Neutral The Ramco Cements; target of Rs 1045: Motilal Oswal

Motilal Oswal's research report on The Ramco Cements

The Ramco Cements (TRCL) reported a volume growth of 38% YoY (18% above our estimate), which led to a revenue beat of 14%, despite lower realizations (4% below estimate). Higher volumes led to a 25% beat in EBITDA; OPM was at 17.1% v/s our estimate 15.5%. EBITDA/t was at INR865 v/s estimated INR813. Profit was at INR1b v/s our estimate of INR0.6b. Net debt increased to INR49.7b in 2QFY24 (v/s INR42.9b in Mar’23), led by the acquisition of limestone-bearing lands in Andhra Pradesh and Karnataka. The management expects volumes in 2HFY24 to be similar to H1. Cement prices have increased significantly in its core markets during Sep/Oct’23, which if sustained, can help support strong profitability improvement in 2HFY24.

Outlook

We largely retain our EBITDA estimates, although we cut our EPS estimates by 13%/4% for FY24/25 due to higher interest expenses. We value TRCL at 13x Sep’25E EV/EBITDA (v/s Mar’25E earlier), and maintain our Neutral rating with a revised TP of INR1,045.