limestone reserves, coastal logistics advantages, and operational debottlenecking initiatives underway, Ambuja aims to significantly improve profitability per tonne. Management targets a sharp reduction in variable costs to approximately Rs1,500 per tonne and an EBITDA improvement to nearly Rs1,800–2,000 per tonne. Supported by India’s cement demand growth and Ambuja’s expansion roadmap, the brokerage maintains a bullish outlook.

PL Capital Reaffirms BUY Rating with Rs640 Target

Strong valuation support and improving operational efficiencies form the backbone of PL Capital’s optimistic stance on Ambuja Cement. The brokerage values the stock at 17x EV/Mar FY27E EBITDA, suggesting substantial upside from the current trading levels.

At present prices, Ambuja Cement trades at approximately 12.5x FY27E EV/EBITDA and 10.7x FY28E EV/EBITDA, which analysts consider attractive relative to the company’s long-term growth trajectory.

The brokerage’s thesis centers on improving cost structures, rising operational capacity, and the strategic importance of the Sanghipuram facility within Ambuja’s western India network.

Sanghipuram Plant: A Strategic Asset Driving Efficiency Gains

A recent analyst visit to the Sanghipuram plant in Kutch, Gujarat underscores its importance within Ambuja Cement’s production network. The facility is one of the largest integrated cement plants in India, boasting cement capacity of around 6.1 million tonnes per annum (mtpa) and clinker capacity of approximately 6.6 mtpa.

Key operational strengths include:

Two high-capacity kilns rated at 9,000 tonnes per day and 10,000 tonnes per day.

Access to roughly 1 billion tonnes of premium limestone reserves.

Operational cement capacity of around 17,000 tonnes per day, with plans to increase to 20,000 tonnes per day through debottlenecking initiatives.

The management plans a capital expenditure of about Rs6 billion to upgrade efficiency at the plant. These upgrades include installing waste heat recovery systems (WHRS) with ~18 MW capacity, which should reduce energy costs and enhance operational sustainability.

Cost Reduction Strategy Could Boost EBITDA Per Tonne

One of the most compelling drivers of the investment thesis is the aggressive cost optimization plan at the Sanghi facility.

When Ambuja acquired the plant, variable costs were roughly Rs2,400–2,500 per tonne. Through operational improvements, costs have already fallen below Rs2,000 per tonne.

Management now aims to bring costs down further to approximately Rs1,500 per tonne, which could lift EBITDA per tonne dramatically.

Projected profitability transformation:

Current EBITDA per tonne: ~Rs1,200–1,500

Target EBITDA per tonne: ~Rs1,800–2,000

The improvement is expected to stem from:

Plant debottlenecking initiatives

Higher power efficiency

Increased usage of renewable energy

Logistics Advantage Through Coastal Connectivity

Ambuja Cement’s Sanghipuram facility benefits from a dedicated coastal jetty, a key logistical advantage that significantly reduces freight costs.

Currently, the plant can ship clinker and cement to markets such as Tuticorin, Dahej, and Mumbai, leveraging sea routes rather than road transport.

Logistics cost comparison:

Sanghipuram logistics cost: ~Rs700 per tonne

Pan-India average: ~Rs900 per tonne

The company is also upgrading shipping infrastructure. Seven new vessels with 7,000-tonne capacity have been ordered, replacing smaller vessels used earlier.

Jetty cargo capacity is also expected to expand from around 2 mtpa to 25 mtpa, which could materially improve supply chain efficiency.

Massive Limestone Reserves Provide Long-Term Raw Material Security

Ambuja Cement holds approximately 1 billion tonnes of limestone reserves in the Kutch region, which has an estimated mine life of around 125 years.

The mining lease covers 1,543 hectares, with about 300 hectares currently operational. Limestone extraction ranges between 20,000 and 25,000 tonnes per day, transported via trucks and conveyor belts to the clinker unit.

The plant also benefits from captive sources of critical raw materials including:

Bauxite

Silica

Laterite

This vertical integration strengthens Ambuja’s cost control and operational resilience.

Shift Toward Blended Cement to Improve Product Mix

Historically, Sanghi was heavily oriented toward Ordinary Portland Cement (OPC) due to limited fly ash availability.

Following Ambuja’s acquisition, the company began sourcing 700–800 tonnes of fly ash per day from Adani Power, allowing the facility to increase production of Portland Pozzolana Cement (PPC).

Over time, management aims to increase blended cement production to around 50% of output, which typically offers better margins and sustainability benefits.

Capacity Expansion Plans and Long-Term Growth Roadmap

Ambuja Cement has laid out an ambitious expansion roadmap.

Key capacity targets include:

Current consolidated capacity: ~109 mtpa

Target by March 2026: ~115 mtpa

Target by March 2028: ~155 mtpa

The company plans to add 10 mtpa of capacity within the next 3–4 months through expansions at multiple facilities including Salai, Banwa, Warisaliganj, and Bathinda.

However, management has emphasized that efficiency improvements will precede large-scale expansions, with utilization targets set at around 85% across plants.

Financial Outlook and Operating Metrics

Ambuja Cement’s financial projections indicate steady growth across revenue, profitability, and operational efficiency.

Volume growth is expected to rise from 65 million tonnes in FY25 to 94 million tonnes by FY28, while EBITDA per tonne is projected to increase from Rs916 to Rs1,257.

Demand Outlook: Cement Industry Set for Structural Growth

Management expects the Indian cement market to grow at roughly 7% CAGR between FY25 and FY30, supported by strong demand from infrastructure, housing, and industrial projects.

Ambuja’s current market share in Gujarat remains below 15%, leaving room for expansion as the company strengthens its regional distribution network.

The company also continues to expand its premium cement portfolio, where higher-value products command price premiums of Rs25–55 per bag, contributing to margin improvement.

Investment View: Strong Long-Term Growth Prospects

Ambuja Cement represents a compelling long-term investment opportunity driven by operational transformation and expansion.

Key catalysts include:

Major cost reductions at the Sanghipuram plant

Logistics advantages from coastal shipping infrastructure

Rising cement demand across India

Capacity expansion to 155 mtpa by FY28

Shift toward higher-margin blended cement products

With the stock trading below its long-term valuation averages and operational improvements expected to lift profitability, PL Capital maintains its BUY rating with a target price of Rs640.