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Tuesday, Ambuja Cements (NSE:ABUJ) Ltd. (ACEM:IN) received an upgrade in its stock rating from UBS, moving from ’Sell’ to ’Buy’, accompanied by a significant increase in its price target from INR475.00 to INR620.00. The adjustment reflects UBS’s reassessment of the company’s operational capabilities and growth prospects.
UBS analysts, led by Nikunj Mandowara, revised their outlook based on Ambuja Cements’ better-than-expected execution on capacity expansion. The firm’s progress has instilled confidence in its ability to meet the 140 million tonnes per annum (mtpa) capacity guidance by the end of the fiscal year 2028. Despite lagging margin improvement compared to the industry, UBS anticipates a sharp margin enhancement in the medium term, supported by sector tailwinds and strong synergies from its parent company, Adani.
The upgrade comes with a bullish forecast for Ambuja Cements, with UBS expecting it to be India’s fastest-growing cement company from fiscal years 2025 to 2028. The firm’s market share in terms of demand and capacity is projected to rise to 18% and 16% respectively by fiscal year 2030, up from 13% and 11% in fiscal year 2024.
UBS’s positive outlook is further supported by financial projections. The firm anticipates Ambuja Cements’ consolidated EBITDA to double over fiscal years 2025 to 2027. This growth is expected to be driven by volume increases of 17% and 15% in fiscal years 2026 and 2027, respectively, with EBITDA per ton forecasted to climb from approximately INR760 in fiscal year 2025 to INR1,150 in fiscal year 2027.
The UBS analysis points to a current valuation discount for Ambuja Cements when compared to the market leader, Ultratech, despite Ambuja’s superior growth trajectory. This gap is attributed to the market’s previous concerns over Ambuja’s execution capabilities, which UBS now believes have been addressed.
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