Motilal Oswal is bullish on The Ramco Cement has recommended buy rating on the stock with a target price of Rs 880 in its research report dated May 22, 2019.
Motilal Oswal's research report on The Ramco Cement
Healthy volumes/realizations: Volumes increased 20% YoY to 3.29mt in 4QFY19, driven by strong growth in the eastern region. Moreover, cement realizations increased 1.5% YoY to INR4,640/ton due to higher prices in south. Consequently, revenue grew 22% YoY to INR15.29b (our estimate: INR13.8b) in the quarter. Profitability restricted by higher cost: Blended EBITDA/t was down 1% YoY to INR979, with cost/t increasing 2% YoY to INR3,670. However, EBITDA grew 20% YoY to INR3.2b (in-line) due to volume gains. Margin contracted 0.5pp YoY to 21.1%. Adj. PAT was up 22.5% YoY to INR1.68b (in-line).
We increase our valuation multiple from 12x to 13x Jun'21E EV EBITDA to account for the capacity addition which will happen in FY21. Our target price stands at INR880. Maintain Buy.
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