In Q4FY2020, revenue remained in-line, while EBITDA/tonne surprised positively despite high ad/promotional expenses. Net profit although affected by low OPM & higher interest costs, beat estimates. Ramco’s capacity expansion plan of Rs. 3,300 crore is in progress with a couple of projects delayed by 3-5 months. Standalone D/E ratio is expected to reduce from 0.6x in FY2020 to 0.4x in FY2022E despite capacity expansions. We expect Ramco to benefit from the expected improvement in cement demand from Q3FY2020 onwards and a favourable cement pricing scenario in the key South Indian market.
OutlookWe maintain our Buy rating on The Ramco Cements (Ramco) with a revised PT of Rs. 740, expecting further room for upside led by gradual improvement in industry outlook.
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