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Reliance Securities
Ramco
Cements (Buy)
CMP: ₹685.95
Target: ₹760
Operating profit of Ramco Cements (RCL) declined by 8.3 per cent y-o-y to ₹250 crore in 1QFY18 (versus our
estimate of ₹260 crore) owing to decline in sales volume to 2.15 mt (+3.6 per cent y-o-y and -5.6 per cent q-o-q) and a significant 27 per cent q-o-q spike in power & fuel cost/tonne.
Cement EBITDA/tonne stood at ₹1,173 in 1QFY18 vs ₹1,325 in 1QFY17 and ₹1,052 in 4QFY17. EBITDA margins stood at 25.5 per cent vs 29.2 per cent in 1QFY17. Demand scenario in its key market (Tamil Nadu) saw a significant slowdown due to drought and shortage of sands. However, a decent demand pick-up in Eastern markets aided RCL to register volume growth on y-o-y comparison. Notably, RCL repaid debt to the tune of ₹690 crore in FY17 from internal accruals, which led to a meagre finance cost of ₹15.5 crore (-47 per cent y-o-y and -23 per cent q-o-q) in 1QFY18. Thus, net profit stood at ₹155 crore (flat on y-o-y and +16 per cent q-o-q) vs our estimate of ₹151 crore. We cut EBITDA estimate by 6 per cent and 2 per cent for FY18E and FY19E, respectively mainly to factor in low sales volume and higher fuel cost.
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