ICICI Direct is bullish on Ramco Cement has recommended buy rating on the stock with a target price of Rs 950 in its research report dated May 23, 2019.
ICICI Direct's research report on Ramco Cement
Ramco Cement reported a strong set of Q4FY19 numbers, which were higher than our estimates on all fronts. The beat on estimates is mainly attributable to the strong volume growth during the quarter. Revenues increased 22.1% YoY to Rs 1,532.4 crore (vs. I-direct estimate of Rs 1,350.7 crore). Volumes recorded a 20.4% increase YoY to 3.29 MT (vs. I-direct estimate of 2.93 MT) whereas realisations of Rs 4,652/t were in line with I-direct estimate of Rs 4,614/t, up 1.4% YoY. On the profitability front, margins were at 21.2% for Q4FY19 (in line with I-direct estimate of 21.3%), expanding 354 bps sequentially (contracting 48 bps YoY). This sequential improvement in margins is led by P&F expenses that were down 9.7% QoQ on a per tonne basis, attributable to lower input costs. Absolute EBITDA increased 19.5% YoY to Rs 325.1 crore (vs. I-direct estimate of Rs 287.6 crore). PAT for the quarter was at Rs 165.4 crore growing 52.3% YoY (vs. I-direct estimate of Rs 130.2 crore) led by strong operational profit.
Continued demand traction in its major markets with the company leveraging its brand to expand its footprints was exhibited in Q4FY19 where the company reported 20.4% growth in volumes. We expect growth momentum to continue led by ramping up as well as addition of capacity. Further, return ratios are expected to improve, going forward, backed by strong profitability (refer exhibit 14). We reiterate BUY rating on Ramco Cement valuing it at 14.5x FY21E EV/EBITDA arriving at a TP of Rs 950.
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