'Buy' Ambuja Cements Says Motilal Oswal, Sees Up To 38% Upside

Motilal Oswal Report

Stocks To Buy - We maintain our constructive view on Ambuja Cement given its value accretive acquisitions, increasing scale of operation, balanced capacity mix across markets, and cost-saving initiates. We value Ambuja Cement at 20 times Sep’26E EV/Ebitda to arrive at our target price of Rs 710.

Ambuja Cement Ltd. has corrected ~30% in the last four-five months amid concerns of a demand slowdown in the sector, persistent pricing pressure across markets, and allegations by the US Department of Justice and US SEC on directors of Adani group. Adani group has denied the allegations and termed them baseless.

In January 2023, Ambuja Cement stock had corrected ~40% in one month after a Hindenburg research report alleged Adani group companies of irregularities. However, the stock subsequently had appreciated by 90%+ between Feb-23 and July-24.

Setting aside the current development on the Adani group, we believe Ambuja Cement, the second largest player in the Indian cement industry, has potential to deliver strong earnings growth, led by capacity expansions and cost-saving initiatives.

The company is committed to increasing its capacity to 140 mtpa by FY28E through organic and inorganic expansions. Further, it is working on improving cost efficiencies and targeting cost savings of Rs 530/tonne by FY28E.We maintain our constructive view on the company given its valueaccretive acquisitions, increasing scale of operation, balanced capacity mix across markets, and cost-saving initiates. We value ACEM at 20x Sep’26E EV/EBITDA to arrive at our TP of INR710.

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