Research House Prabhudas Lilladher has reiterated its ‘BUY’ rating on Ambuja Cements (ACEM), setting a revised target price of Rs692. The brokerage’s conviction is underpinned by ACEM’s aggressive expansion, robust cost optimization, and strategic integration of recent acquisitions. The company is on a trajectory to surpass its FY28 capacity target ahead of schedule, while simultaneously driving digital transformation and sustainability. Investors are advised to monitor key levels: the current market price (CMP) stands at Rs594, with a 52-week high of Rs707 and a low of Rs 453.

Ambuja Cements: On the Cusp of a New Era

Prabhudas Lilladher’s latest research underscores Ambuja Cements’ transformation from a regional player to a national powerhouse, fueled by strategic acquisitions and operational excellence. The company’s rapid capacity expansion—both organic and inorganic—has positioned it to achieve 140 million tonnes per annum (mtpa) well before FY28. The integration of Penna and Orient Cement into the ACEM/ACC brand ecosystem is progressing seamlessly, with both entities ramping up volumes under their new banners.

Strategic Expansion and Integration

ACEM’s capacity has surged from 68mtpa to 103mtpa, primarily through acquisitions, with an additional 16.2mtpa set to be commissioned in FY26. The company’s acquisition spree—encompassing Sanghi, Penna, and Adani Cementation—has been complemented by organic growth, with 6mtpa added through greenfield projects. The merger of these entities is expected to be finalized by the end of CY25, streamlining operations and enhancing synergies.

Digitalization and Operational Excellence

Ambuja Cements is leveraging cutting-edge technology to drive efficiency and reduce human intervention across its manufacturing footprint. The deployment of real-time analyzers, line cameras, drone-led inspections, and in-plant automation is being replicated across all locations. These initiatives are expected to yield significant cost savings and operational agility, reinforcing ACEM’s competitive edge.

Cost Optimization: A Relentless Pursuit

The management has set an ambitious target of reducing production costs by Rs500-550 per tonne, with Rs150 already achieved by end-FY25. The bulk of these savings—approximately 65%—will be realized through Adani group synergies, including green power, logistics, and raw material procurement. The remainder will stem from administrative efficiencies and process improvements, with the majority of benefits expected to materialize by FY27.

Financial Performance and Valuation

ACEM’s financials reflect a robust growth trajectory, with EBITDA expected to register a 34% CAGR over FY25-27E. The company’s EBITDA margins are projected to expand from 17.0% in FY25 to 22.7% in FY27, driven by higher cement pricing, volume growth, and a stable cost structure. The stock currently trades at 17.8x/14.1x EV/EBITDA on FY26/27E estimates, offering a compelling risk-reward profile.

Green Energy and Sustainability Initiatives

ACEM is targeting a green power share of 60% by FY28, up from 21% in FY25, through aggressive investments in waste heat recovery systems (WHRS) and renewable energy. The company plans to commission 250MW of WHRS and 1,000MW of renewable energy, with 350MW already operational. This transition is expected to significantly reduce energy costs and carbon footprint, aligning with global sustainability benchmarks.

Market Share and Premiumization

Ambuja Cements is aggressively pursuing market share gains, with a focus on premium products and enhanced brand equity. The share of premium products is projected to rise from 30% to 60-65% over the next five years. ACEM’s market share in the trade segment is expected to climb from 14.5% to over 20% by FY30, supported by capacity additions and infrastructure investments.

Industry Outlook and Competitive Landscape

The Indian cement industry is poised for 7% CAGR demand growth through FY30, with capacity additions expected at 6.3% CAGR. While incremental capacity may keep prices in check in the near term, ACEM’s value-over-volume strategy and operational efficiencies are likely to drive superior profitability. The company’s focus on premiumization and digital transformation sets it apart from peers.

Key Stock Levels and Investment Thesis

Investors should note the following levels: CMP at Rs594, 52-week high at Rs707, and 52-week low at Rs453. The target price is set at Rs692, implying a potential upside of over 16% from current levels. The stock’s valuation, combined with its growth prospects and cost leadership, makes it an attractive proposition for long-term investors seeking exposure to India’s infrastructure and construction boom.

Long Term View for Ambuja Cements

Ambuja Cements is executing a bold blueprint for industry leadership, blending scale, efficiency, and sustainability. With a clear roadmap to 140mtpa capacity, relentless cost optimization, and a pivot toward green energy, ACEM is redefining the contours of the Indian cement sector. Prabhudas Lilladher’s ‘BUY’ call, with a target of Rs692, reflects confidence in the company’s ability to deliver outsized returns in the years ahead.