YES Securities' research report on The Ramco Cements
The Ramco Cements (TRCL) reported mixed bag performance; Where revenue/EBITDA came +3/9% above YSECe to Rs20.1/2.83bn (+30/24% y/y) but Adj. PAT missed by 13% to Rs516mn (‐32% y/y) due to higher depreciation & finance cost. Volume witnessed a growth of +19% y/y to 3.57MT (v/s 3.52MT YSECe). Net realization grew by +9% y/y, mitigated total cost/te increase of +10% y/y which resulted in EBITDA/te of Rs793 (v/s Rs740/te YSECe) up by +4%y/y. Power cost/te remained elevated by 43% y/y but witnessed marginal decline of 2% q/q to Rs1967/te (Rs1858/te 9MFY23) in Q3FY23. On account of improving utilization of newly added capacities, we expect volume to grow at ~14% CAGR over FY23‐25E whereas upcoming election year to fuel the demand further. Given the ongoing energy cost correction and increasing operating leverage, we believe operating efficiency to improve steadily to +Rs1000/te by FY25E (v/s Rs759/te in 9MFY23). However, high exposure to the fragmented south market with higher OPC sales & volatile demand will keep operating efficiencies under check in the short run. We remain POSITIVE on TRCL for its 1) strong retail presence in the south 2) low‐cost cement producer 3) steadily increasing capacity share. Additionally, we expect TRCL to generate OCF of ~Rs30.7bn over FY23‐25E will aid to fund the capex partly.
Outlook
Hence, net debt/EBITDA to remain elevated close to ~2.5x till FY25E and expected to lower the profitability due to higher interest outgo. At CMP, stock trades at 20/12x EV/EBITDA on FY24/25E. We rolled our estimate to FY25 and arrived at a Target Price of Rs931 with a BUY rating, valuing the stock at 15x EV/EBITDA on FY25E.
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