Ambuja Cements: ₹750 Target Price as Adani's Cement Empire Doubles Down

The Adani Group's cement consolidation play is accelerating. Ambuja Cements sits at the center of this strategy, with capacity nearly doubling since acquisition and more deals in the pipeline.

The stock carries a BUY rating with a target of ₹750—that's 38% upside from the current price of ₹543.

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What's Driving the Bullish View?

Three years ago, the Adani Group acquired Ambuja Cements with 68 million tonnes per annum (mtpa) capacity. Today, consolidated capacity stands at 107mtpa. By FY28, the target is 155mtpa.

That's more than doubling in six years.

The capacity trajectory:

• At acquisition: 68mtpa
• Current: 107mtpa
• FY26 target: 120mtpa
• FY28 target: 155mtpa (recently raised from 140mtpa)

And it is not just about getting bigger. The company is simultaneously driving down costs from ₹4,200/tonne currently to ₹3,650/tonne by FY28. When scale expansion meets cost reduction, profitability compounds.

The Jaiprakash Associates Acquisition

Adani Enterprises (the promoter group company) has been declared the successful resolution applicant for Jaiprakash Associates (JAL) under the Insolvency and Bankruptcy Code.

What JAL brings:

• 4 cement plants in central India
• 3.3mtpa clinker capacity
• 5.2mtpa grinding capacity
• 279 MW captive thermal power
• Leased limestone mines in Madhya Pradesh

The plants are currently non-operational but can restart quickly with capital infusion. The expected valuation: approximately ₹50 billion (implying ~$100/tonne).

Strategic significance: The Adani Group's capacity share in central India jumps from ~10% currently to ~16% post-acquisition. This fills a gap in the portfolio, central India was underrepresented at just 8% of consolidated capacity.

The Consolidation Playbook

The Adani Group is methodically consolidating all cement assets under Ambuja Cements as the single listed entity.

Recent and upcoming mergers:

All acquired brands (Orient, Penna, Sanghi) are now being routed under the Ambuja or ACC umbrella. This creates brand consolidation alongside operational consolidation.

The Cost Reduction Roadmap

Current cost per tonne: ₹4,200 Target by March 2026: ₹4,000 Target by FY28: ₹3,650

That's ₹500-550/tonne in savings. Here's where it comes from:

Energy costs (₹200-300/t savings):

• Green power capacity: 673 MW currently → 1.1 GW by FY28
• Waste Heat Recovery Systems (WHRS): 228 MW → 376 MW
• Thermal Substitution Rate (TSR): 6% currently → 27% by FY28

Logistics costs (₹100/t savings):

• Sea transport share: Targeting 5-8% by FY28 (60% cheaper than road, 40% cheaper than rail)
• Direct dispatches: 75% currently → 85% target (was 50% two years ago)
• Reduced lead distance through optimized plant locations

Raw material costs (₹100/t savings):

• Leveraging group synergies across Adani entities
• Bulk procurement advantages

Admin and overheads (₹50-100/t savings):

• Operational efficiencies from integration
• Shared services consolidation

Modernization initiatives:

• New blenders and low-heat clinker lines
• Heat consumption: 730-740 kcal/kg → 680 kcal/kg
• Power usage: 60 kWh/tonne → below 50 kWh/tonne

Financial Projections: FY26-28

The numbers tell a story of accelerating profitability as scale and efficiency gains compound.

Volume growth:

• FY25: 65.2 million tonnes
• FY26E: 74.5 million tonnes (+14%)
• FY27E: 81.9 million tonnes (+10%)
• FY28E: 90.2 million tonnes (+10%)

EBITDA per tonne trajectory:

• 5-year average: ₹966/t
• FY25: ₹794/t (weak year)
• FY26E: ₹1,043/t
• FY27E: ₹1,154/t
• FY28E: ₹1,230/t
• FY28 target: ₹1,500/t

The company has delivered EBITDA/t above ₹1,000 for three consecutive quarters, showing the improvement is structural, not just cyclical.

Read more: Top 3 Technical Indicators for Trend Analysis

Regional Capacity Mix Evolution

The JAL acquisition meaningfully shifts the regional balance:

Current mix:

• South: 28%
• West: 23%
• East: 22%
• North: 19%
• Central: 8%

Post-acquisitions (FY26E):

• South: 24%
• East: 22%
• North: 21%
• West: 20%
• Central: 13%

The central region was notably underweight. With JAL's assets, Ambuja becomes the second-largest player in central India with 16.5% market share, behind only UltraTech at 33.8%.

Central region competitive landscape (post-acquisition):

Capacity Expansion Timeline

Ongoing organic additions (FY26):

• Q3 FY26: 7.0mtpa grinding capacity
• Q4 FY26: 5.6mtpa grinding capacity
• Total FY26 exit capacity: ~120mtpa

Inorganic additions:

• Sanghi Industries: Expected end-FY26
• Penna Cement: Expected end-FY26
• JAL cement business: Post regulatory approvals

FY28 target: 155mtpa (up from earlier guidance of 140mtpa)

Cash Flow and Balance Sheet

The aggressive expansion is consuming the cash pile accumulated over years.

Net cash position:

• March 2025: ₹101.3 billion
• October 2025: ₹25.6 billion

Why the decline?

• Organic capacity expansion
• Inorganic acquisitions
• Green power investments
• Modernization and logistics upgrades

Capex trajectory (₹ billion):

The JAL acquisition would require an additional ~₹50 billion outflow.

Balance sheet trajectory:

• FY26E: Net debt ₹20 billion (shift from net cash)
• FY27E: Net debt ₹12 billion
• FY28E: Net cash positive (₹1 billion)

The company transitions to net debt temporarily during the heavy capex phase but returns to net cash by FY28 as operating cash flows from expanded capacity kick in.

Operating cash flow forecast:

• FY26E: ₹56 billion
• FY27E: ₹79 billion
• FY28E: ₹83 billion

Valuation: Why the Stock Looks Attractive

Current valuations are well below historical averages:

Forward multiples:

Target price derivation: The ₹750 target is based on 20x September 2027E EV/EBITDA, still below the 5-year average multiple of 18x on 1-year forward basis.

At target price:

• Implied EV/EBITDA: 20x Sep'27E
• Upside from CMP: 38%

Operating Metrics Trend

The operational turnaround is visible in the numbers:

Utilization dips as new capacity comes online faster than demand absorption, but this normalizes as volumes catch up.

What Could Go Wrong?

Near-term headwinds:

• Cement demand pickup slower than expected
• Weak non-trade (retail) prices
• Integration challenges with multiple acquisitions
• Regulatory delays for JAL acquisition

Balance sheet stress during expansion:

• Net cash depleting rapidly
• Heavy capex commitments over FY26-28
• Working capital needs increasing

Industry dynamics:

• Overcapacity in certain regions
• Price competition from peers also expanding
• Input cost volatility (fuel, raw materials)

Execution risks:

• Cost reduction targets may be ambitious
• Green power and logistics optimizations require sustained execution
• Multiple simultaneous integrations increase complexity

Investment Perspective

The bull case:

• Capacity scale driving market share gains
• Cost reduction compounding profitability
• Adani Group synergies (procurement, logistics, power)
• Consolidation creating a national champion
• Attractive valuations vs. historical averages
• 25% PAT CAGR through FY28

The bear case:

• Near-term demand weakness persists
• Cash burn concerning during expansion phase
• Return ratios (RoE 5-7%, RoCE 6-8%) remain subdued
• Multiple moving parts increase execution risk

Read more: Technical Analysis: ROC, RSI, SMA, EMA, MACD and DEMA

Who should consider this stock:

• Investors with 2-3 year horizon
• Those seeking infrastructure/cyclical exposure
• Believers in India's construction growth story
• Portfolios underweight cement sector

Who might want to wait:

• Those seeking immediate earnings visibility
• Investors uncomfortable with cyclical stocks
• Those requiring higher dividend yields (current: 0.4-0.7%)
• Risk-averse investors concerned about capex-heavy phase

Frequently Asked Questions

1. What is Ambuja Cements' target price?

The target price is ₹750, representing 38% upside from the current price of ₹543. The valuation is based on 20x September 2027E EV/EBITDA. Current valuations at 15x forward EV/EBITDA are below the 5-year average of 18x.

2. Is Ambuja Cements a good buy now?

The stock has a BUY recommendation. While near-term challenges exist (weak demand, pricing pressure), the medium-term outlook is constructive given capacity expansion, cost reduction initiatives, and Adani Group's consolidation strategy delivering 20% EBITDA CAGR through FY28.

3. What is Ambuja Cements' capacity target?

Current capacity is 107mtpa. The company targets 120mtpa by FY26 end and 155mtpa by FY28 (recently raised from 140mtpa). This represents more than doubling since the Adani Group acquisition in 2022 when capacity was 68mtpa.

4. How does the Jaiprakash acquisition help Ambuja?

The JAL cement business acquisition adds 5.2mtpa grinding capacity in central India, where Ambuja was underweight (only 8% of portfolio). Post-acquisition, Adani Group's central region market share jumps from ~10% to ~16%, making it the second-largest player behind UltraTech.

5. What is Ambuja's EBITDA per tonne outlook?

EBITDA/t is expected to improve from ₹1,043 in FY26E to ₹1,154 in FY27E and ₹1,230 in FY28E. The company targets ₹1,500/t by FY28 through ₹500-550/t cost reduction in energy, logistics, raw materials, and overheads.

6. Is Ambuja Cements' balance sheet at risk?

The company is transitioning from net cash (₹101 billion in March 2025) to temporary net debt (₹20 billion in FY26E) due to aggressive capex. However, it's expected to return to net cash by FY28 as operating cash flows from expanded capacity normalize at ₹79-83 billion annually.

7. How does Ambuja compare to UltraTech?

UltraTech remains the industry leader with 34% share in central India and larger national presence. However, Ambuja under Adani is the fastest-growing large player, adding capacity at 15-20% CAGR. Ambuja trades at lower multiples (15x vs. UltraTech's 18-20x EV/EBITDA).

The Bottom Line

Ambuja Cements represents a bet on the Adani Group's ability to consolidate India's fragmented cement industry while driving operational efficiencies.

The math is straightforward: capacity doubling + costs falling ₹550/tonne = significant earnings leverage. At 15x forward EV/EBITDA versus a historical average of 18x, and with 38% upside to target, the risk-reward appears favorable for patient investors.

Near-term challenges (demand softness, pricing pressure, heavy capex) create the entry opportunity. The FY26-28 period should see the fruits of expansion and integration as 25% PAT CAGR materializes.

For those who believe in India's infrastructure buildout and cement demand trajectory, Ambuja offers exposure to a consolidator with scale advantages and improving unit economics.

Disclaimer: *The companies mentioned in the article are for information purposes only. This is not investment advice.