Ambuja Cement Ltd management has aggressive and renewed focus on cost reduction by improving internal efficiencies, leveraging group synergies to rationalize costs and streamline logistics, enhancing green power usage and the renewable mix, and increasing digitalization and automation – thereby improving overall plant efficiency and go-to-market strategy.
The management remains committed to its capacity expansion plans, to be funded via internal accruals. It expects pricing volatility to persist for some more time, given the ongoing expansion by multiple players.
From 2HFY26 onwards, the company would begin to see meaningful benefits from its internal efficiency and group synergy efforts. Retain LONG with a Sep’26 TP of Rs 692 (vs. Jun’26 earlier TP of Rs.664), based on 17x one-year forward EV/EBITDA (unchanged).
Capacity expansion remains a key focus area: As of Apr’25, ACEM had a capacity of 100.3MTPA and has since commissioned 2.4MTPA at its Sankrail plant in West Bengal, taking total capacity to 102.95MTPA. It is undergoing further expansion of 16.2MTPA, targeting ~120MTPA by FY26, and further aims to reach 140MTPA by FY28. On the clinker side, ACEM’s current capacity stands at 62MTPA; it is undertaking an expansion of 11MTPA and has another 16MTPA of projects under evaluation. The company plans to fund capacity additions through internal accruals rather than leverage the balance sheet.
Market share improvement – a top priority: As per management, ACEM has a market share of 18-20% in B2C and ~11% in B2B, taking its overall share to ~15%, up from ~11% pre-acquisition. It has guided for a 100bps increase in FY26, and is targeting 17-18% by FY28 and 20% by FY30. Volume growth in FY26 is expected to be higher, largely on account of the consolidation of Orient Cement and Penna Cement volumes relative to the base year. We build in a 14% consolidated volume CAGR over FY25-FY28E, with volume front-loading expected in FY26.
Cost reduction to drive profitability: The Adani Group’s overall cement business has ~65% cost overlap with other group companies, offering significant synergy potential. ACEM aims to reduce its operational cost to Rs 3,650/t by FY28, implying a reduction of Rs 550-600/t from current levels; this is likely to drive EBITDA/t to Rs 1,500/t by FY28. The reduction will be led by three key levers: (a) Lower power & fuel costs of Rs 200-300/t, as renewable energy usage increases from 28% in FY25 to 60% in FY28. The company targets 1GW of renewable capacity by Jun’26 (vs. 375MW currently), with benefits expected to materialise by FY27E. (b) Logistics cost savings of Rs 100/t through a higher share of marine and rail transport and reduced lead distances. Management indicated that sea dispatches are ~60% cheaper than road and ~30% from rail, and it is targeting 10% of volumes by sea by FY28. ACEM has also improved direct dispatches to ~75% vs 50% pre-acquisition, and aims to reach 85% by FY26. (c) RM cost savings of Rs 100/t through group-level synergies.
Ambuja-ACC merger not an immediate priority, to be considered at an appropriate time: Management is currently focused on operational streamlining and the subsequent merger of recently acquired assets – Sanghi Industries and Penna Cement. This will be followed by the integration of Orient Cement’s assets, which currently manufacture ~60% of volumes under the Ambuja and ACC brands. As such, the Ambuja-ACC merger is not under active consideration for now but is expected to take place at a suitable time in the future.
Equirus Securities retains LONG on Ambuja Cements with a Sep’26 TP of Rs 692 post plant visit, citing cost-efficiency focus, synergy benefits, and robust capacity expansion plans.
