Buy The Ramco Cement; target of Rs 880: Motilal Oswal

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).

Outlook

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.