Prabhudas Lilladher recommended hold rating on The Ramco Cements with a target price of Rs 600 in its research report dated January 29, 2019.
Prabhudas Lilladher's research report on The Ramco Cements
Admittedly, cement prices have bottomed-out given the wafer thin margins. We do expect gradual improvement in prices in the current quarter. However, continuous capacity addition in the region, high aspiration of players to increase market share in rising demand environment and poor mix of demand inclined towards highly competitive and low margin Non-trade segment would keep prices under pressure for prolonged period. Led by weaker outlook on prices and rising share of
volumes from low margin regions, we cut our earnings estimates by 3%/4% for FY20e/FY21e. Despite steep fall in the stock price, valuations remain stretched.
Hence, we maintain Hold with a TP of Rs 605 (earlier Rs660), factoring in cut in estimates and contraction in EV/EBITDA multiple to 12.5x (against 13x earlier) FY21E
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