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Group stepping up capex; cement a long-term runway

* The group plans to increase capex from INR1.5t in FY26 to INR7-8t by FY30, with scope to reach INR10t. Management emphasized that investments will remain disciplined, with each business pursuing projects that generate returns above the cost of capital. The investment outlook is supported by India's large infrastructure capex gap, with annual spending of INR17t vs. an estimated requirement of INR70t, alongside significant scope for productivity improvement.

* Management believes cement in India is still perceived and sold as a branded product, unlike many global markets, where it is treated as a commodity. It expects this distinction to change over time, with cement eventually being sold as a commodity in India as well. The group anticipates significant longterm volume growth potential, driven by low cement penetration in housing, infrastructure, roads, and logistics. While industry returns remain below expectations, operational efficiency improvements (with a reduction in lead distance) can enhance profitability. The group has targeted an RoE of ~15% to be achieved over the next 2–4 years.

* We believe the change in brand perception is a long-term journey, as industry players are likely to remain focused on increasing/maintaining their higher premium product share in the near term. We have a BUY rating on the stock with a TP of INR530 (valuing the stock at 16x FY28E EV/EBITDA).

Adani Group accelerates infrastructure capex

* Adani Group has embarked on one of the most ambitious infrastructure investment cycles in India, with consolidated capital expenditure reaching a record INR1.53t in FY26, the highest annual capex undertaken by any Indian corporate group. Looking ahead, the group has indicated that annual capital deployment could increase substantially, with aggregate investments likely to increase to INR7-8t annually by FY30, with upside potential to INR10t under an accelerated growth scenario. The investment pipeline spans across renewable energy parks, transmission networks, ports, airports, data centers, copper, and green hydrogen projects, positioning the group at the center of India's infrastructure expansion.

* Adani Group has highlighted a significant infrastructure investment gap in India, noting that the country's annual infrastructure investment requirement is estimated at ~INR70t, while current spending levels are only ~INR17t. This substantial shortfall continues to create opportunities across transportation, logistics, energy, and urban infrastructure. Despite considerable progress in recent years, several foundational infrastructure challenges persist, including the need for higher-quality road networks. The group indicated that India's per capita GDP productivity is at ~USD7/hr, well below levels seen in other emerging economies such as Indonesia, which stands at ~USD28/hr.

* The group emphasized that capital allocation decisions are made independently by each operating company and are guided by a disciplined, sustainable investment framework. Further, all growth investments must generate returns above the cost of capital and create long-term shareholder value, ensuring that expansion remains financially prudent and self-sustaining over the investment cycle.

Valuation and view

* We believe the change in brand perception remains a long-term journey as most industry players continue to focus on increasing/maintaining their higher premium cement share. ACEM’s premium cement share stood at ~36% of trade sales in 4QFY26 (vs. ~29% in 4QFY25). While lead distances remain elevated due to the concentration of limestone mines in select areas/clusters, companies are mitigating this through split-location grinding units, optimizing scale operations, and increasing direct dispatches.

* We believe the cement demand outlook remains positive for the medium to long term, given the higher government spending on the infrastructure and residential segments. However, cost pressure and subdued cement price hikes are likely to remain key challenges in the near term.

* We estimate a CAGR of ~11%/18%/19% in consol. revenue/EBITDA/PAT over FY26-28, led by volume growth of ~9% and improvement in realization by ~2%. We estimate its EBITDA/t at INR856/INR1,053 in FY27/FY28 vs. INR887 in FY26. We estimate the company to shift from a net cash position (INR9.1b in FY26) to a net debt INR7.9b/INR22.9b in FY27/FY28. ACEM currently trades at 17x/13x FY27E/FY28E EV/EBITDA. We value the company at 16x FY28E EV/EBITDA to arrive at our TP of INR530. Reiterate BUY.

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