The Ramco Cements Ltd. share price target

We estimate TRCL to deliver 23.8% EBITDA CAGR during FY19-21E. TRCL is prudently expanding its cement capacity by 25% 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 strong retail presence and robust profitability metrics) on FY21E standalone EBITDA, leading to TP of Rs 800/share (implies EV/MT of USD Rs 170). As the stock is fairly valued, 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.

Strong capacity addition lined up; leverage to remain stable Ramco has a pipeline of 6.2 MT of cement capacity to be commissioned over FY20E and FY21E (refer exhibit 4). During FY20E, 2 MT of capacity in the East (West Bengal, Odisha) and 1 MT in South (Vizag). Rest of the capacities would be coming in FY21E along with 3.75 MT of clinker capacity addition (greenfield and brownfield). These projects would be completed at a cost of ~| 3430 crore out of which | 1200 crore has already been spent in FY19. Over two years, the balance would be spent for which we believe some debt...

Profitability restricted by higher cost: Blended EBITDA/t was down 1% YoY to INR979, with cost/t increasing 2% YoY to INR3,670. However, EBITDA grew 20% YoY to INR3.2b (in-line) due to volume gains. Margin contracted 0.5pp YoY to 21.1%. Adj. PAT was up 22.5% YoY to INR1.68b (in-line). FY19 performance: Volumes grew ~19%, sales increased 17% to INR51.2b, while EBITDA/PAT was down 5%/9% YoY to INR10b/INR5.1b. Key highlights from management interaction: (1) Average diesel prices increased 17% YoY in FY19, leading to higher logistics cost. (2) Petcoke prices...

at par with existing operations backed by highly competitive logistics (WB) and Vizag (AP) units. Ongoing capacity addition in Eastern region are network and blending advantage. Led by improvement in prices, we upgrade...

Ramco Cement came out with stable set of results in Q4FY19, ahead of our estimates. Revenue for the quarter grew 22.1% YoY and 26.6% QoQ to Rs 15324 mn against our estimate of Rs 13370 mn. EBITDA for Q4FY19 came at Rs 3251 mn (estimate Rs 2540 mn) a growth of 19.5% YoY and 51.9% QoQ. EBITDA margin expanded 354bps QoQ (-48bps YoY) to 21.2% for the quarter against 21.7% in corresponding quarter last year. EBITDA margin was stable YoY (slight fall of 48bps) despite higher raw material (+24.3% YoY) costs, due to efficiency at the company level. PAT for the quarter stood at Rs 1654 mn which was ahead of our...

ICICI Securities Ltd | Retail Equity Research Ramco Cements' Q3FY19 results were a mixed bag. Revenues increased 14.6% YoY to | 1,210.4 crore (below I-direct estimate of | 1,241.5 crore) mainly driven by volume growth of 20.8% YoY to 2.75 MT (above I-direct estimate of 2.65MT). Blended realisations were at | 4406/t (below I-direct estimates: | 4686/t), down 5.1% YoY EBITDA margins declined 460 bps YoY to 17.7% (vs. I-direct estimate of 20.8%) due to ~31% YoY increase in power & fuel cost per tonne to...

Admittedly, cement prices have bottomed-out given the wafer thin margins. We do expect gradual improvement in prices in the current quarter. However, continuous capacity addition in the region, high aspiration of players to increase market share in rising demand environment and poor mix of demand inclined towards highly competitive and low margin Non-trade segment would keep prices under pressure for prolonged period. Led by weaker outlook on prices and rising share of volumes from low margin regions, we cut our earnings estimates by 3%/4% for FY20e/FY21e. Despite steep fall in...

Cement realizations at INR4,392/t (-5% YoY, -5% QoQ) were below our estimate of INR4,542/t due to lower prices in focus 29 January 2019 INR11.4b). Revenue from wind stood at INR9m. Cost/t remained flat YoY (-4% QoQ) at INR3,627 (our prices) and freight cost/t (+2% YoY, led by higher diesel prices) were offset by lower raw material costs/t. Power segment reported EBITDA loss of INR44m in 3QFY19, while Cement EBITDA/t stood at INR784 (-21% YoY/-8% QoQ). Hence, at 17.5% (-4.1pp YoY, -3.2pp QoQ). Adj PAT came in at INR1.01b (-8.4%YoY) as against est. of INR959m as 3QFY18 had extraordinary income of INR 124m related to reversal of provisions for DMF and tax for earlier years.

Ramco reported a good set of Q2FY19 numbers. Revenues increased 11% YoY to | 1,183.5 crore (above I-direct estimate of | 1,122.9 crore) mainly driven by double digit volume growth of 14.7% YoY to 2.47 MT (slightly above I-direct estimate of 2.4 MT) due to higher sales in the eastern region while realisations stayed weak (down 3.3% YoY to | 4794/t) due to monsoon but were better than our estimates of | 4,684/t) With better-than-expected realisations, the company managed to clock...