Target: ₹1,130
CMP: ₹948.60
Ramco Cements is expected to benefit from a sharp increase in average cement prices in the Southern region and an easing of fuel costs post Q2FY24. Average cement prices in the South have increased by almost ₹40 per bag since October 5, 2023, translating to 10 per cent higher cement prices compared to the Q2-FY2024 average. The cement demand remains healthy during Q2-FY24 despite a seasonally weak quarter and is expected to sustain momentum for FY2024.
The company would be aiming for 20% y-o-y volume growth in FY24. Further, in October, international coal and domestic pet coke prices saw a drop of about 13 per cent m-o-m and 5 per cent m-o-m respectively. The same, coupled with an increase in regional cement prices, would aid operational profitability expansion.
The company’s focus on the non-trade segment, premiumisation, cost efficiencies, increased realisations, and robust demand environment is expected to drive operational and net profitability. We have introduced FY2026E earnings in this note.
At CMP, the stock is trading at 14x/13x EV/EBITDA on its FY2025E/FY2026 earnings, providing further room for upside.