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2025-07-04 11:58:52 am | Source: JM Financial Services
Buy Ambuja Cements Ltd For Target Rs. 635 By JM Financial Services
Buy Ambuja Cements Ltd For Target Rs. 635 By JM Financial Services

Cementing vision for FY28

We recently interacted with the management of Ambuja Cements during a visit to the Marwar Mundwa plant in Rajasthan. The key takeaways from the interaction are: (1) the company reiterated its cement capacity expansion targets of 118mt by FY26 and 140mt by FY28 (from ~103mt currently); (2) it aims to enhance market share from ~14% currently to 17–18% by FY28 and over 20% by FY30; (3) it has a cost reduction target of INR 500– 550/tn, bringing cost/tn down to INR 3,650 by FY28; and (4) the long-term strategic focus is on integrating operations under its “One Business, One Company” vision. We maintain our BUY rating on Ambuja Cements with a Mar’26 target price of INR 635/share, based on 18x FY27 EV/EBITDA. We continue to like the company for its strong pan-India presence, dominant market position, industry-leading volume growth, and robust balance sheet.

 

* Targeting clinker/cement capacity of ~107mt/140mt and 17–18% market share by FY28: Since the acquisition of Holcim’s stake in Sep’22, Ambuja Cements has expanded its cement capacity by over 35mt (>50%), with ~28mt (~80% of the addition) coming through the inorganic route. This has taken the group’s total capacity >100mt milestone. The company remains committed to its aggressive expansion strategy, targeting cement capacity of 140mt and clinker capacity of ~107mt by FY28. Of this, ~16mt is currently under execution, with plans to add another 21mt. The planned capacity additions are expected to come at a competitive capital cost of USD 75–80/tn. Ambuja’s current capacity market share is ~14%, which it aims to lift to ~15% by FY26 and to 17–18% by FY28 and over 20% by FY30.

 

* Reaffirms cost optimisation target to achieve INR 3,650/tn by FY28: Ambuja Cements reiterated its cost reduction roadmap, aiming to lower cost/tn by INR 500–550 to INR 3,650/tn by FY28. Key levers include: (1) savings of INR 280–300/tn in power and fuel costs, driven by scaling up green power capacity from 375MW to 1GW by Jun’26 (targeting ~60% of power requirement from green sources by FY28 vs. 23% in FY25) and increasing AFR usage to 27% by FY28 (from 9% in FY25); (2) logistics savings of INR 100/tn through network optimisation, reduction in lead distance, and increasing the share of sea logistics by 500bps to 10%; (3) raw material savings of INR 100/tn via long-term tie-ups for fly ash and slag; and (4) overhead and administrative savings of INR 50–100/tn. A significant portion of these savings is expected to materialise from FY27 onwards. Premium products contribute ~30% of trade sales and it is targeting 50% share in the near term. These products generate an EBITDA premium of ~INR 400/tn. The management has reaffirmed its guidance of achieving EBITDA/tn of INR 1,500 by FY28.

 

* “One Business, One Company” strategy driving portfolio consolidation: The Adani Group is actively consolidating its cement operations under a unified structure. The ongoing mergers of Sanghi Industries and Penna Cement are expected to be completed by 3QFY26. A potential merger between Ambuja and ACC remains under consideration. The recent acquisition of Orient Cement was executed smoothly, with no disruption to volumes—around 60% of Orient’s dealers have already begun selling Ambuja and ACC products.

 

 

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