Neutral The Ramco Cements; target of Rs 890: Motilal Oswal

Motilal Oswal's research report on The Ramco Cements

TRCL’s 1QFY25 EBITDA was in line with our estimate as lower-than-estimated opex/t offset lower-than-estimated volume. EBITDA came in at INR3.2b (est. INR3.1b), while EBITDA/t stood at INR733 (est. INR679). OPM was flat at 15% (est. 14%). PAT stood at INR355m (est. INR345m). The management has increased its capacity target to 30mtpa by FY26 vs. the earlier estimate of 26mtpa. Currently, TRCL is expanding its clinker/grinding capacities at the Kurnool plant in Andhra Pradesh by 3.15mt/1.5mtpa (brownfield expansion). It further plans to add capacities through debottlenecking and expansion of grinding capacities at exiting locations with a minimal capex. It has taken effective steps to monetize certain non-core assets worth INR10b in the next one year.

Outlook

We estimate the company’s volume growth to moderate to ~7% CAGR over FY24-27 vs. ~23% over FY21-24. Pricing pressure in its key markets, higher leverage, and low return ratios (RoE/ROCE estimated in mid-single digits in FY25) will keep stock price range-bound. At CMP, the stock trades at 13x/11x FY25E/FY26E EV/EBITDA. We value TRCL at 12x Jun’26E EV/EBITDA and reiterate our Neutral rating with a TP of INR890.