Hold Ramco Cements; target of Rs 1020: Emkay Global Financial

Emkay Global Financial's report on Ramco Cements

Ramco's Q4FY21 EBITDA grew 61% YoY to Rs4.5bn (8% below our forecast of Rs4.9bn), but in line with consensus, because of higher-than-expected freight cost, as lead distance was up 40kms YoY. Cement EBITDA/ton increased 48% YoY to Rs1,417 (Emkay: Rs1,478). TRCL is nearing completion of 40% capacity expansion projects to 20mt and is poised to benefit from the cyclical volume upturn, which should boost its RoIC to mid-teens by FY23E and well over 20% over the next 4-5 year, in our view.

Outlook

We maintain FY22-23 estimates, and our Hold rating; our DCF-derived TP of Rs1,020 (Jun'22E) implies a 13.5x 1-year forward EV/EBITDA. Current EV/EBITDA multiple of 16x indicates ongoing expansion and cyclical upturn are largely priced in. Please find our sector initiation report: Link