The Ramco Cements Ltd. share price target

Ramco Cements continued its outperformance and reported strong Q2FY20 results. The beat was led by strong volume growth with other operational parameters coming broadly in-line with I-direct estimates. Revenues during the quarter increased 11.2% YoY to | 1316.7 crore, led by 10.3% growth in volumes to 2.72 MT (vs. I-direct estimate of 2.6 MT). Blended realisations improved marginally by 0.8% YoY to | 4,834/t (vs. I-direct estimate of | 4,797/t). On the operational front, total costs per tonne declined 1.1% YoY, in line with I-direct estimates. Further combined with a marginal...

volumes surprised positively (up 10% YoY to 2.72mt in a weak demand scenario), implying market share gains. Cement realizations, however, declined 5.6% QoQ to INR4,708/t (+1.8% YoY), due to weaker pricing in the 30 October 2019 southern and eastern regions of India. Thus, cement EBITDA/t also declined 20% QoQ to INR 977/t (+15%YoY). According to our estimates, we expect realization/EBITDA margins to be further pressurized in 3QFY20 as prices in the South/East are currently 2-6% below 2QFY20 average. Revenue/ EBITDA/ PAT of INR13.1/ INR2.9/ INR1.7b, up 11%/ 19%/ 47% YoY, was driven by strong volumes (+10% YoY) and lower tax rate at 21% (v/s 32% last year) due to MAT credit availed. sharply by 55% from Mar19 to INR22.2b in Sep19 (implying 1.9x net debt/ EBITDA) due to low cash conversion rate (CCR) of 0.4x and higher capex spend.

our/consensus estimates. The marginal beat came largely on account of better than expected volume growth (10.5% v/s PLe:+8.5%). In line with our expectation, TRCL's margins fell sharply by 24% QoQ as the competition for volumes intensified in South region post July in wake of weak discipline, poor demand and high price levels. The upcoming new supplies of Chettinad cement, Penna and TRCL would keep region's prices under prolonged pressure. Sharp fall of ~20% in pet coke/thermal coal prices over last six months would help in costs lower by Rs100-120/t in H2FY20E....

Exceeding our estimates, Ramco Cements (TRCL) has reported a strong performance mainly led by better-than-expected volume and pricing despite a challenging environment. EBITDA surged by 27% YoY to Rs2.6bn (-20% QoQ) exceeding our estimate of Rs2bn, while EBITDA/tonne stood at strong Rs958 as against Rs830 and Rs1199 in 2QFY19 and 1QFY20, respectively. Sales volume grew by a strong 10% YoY (1% QoQ) to 2.72mnT (a significant beat) despite slowdown in construction activities across pockets. Average realisation stood at Rs4,708/tonne (+2% YoY and -5.6% QoQ), which is ~Rs60/tonne higher than our estimate. PAT increased significantly by 47% YoY led by improved operating performance and lower ETR (under MAT). Its gross debt...

Ramco Cements continued its outperformance and reported strong Q2FY20 results. The beat was led by strong volume growth with other operational parameters coming broadly in-line with I-direct estimates. Revenues during the quarter increased 11.2% YoY to | 1316.7 crore, led by 10.3% growth in volumes to 2.72 MT (vs. I-direct estimate of 2.6 MT). Blended realisations improved marginally by 0.8% YoY to | 4,834/t (vs. I-direct estimate of | 4,797/t). On the operational front, total costs per tonne declined 1.1% YoY, in line with I-direct estimates. Further combined with a marginal...

TheRamco CementsLimited, formerlyMadras CementsLimited, manufacturescement, ready-mix concrete and dry mortar products.

TRCL is prudently expanding its cement capacity by 27% over next two years, funded mainly through its strong internal accruals. While TRCL remains a regional player, we ascribe it premium valuations of 13x EV/EBITDA (for its robust cost and profitability metrics), leading to TP of Rs 800/share (implied EV USD 167/MT). It currently trades at 12.2x FY21E EBITDA and at EV of USD 158/MT. Amid limited upside, we maintain Neutral rating on the stock. We retain NEUTRAL rating with TP of Rs 800 (13x FY21 EBITDA). Our TP implies EV/MT of USD 170/MT.

Over FY19E-21E, incremental demand of ~35 MT is expected in the southern region from low cost housing, real estate and also infra projects like road construction and irrigation projects. Though the current liquidity situation is tight, we believe volumes from upcoming capacities of the company, especially in consumption heavy region of eastern India, would support the growth of the company. Further, with utilisation levels in the industry picking up, we also believe realisations would remain strong, going ahead, as well. Thus, we model 3.4% CAGR in realisations in FY19-21E and...

Volume growth moderates; better realizations drive margins: Volumes increased 3.4% YoY to 2.7mt in 1QFY20. Cement realizations were up 10% YoY at INR4,989/ton. Consequently, revenue grew 14% YoY to INR13.7b (our estimate: INR12.2b) in the quarter. Blended EBITDA/t increased 42% YoY to INR1,277, with cost/t increasing by 2% YoY to INR3,791. Power EBITDA stood at INR162m, resulting in cement EBITDA/t of INR1,217. EBITDA grew 47% YoY to INR3.5b (our estimate: INR2.6b), with the margin expanding 6pp YoY to 25.2%. PAT was up 54% YoY to INR1.9b (our estimate: INR1.4b)....

The Ramco Cements (Ramco) reported strong 54% y-o-y growth in standalone net profit to Rs. 192 crore during Q1FY2020. Strong realization growth of 8.2% y-o-y (led by steep rise in cement price in South India since February 2019) along with contained opex/tone (up by 2.2% y-o-y) led to EBITDA/tone growth of 35.3% y-o-y to Rs. 1120. The company's capacity expansion plans remains intact and the management is confident of reaching 20MTPA by end of 2020. We believe Ramco is well placed to benefit from demand revival post...