Accumulate The Ramco Cements; target of Rs 890: Prabhudas Lilladher

Prabhudas Lilladher's research report on The Ramco Cements

The Ramco Cements (TRCL) reported Q4FY18 EBITDA above our expectation on the back of lower costs and higher volumes. However, PAT came in line with our expectation due to high tax rate.  Led by highly efficient operations, TRCL continued to perform better than market despite sharp increase in costs and pressure on prices. Street has apprehensions on company’s ongoing capacity addition in Eastern region that it would face headwinds on margins due to intense competition and large capacity addition from the peers in the region. However, we believe that these capacities would generate strong margins at par with existing operations backed by highly competitive logistics network and blending advantage.

Outlook

TRCL remains the best play on Southern region; stretched valuations limits material upside from current levels. Hence, we maintain Accumulate with a TP of Rs890, EV/EBITDA of 16x FY20E.