The Ramco Cements Ltd. share price target

Ramco Cements Q3FY16 performance was largely in-line with our estimates. Revenue/EBITDA came at Rs 8.1bn/Rs 2.4bn against our estimates of Rs 8.3bn/Rs 2.5bn.

Ramco Cements (RCL) reported healthy set of numbers and better operating performance amid subdued demand environment as EBITDA grew 1.4x yoy to Rs2.44bn as against our estimate of Rs1.91bn. Strong growth is purely on account of ~6.5% yoy jump in average realizations and a meaningful correction in operating cost/tonne (down 13% yoy and 1% qoq). Cement EBITDA/tonne stood at Rs1,512 as against Rs583 seen last year. Notably, a healthy correction in freight cost/tonne (-16% yoy due to change in geographical mix led to low lead distance) and power & fuel cost/tonne (-23% yoy and -11% qoq owing to improved plant efficiency and...

Ramco Cements (Ramco) reported another solid quarter, with EBITDA/t at Rs 1,302/t (adjusted for reversal of excess provision made for DMF contribution, ~Rs 300mn in our estimate). While volumes declined ~12% YoY, realisations continue to hold (Rs 4,926/t, -1.9% QoQ, 7.4% YoY), as prices in the South remain elevated.

Ramco Cements Q2FY16 EBITDA of Rs 2.7 bn came 25% ahead of our estimate of Rs 2.2 bn, primarily on account of better than expected margin (led by significant decline in freight cost). Sluggish demand led volume de-growth of 12% YoY, which offset better realisations (+7% YoY) in south region and led to fall in revenues.

Ramco Cements (RCL) reported healthy operating performance amid subdued demand environment as EBITDA grew by ~46% yoy to Rs2.73bn ahead of our estimates of ~Rs2.15bn. Strong growth is on account of ~6% yoy jump in average realizations to Rs5,028/tonne and a meaningful decline in operating costs/tonne (down ~7% yoy). EBITDA margins stood at ~31.3% (best in the industry), which is 1,102bps higher compared to last year. Cement EBITDA/tonne stood at Rs1,409 as against ~Rs785 seen last year. A significant decline in fuel prices along with cost reduction measures adopted by RCL aided in low operating costs. Reported PAT...

Ramco Cements (Ramco) has reported another strong quarter with EBITDA/t at Rs 1,230 (vs estimated 1,229/t). Strong pricing (Rs 5,021/t, 18.5% YoY, -1.9% QoQ) continues to drive profitability even as volumes shrank for the 4th straight quarter (1.18 mT, -14.8% YoY).

Ramco Cements Q1FY16 Revenues (flat YoY) & EBITDA (up 63% YoY) were lower than estimates on account of lower than expected volumes which declined 15% YoY (vs. estimate of 9% decline). EBITDA/ton at Rs 1230/t (in-line with estimate) improved sharply by 92% YoY (on better realisation & moderation in variable costs) leading to net profit growth of 169% YoY. Going ahead, we have reduced our EBITDA estimate for FY16E by 3% factoring in lower cement volumes.

We remain cautious as valuations remain steep at 9.4/8.3x FY16/17x EV/EBITDA and US$145/t. The high prices in South will supercharge the earnings till they sustain. However, it is not prudent to assign high multiples to such unsustainable earnings, susceptible to sharp pricing declines, as seen in Dec 2013-Nov 2014 period.

Ramco Cements, though facing volume pressure (on account of poor demand in south region), has been benefiting from higher cement prices in the region (led by pricing discipline) where it sells ~ 85% of its cement output. The company's operating margin improved significantly in FY15 (EBITDA/t increased 45% YoY to Rs 863/t) as its net cement realisation improved by ~ 11% YoY which negated the negative impact of volume de-growth of ~ 11% YoY.

Ramco Cements (TRCL) reported a weak EBITDA/t (excl other operational income) of Rs ~583/t (vs. est. Rs 814, Rs 653 in 3QFY14). Realizations remained flat (5.7% YoY, -0.4% QoQ) with pricing in South holding on to the increases experienced in 2QFY15. But volumes shrank ~12% YoY to 1.72 mT (implied 55% utilization vs 62% a year ago). Demand remains extremely weak and industry remains hopeful of a pickup.