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HomeNewsBusinessEarningsHold Ramco Cements; target of Rs 836: ICICI Securities

Hold Ramco Cements; target of Rs 836: ICICI Securities

ICICI Securities recommended hold rating on Ramco Cements with a target price of Rs 836 in its research report dated July 26, 2024.

August 01, 2024 / 18:57 IST
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ICICI Securitie's research report on Ramco Cements

For TRCL, Q1FY25 turned out to be an unblessed quarter with low volumes, up just 1.3% YoY amidst weak prices (realisation down 1.6% QoQ/8% YoY). Against these odds, TRCL reported impressive cost performance. Its variable cost/t eased 4.2% QoQ given the benefits of low fuel prices and lead distance optimisation. Further, a tight leash on ‘Other Expenses’ (up just 2% YoY; down 20% QoQ) helped restrict the YoY drop in EBTDA at 6%. EBITDA/t stood at INR 733 (down 8% YoY/4% QoQ) vs our revised estimate of INR 772 for FY25E and INR 974 for FY26E. Elevated competitive intensity does pose a risk to FY26 estimates (kept unchanged as of now) even as we trim FY25E EBITDA by 6%.

Outlook

The Ramco Cements’ (TRCL) cost performance in Q1FY25 was impressive with variable cost/t plunging >4% QoQ and total cost/t being 2% below our expectation. Yet, EBITDA (INR 3.19bn, down 6%YoY/23% QoQ) stood broadly in line given the disappointment across volumes (up 1.3% YoY; being 8% below our estimate) and realisations (down 1.6% QoQ vs our 1% drop estimate). Tracking the underlying weakness in cement prices, we trim FY25E EBITDA by 6%. While elevated competitive intensity may risk FY26E earnings (we have kept it unchanged as of now), TRCL’s new resolve to achieve 30mtpa capacity by FY26 (from 26mtpa guided earlier) may amplify leverage concerns. In this backdrop, we see little scope to argue for an increase in valuation multiple (kept unchanged at 12x FY26E EV/EBITDA), and hence, downgrade TRCL to HOLD (vs Add earlier). Our revised TP stands at INR 836 (INR 845 earlier).

For all recommendations report, click here

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ICICI_Ramco Cements

Broker Research
first published: Aug 1, 2024 01:08 pm

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