Target: ₹1,135 CMP: ₹658.1

The Ramco Cements (TRCL) reported better-than-expected EBITDA/te of ₹924 (beat Yes Sec est. of ₹774) due to higher-than-expected NSR of ₹5,368/te (+2 per cent than Yes Sec est.) and in-line total cost of ₹4,444/te in Q4-FY22.

The extended monsoon and weak demand in the southern region resulted flat y/y volume growth to 3.2MT (miss of 9 per cent to Yes Sec est.) translate in revenue of ₹1,710 crore miss of 7 per cent to Yes Sec est. in Q4-FY22.

For FY22, TRCL posted a volume growth of 11MT (11 per cent y-o-y; Yes Sec est. 11.3MT) with NSR rise of 3 per cent y-o-y resulting in 14 per cent revenue growth, however EBITDA decline by 17 per cent y-o-y as operating cost surged by 26 per cent y-o-y in FY22.

The inflated fuel/diesel cost eroded the EBITDA/te to ₹1,168 decline by 25 per cent y-o-y in FY22, but sequential price hikes and anticipated cost normalisation should uphold the EBITDA/te at ₹1,150 for FY23E.

We trimmed our EBITDA/PAT est. by 30/40 per cent and 16/21 per cent for FY23/24. We believe TRCL to generate healthy operating cash flow of ₹2,660 crore and its fund ongoing capex (₹850 crore) also deleverage its B/S (10 billion) over FY23-24.

This would aid TRCL to lower the Net Debt/EBITDA to 1.2x by FY24E v/s 2.8x FY22. Thus, we retain our BUY recommendation with a TP of ₹1,135 (earlier ₹1,188 on FY23E), valuing the stock at 15x EV/EBITDA on the FY24 estimates.