Motilal Oswal Financial Services has reiterated its BUY recommendation on Ambuja Cements, setting a target price of Rs 700—a 21% upside from the current market price of Rs 580. The report underscores Ambuja’s ambitious transformation under the Adani Group, highlighting aggressive capacity expansion, cost optimization, and premiumization strategies that are set to redefine the company’s competitive position in India’s cement sector. Investors are advised to consider the robust growth outlook, operational synergies, and the company’s focus on sustainability, all of which are expected to drive superior returns over the coming years.

Summary of the Investment Thesis

Motilal Oswal’s latest research advocates a BUY on Ambuja Cements, citing a 21% potential upside as the company embarks on a transformative growth journey under the Adani Group. Key drivers include a targeted ramp-up to 140mtpa cement capacity by FY28, a sharp focus on cost reductions through energy and logistics efficiencies, and a strategic push towards premium cement products, which command higher margins. With demand growth outpacing supply, Ambuja’s operational scale, digital innovation, and sustainability initiatives are expected to enhance profitability and shareholder value. The stock is recommended for investors seeking exposure to India’s infrastructure and industrial growth story, with a 12-month target of Rs 700.

Strategic Capacity Expansion: Scaling New Heights

Ambuja Cements is executing one of the most ambitious expansion plans in the Indian cement industry, targeting a capacity of 140mtpa by FY28. The company’s capacity has surged from 68mtpa in September 2022 to 102.8mtpa currently, fueled by a series of strategic acquisitions, including Sanghi Industries, Asian Cement, Penna Cement, and Orient Cement. By FY26, installed capacity is projected to reach 118mtpa, with further organic and inorganic expansion to hit the 140mtpa milestone by FY28. This aggressive scale-up is underpinned by a disciplined approach to capital expenditure, with greenfield projects maintained at a cost of USD 75-80 per ton, and a commitment to remain net debt-free during this phase.

Market Share and Premiumization: Building Pricing Power

Ambuja Cements has increased its market share from 11-12% to 14.5% in recent years, with a clear roadmap to reach 17-18% by FY28 and over 20% by FY30. The company is leveraging its leadership in premium cement, which now constitutes 26% of trade volumes and delivers an additional Rs 400 per ton in profitability compared to standard products. Trade sales account for approximately 74% of total volumes, and the company aims to push the premium share to as much as 50%, capitalizing on robust demand trends in urban and infrastructure segments.

Operational Excellence: Cost Optimization and Digitalization

Ambuja is targeting a reduction in costs by Rs 500-600 per ton by FY28, driven by a multi-pronged strategy:

Energy savings of Rs 200-300 per ton via increased green energy adoption, with 376MW of green power already commissioned and a target of 1,000MW by June 2026.

Logistics savings of Rs 100 per ton by shifting to sea transport (targeting 5-8% by FY28), which is significantly cheaper than road or rail.

Raw material cost reductions of Rs 100 per ton through group synergies and long-term sourcing contracts.

Administrative and overhead savings of Rs 50-100 per ton through digitization and process optimization.

These initiatives are expected to elevate EBITDA per ton to Rs 1,500 by FY28, positioning Ambuja as one of the most cost-efficient players in the industry.

Financial Performance and Valuation: Robust Growth Outlook

Ambuja Cements is projected to deliver a consolidated revenue CAGR of 17%, EBITDA CAGR of 35%, and PAT CAGR of 36% over FY25-27. The company’s EBITDA per ton is forecast to rise from Rs 768 in FY25 to Rs 1,090 in FY27. At the current price, Ambuja trades at 21x FY26E EV/EBITDA and 17x FY27E EV/EBITDA, with an enterprise value per ton of USD 154 in FY26E and USD 147 in FY27E. The stock’s valuation remains attractive given the growth trajectory, operational leverage, and industry tailwinds.

Key Levels and Targets for Investors

The following table summarizes the critical levels and targets for Ambuja Cements:

Transformation Under Adani: Integration and Sustainability

Ambuja’s integration into the Adani Group ecosystem is unlocking new synergies in energy, logistics, and technology. The management is focused on digitization, premiumization, and sustainability, with a five-year plan to drive operational excellence and environmental stewardship. The company is targeting Net Zero emissions by 2050, validated by the Science Based Targets initiative (SBTi), and is investing in green hydrogen, carbon capture, and advanced waste management systems.

Sector Tailwinds: Demand Outpacing Supply

India’s cement demand is forecast to grow at a CAGR of 7% between FY25 and FY30, outpacing the 6% CAGR in capacity additions. This dynamic is expected to boost industry utilization rates and pricing power, particularly in the infrastructure and industrial segments, which are set to increase their share of total demand by FY30. Ambuja’s scale, product mix, and operational agility position it to capture a disproportionate share of this growth.

Conclusion: Investment Rationale and Recommendation

Motilal Oswal’s BUY call on Ambuja Cements is underpinned by a compelling blend of expansion-led volume growth, margin accretive premiumization, and industry-leading cost efficiencies. With a 12-month target price of Rs 700, investors are presented with a robust opportunity to participate in India’s infrastructure renaissance through a company that is redefining operational and financial benchmarks in the cement sector.