Hold Ramco Cements; target of Rs 670: Emkay Global Financial

Emkay Global Financial recommended hold rating on Ramco Cements with a target price of Rs 670 in its research report dated November 09, 2022.

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November 13, 2022 / 19:15 IST

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Emkay Global Financial's research report on Ramco Cements

Ramco Cements’ (Ramco’s) Q2FY23 EBITDA declined 53% YoY and 39% QoQ to Rs1.8bn, clocking 14-17% below Consensus’ and our estimates due to higher-thanexpected input costs. Accordingly, blended EBITDA/ton declined 62% YoY and 39% QoQ to Rs555 (Emkay est.: Rs700). The company has revised its capex guidance upward, to Rs26bn for FY23-24 (vs ~Rs14bn earlier) owing to preparatory work for a second line in Kurnool, expansion of its Odisha grinding unit, and capex in the RR Nagar modernization & beneficiation plant, mining land development, etc. Consol. FCF generation stood at a negative Rs9.7bn in H1FY23 post workingcapital blockage of Rs4bn and capex of ~Rs10bn. Hence, net debt increased by Rs10bn to Rs47bn, as of Sep-22. Factoring-in the Q2 miss and the higher opex/ton, we reduce EBITDA for FY23E by 13% and for FY24-25E by 3%.

Outlook

Further, building-in higher capex and increase in leverage, we revise our Sep-23E TP to Rs670 (Rs710 earlier). Our DCF-based TP implies 1-yr forward EV/EBITDA of 11x; maintain HOLD.

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