Ambuja Cements shares: Choice retains 'Buy' on growth optimism, hikes target price

Ambuja Cements Ltd has seen its target share price raised to Rs 700 by Choice Institutional Equities, which maintains a 'BUY' rating amidst positive growth forecasts. The revised target reflects anticipated volume growth rates of 12 per cent in FY26, followed by steady 10 per cent growth in the subsequent two fiscal years.

Choice expects Ambuja Cements' EBITDA to increase at a CAGR of 34.8 per cent from FY25 to FY28. This growth is supported by forecasts of volume and realisation growth, with realisation expected to rise by 1.5 per cent, 2 per cent and 0.5 per cent in FY26, FY27 and FY28, respectively.

A significant part of this optimistic outlook is driven by a Rs 400 per tonne cost reduction benefit, exceeding previous estimates of Rs 300. Additionally, the company is set to benefit from a higher share of premium products, which is expected to enhance realisation rates, thus improving overall profitability.

The company's adjusted Return on Capital Employed (ROCE) is projected to rise from 8 per cent in FY25 to 15.9 per cent in FY28, thanks to strategic adjustments in non-current investments. The valuation framework now also accounts for stakes in Orient Cement and Sanghi Cement, thereby strengthening Ambuja's market positioning.

Aggressive expansion plans are pivotal to the group's growth strategy. Adani Cement, which includes Ambuja, aims to increase its capacity from 103 MnT in FY25 to 140 MnT by FY28. This includes a phased expansion strategy with significant brownfield project developments, which are expected to drive substantial growth.

The capacity expansion is expected to increase Adani Cement's market share from 14 per cent in FY25 to 17 per cent by FY28, reinforcing its status as one of the leading players in India's cement industry. The strategic rollout of these projects is anticipated to significantly boost the group's overall market presence and competitive advantage.

The improved fundamentals offer a conservative yet promising outlook for investors, with the strategic expansion expected to enhance revenue streams and profitability.

Meanwhile, shares of Ambuja were trading 0.60 per cent lower at Rs 590.95 on Thursday, indicating a potential upside of 18.45 per cent based on Choice's revised target price.

Separately, Nuvama Institutional Equities has also retained its 'BUY' rating on the Adani Group firm with a target price of Rs 694.