Buy Ramco Cements; target of Rs 420: Sharekhan

Sharekhan is bullish on The Ramco Cements and has recommended buy rating on the stock with a target price of Rs 420 in its research report dated February 05, 2015.

February 06, 2015 / 19:19 IST

26 Aug, 2025 12:21

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Sharekhan's report on The Ramco Cements

The Ramco Cements reported a muted result for the quarter on account of lower volume (decline by 11.4% YoY) due to a slowdown in demand from the key southern markets. For Q3FY2015, the company’s earnings declined by 10% YoY to Rs23 crore because of a decline in revenue (down 6% YoY) and an increase in the operating cost (up 8.6% YoY) which was marginally negated by higher realisation (up 5.5% YoY). Consequently, EBITDA per tonne declined by 12% YoY to Rs 577 per tonne.

Although tough demand environment persists in the southern region, yet price hikes have been taken by regional cement players to mitigate higher operating cost. However, sustainability of the price hike remains the key issue to monitor. We believe the southern region may remain under pressure with respect to demand although the company can reap benefits of operating leverage with an improvement in realisation.

We have revised our estimates marginally downwards for FY2015 to factor in lower volume on back of a sluggish demand and also accounted marginally higher operating cost due to a decline in the capacity utilization.

"We maintain our Buy rating on the stock and reiterate our preference for The Ramco Cements as a preferred pick in the southern region (due to a relatively better balance sheet, quality of the management and valuations). We have maintained our price target of Rs 420", says Sharekhan research report.