Ambuja Cement BUY Call: Target Price at ₹660 Amid Expansion

Brokerage Maintains Positive Outlook on Cement Major

Choice Institutional Equities has reiterated its 'BUY' rating for Ambuja Cements Ltd. (ACEM), a key player in the Indian cement sector and part of the Adani Group. Despite a downward revision of the target price to ₹660 per share from the earlier ₹700, the brokerage remains constructive on the company's growth prospects. The positive outlook is anchored in a clear strategy focused on aggressive capacity expansion, significant cost reduction initiatives, and an enhanced product mix.

On January 30, 2026, Ambuja Cements' stock closed at ₹510.15, marking a 4.84% decline from its previous close of ₹536.05. The stock has a 52-week high of ₹624.95 and a low of ₹455.00, reflecting a volatile trading period. The company currently holds the second-largest market capitalization in the cement sector at approximately ₹1,26,100 crore.

Strategic Pillars for Growth

Choice Equities' confidence in Ambuja Cements is based on three primary factors. First is the company's ambitious capacity expansion plan. Management has increased its target, now aiming to reach a production capacity of 115 million tonnes (Mnt) by the end of fiscal year 2026 and a formidable 155 Mnt by FY28. This is an upward revision from the previous target of 140 Mnt, signaling a strong commitment to scaling operations and capturing a larger market share.

Second, a robust cost-reduction program is expected to drive profitability. The company aims to achieve savings of ₹300 per tonne over FY25-28. A significant portion of this, around ₹150 per tonne, is anticipated from logistics optimization by reducing lead distances and increasing the use of sea and rail transport. The remaining savings will come from operational efficiencies and synergies within the Adani Group's ecosystem.

Third, Ambuja Cements is focusing on increasing the share of its premium products. This strategic shift is designed to improve sales realisation and enhance profit margins, moving the company up the value chain.

Financial Projections and Valuation

Based on these strategic initiatives, the brokerage forecasts strong financial performance. It projects Ambuja's EBITDA to grow at a Compound Annual Growth Rate (CAGR) of 13.5% between FY25 and FY28. This growth is expected to be supported by healthy volume increases of 12% in FY26, followed by 8% in both FY27 and FY28. Realisation is also projected to grow by 4% in FY26 and 0.5% in the subsequent two years.

To arrive at the target price, Choice Equities has employed an Enterprise Value to Capital Employed (EV/CE) valuation framework, assigning a multiple of 2.4x for FY27 and FY28. This methodology is intended to capture the company's improving fundamentals and efficient capital allocation.

Market Performance and Key Metrics

The stock's recent performance has been under pressure, with technical indicators like the 5-day moving average crossover suggesting a bearish trend. However, the fundamental picture painted by analysts remains largely positive. Below is a summary of key financial metrics for Ambuja Cements.

Analyst Consensus and Industry Outlook

The broader analyst community shares a generally positive view on Ambuja Cements. Out of 40 analysts covering the stock, 30 have issued 'Buy' or 'Strong Buy' recommendations, while eight suggest 'Hold'. Only two analysts have a 'Sell' or 'Strong Sell' rating. Other brokerages have also expressed confidence, with JM Financial setting a target of ₹635 and Motilal Oswal at ₹600. This consensus reflects a belief in the company's long-term strategy, particularly its consolidation and expansion plans under the Adani Group.

Company management has indicated that the overall cement industry is poised for healthy growth, projecting an expansion of 7-8% in FY26, driven by infrastructure development and housing demand.

Potential Risks to Consider

While the outlook is optimistic, potential risks could impact the company's performance. A slowdown in demand or weaker-than-expected price realisation in key markets could affect revenue growth. Furthermore, any significant delays in the planned capacity expansion projects could hinder the company's ability to meet its growth targets. A sharp and sustained increase in input costs, particularly for coal, pet coke, and logistics, also remains a key risk that could pressure operating margins.

Conclusion

Choice Institutional Equities' 'BUY' rating on Ambuja Cements underscores the company's strong strategic positioning. The combination of aggressive capacity expansion, a clear cost-reduction roadmap, and a focus on premium products provides a solid foundation for future growth. While the stock has faced near-term headwinds, the long-term investment thesis remains intact, centered on the company's ability to execute its expansion plans and leverage synergies within the Adani Group to become a dominant force in the Indian cement industry.