The Ramco Cements Q3 Results Review - Below Estimates On Lower Volumes, Realisation: Motilal Oswal

Motilal Oswal Report

The Ramco Cements Ltd.'s Q3 FY24 performance was below our estimates, primarily due to a 6% lower-than-estimated sales volume (up 10% YoY). Realization improved 4% QoQ, but was 1% below our estimate. Ebitda grew 39% YoY to Rs 3.95 billion (estimate Rs 4.4 billion), while operating profit margin was up 4.6 pp YoY to 18.8% (versus estimate 19.6%). Ebitda/tonne stood at Rs 988 versus estimated Rs 1,040. Profit was Rs 934 million versus our estimate of Rs 1.3 billion.

Management guided sales volume of 5 million tonne in Q4 FY24 (up ~7% YoY) and ~19- 20 million tonne in FY25 (up 6-11% YoY). It announced a brownfield expansion of 3.15 million tonne clinker/1.5 million tonnes per annum cement capacity at a capex of Rs 12.5 billion. Further, The Ramco Cements believes that net debt at Rs 50 billion has peaked and future expansion will predominantly be funded through internal accruals.

We cut our earning per share estimate by 6% for FY24; while retaining our estimates for FY25/26.

We value The Ramco Cements at 12 times FY26E enterprise value/Ebitda (versus 13 times earlier) given its higher leverage (net debt-to-Ebitda is estimated at greater then 2 times until FY26). We reiterate our 'Neutral' rating on the stock with a revised target price of Rs 970.

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