Buy The Ramco Cements; target of Rs 785: Motilal Oswal

Motilal Oswal's research report on The Ramco Cements

The Ramco Cements (TRCL) reported in-line EBITDA of INR3b (v/s estimated INR3.1b) and OPM of 17.3% (v/s estimated 17.5%) in 4QFY22. Higher depreciation and interest expense led to a miss in profits (-10% v/s estimates). We reduce our FY23E/24E EBITDA by 6%/5% on higher energy costs, which leads to 13%/8% cut in our EPS estimates, respectively. Though near-term challenges persist for the industry, we forecast the company to benefit from its capex plans (38% increase in clinker capacity in last one year) and expect its debt to reduce going forward. We maintain our BUY rating on the stock.

Outlook

The stock trades at 16.5x/11.5x FY23E/24E EV/EBITDA. We value TRCL at 13x FY24E (v/s 14x earlier) EV/EBITDA to arrive at our TP of INR785 (v/s INR905 earlier). We maintain our BUY rating on the stock.