'Buy' Ambuja Cement Shares Maintains Systematix; Says Premiumisation, Cost Efficiency To Drive Growth

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Systematix Report

Ambuja Cements Ltd.'s expects cement demand in India to remain strong with a CAGR of 7%+ over the next three years. Demand growth is expected to be led by higher infra spend. Further, the company expects its market share to rise nearly 1-2% every year to reach 22-24% by 2030 from the current 15-16%.

Total incremental demand in India is expected to be ~30mtpa (current demand ~450mtpa) in FY26 while incremental supply is expected to be double. However, the company’s focus on value would drive the growth.

Ambuja Cements has already reached a capacity of 103 mtpa and is on track to reach its target of 140 mtpa by FY28. With the acquisition of Orient Cement and commissioning of Farakka grinding unit, Ambuja Cements expects to reach 118 mtpa by end of FY26.

Key upcoming expansions include the Bhatapara Clinker unit (4mtpa), Grinding units at Sankrail, Sindri, Salai Banwa along with the brownfield expansion at Kalamboli, Dahej, Marwar and Jodhpur.

The total capex is estimated to be in the range of $70-80/mt for a greenfield project. The company expects the clinker ratio to be maintained at ~65% and expects the capacity of clinker to grow in line with the cement capacity addition.

Valuation and Outlook

We are forecasting a revenue/Ebitda CAGR of 19%/26% during FY25-FY27E. Currently we are modeling Ebitda/tonne of Rs 1,047/1202 for FY26E/FY27E vs Rs 916 in FY25.

The stock is trading at an EV/Ebitda of 13.7x/11.0x on FY26E/FY27E. We maintain Buy on the stock with a target price of Rs 649.

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