Buy The Ramco Cement; target of Rs 1020: ICICI Direct

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26 Aug, 2025 12:21

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Ramco Cements continued its outperformance and reported strong Q2FY20 results. The beat was led by strong volume growth with other operational parameters coming broadly in-line with I-direct estimates. Revenues during the quarter increased 11.2% YoY to Rs 1316.7 crore, led by 10.3% growth in volumes to 2.72 MT (vs. I-direct estimate of 2.6 MT). Blended realisations improved marginally by 0.8% YoY to Rs 4,834/t (vs. I-direct estimate of Rs 4,797/t). On the operational front, total costs per tonne declined 1.1% YoY, in line with I-direct estimates. Further combined with a marginal improvement in realisations, EBITDA margins expanded 154 bps YoY to 22.4% (I-direct estimate: 21.9%) and EBITDA/t increased 8.3% YoY to Rs 1,064/t (I-direct estimate: Rs 1,051/t). Absolute EBITDA increased 19.4% YoY to Rs 295.2 crore (vs. I-direct estimate of Rs 274 crore). PAT jumped 47% YoY to Rs 168.2 crore (vs. I-direct estimate of Rs 158.2 crore) led by a strong operational performance and lower tax provisions.

Despite a weak market scenario, the company managed to report strong growth and continued to outperform. Ramco Cements has been steadily reporting industry leading margins despite not operating at high levels of utilisation, which further provides confidence in the company. We expect growth momentum in the company to continue on the back of additional capacities. Further strong cash flows, low leverage and improving return ratios lead us to reiterate our BUY rating on Ramco Cements and maintain the target price of Rs 1020/share (15x FY21E EV/EBITDA).

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