Moneycontrol
Nov 13, 2017 05:19 PM IST | Source: Moneycontrol.com

Hold The Ramco Cements; target of Rs 750: Sharekhan

Sharekhan recommended hold rating on The Ramco Cements with a target price of Rs 750 in its research report dated November 02, 2017.

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Sharekhan's research report on The Ramco Cements


The Ramco  Cements (Ramco) posted 5% YoY growth in net  sales to Rs1,066 crore during Q2FY2018. This  was on account of a 6.3% YoY growth in cement  volume and 1% YoY increase in the blended  realization. The slowdown in Tamil Nadu, its  key market due to drought and sand shortage  continues to keep volume under pressure in the  Southern region but Eastern markets continue  to grow at healthy pace. The Operating Profit  Margin (OPM) declined sharply by 644basis  points YoY to 28.3% on account of higher power  & fuel (up 35% YoY on per tonne basis due to  rise in the petcoke price) and higher freight  expenses (up 10.9% YoY on per tonne basis).  Consequently, the blended EBITDA per tonne  was also declined by 18% YoY to Rs1,071. Led by  a sharp decline in the OPM which was partially  offset by decline in the interest cost (down 38.7%  YoY), the PAT declined by 18.6% YoY to Rs168.5  crore.


Outlook
We  have fine tuned our FY 2018 and FY 2019 earnings estimates. We do not see any significant positive  triggers in the near term given that the benefits  of capacity expansion would be back ended.  Further, high operating cost (fuel and freight) is  expected to keep margins under check. Hence,  we maintain our Hold rating and price target of  Rs750 on the stock.


For all recommendations report, click here


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