Prabhudas Lilladher has reiterated BUY Call for Ambuja Cements, anchoring its target price at a solid Rs 718 per share. This research piece explores Ambuja Cements' dynamic transition, marked by robust operational gains, ambitious green energy pivots, potent capacity expansion, and prudent cost rationalization. With management pressing the pedal on both organic and inorganic growth, integration of acquired assets into the Adani Cement framework, and strategic cost contraction, Ambuja is positioning itself to capture incremental market share and outpace sector peers.

Ambuja Cements Research Recommendation

Prabhudas Lilladher’s BUY stance on Ambuja Cements (CMP: Rs 577, Target: Rs 718) is a testament to the company’s commanding execution of its long-term strategic plan: The analyst sees Ambuja as a frontrunner, benefitting from both inorganic integration and an aggressive capex strategy. Volume-led revenue traction and margin accretion remain focal points, even as near-term realization pressures linger. Operational excellence, supply chain agility, and a rising green energy quotient form the backbone of expected margin resilience, while scale unlocks new cost efficiencies and network advantages.

Operational Highlights and Growth Drivers

1. Record-Breaking Volume Expansion: Ambuja Cements posted an impressive 20% YoY volume surge in Q2FY26, reaching 16.6 million tonnes—fuelled predominantly by the accelerated ramp-up of newly absorbed assets.

2. Strategic Integration Drives Scale: Seamless absorption of Orient, Penna, and Sanghi outputs into the Adani Cement brand portfolio created a discernible boost in net sales realization, leveraging the group’s expansive pan-India dealer network.

3. Inorganic Expansion at Warp Speed: Management has lifted its FY28 capacity target by 15 million tonnes to 155 million tonnes via debottlenecking and brownfield projects—a move designed to enhance both reach and utilization.

4. Market Leadership and Share Gains: Market share has improved by one percentage point YoY to reach 16.6%, and sustained outperformance is projected as Ambuja bulks up capacity and deepens dealer engagement.

Financial Performance Snapshot

5. Revenue and Profit Growth: Consolidated revenue for Q2FY26 jumped 21% YoY to Rs91.7 billion, underpinned by robust volumes and selective premiumization, even as average cement realization dipped marginally by 1% QoQ to Rs5,195 per tonne.

6. Margin Resilience and Efficiency Levers: EBITDA for the quarter was up a staggering 58% YoY, at Rs17.6 billion, powered by lower raw material costs and improving logistics efficiencies. Company-wide cost-cutting efforts, particularly in procurement and energy, paid off handsomely, with unit EBITDA climbing to Rs1,045 per tonne—a 34% YoY leap.

7. Profitability Milestones: Net profit for the quarter soared by 4.6x YoY, benefitting from reversal of tax provisions and robust operational leverage inherited from integrated assets.

Cost Leadership and Sustainability Initiatives

8. Relentless Cost Discipline: Management is driving an industry-leading cost reduction agenda, targeting total costs of Rs4,000 per tonne by FY26-end and eyeing further annual declines to Rs3,650 per tonne by the close of FY28, primarily via enhanced green power usage and strategic logistics.

9. Green Energy Surge: The share of renewable energy in Ambuja’s power mix now stands at 32.9%, with a goal to hit 60% by FY28. Recent commissioning of 200MW solar has lifted the group’s renewable capacity to 673MW—expected to touch 1,122MW by FY27.

10. Robust Capex and Capacity Roadmap: Capex plans are sharply focused on both new installations and debottlenecking existing plants, ensuring the company retains a capacity edge over rivals. Plant average life is being controlled, while the share of premium cement continues to rise via investments in blending technology.

Stock Levels, Targets, and Valuation Metrics

11. Key Stock Levels for Investors:

Current Market Price (CMP): Rs577

Target Price (TP): Rs718

52-week High/Low: Rs625/Rs453

Capacity Targets: 118mt by FY26, 130mt by FY27, 155mt by FY28

Targeted EBITDA Margin: 22.1% by FY28

12. Valuation Comfort and Upside:

Stock trades at 14.7x/12.5x FY27/28E EV/EBITDA, offering attractiveness against the cement sector’s historical multiple.

Revised target price valuation employs a 17x EV/EBITDA multiple on forward (Sep’27E) earnings.

Key Financials (Consolidated)

Strategic Capital Allocation and Investor Perspective

13. Flexibility Through Balance Sheet Strength: With a net working capital cycle of just 21-26 days and a modest net debt profile, Ambuja is well-insulated to withstand sectoral volatilities. Free cash flow projections, albeit lower in FY27-FY28 due to expansion capex, remain positive.

14. Dividend and Yield Focus: Dividend per share advances to Rs2.7 by FY28, maintaining a stable yield profile even as the company channels surplus cash into expansion.

15. Investor Action Point: For those seeking resilience in the cement space and exposure to India’s infrastructure up-cycle, Ambuja remains a compelling buy. The risk-reward matrix is enhanced by the company’s dual pursuit of higher volumes and industry-best cost control.