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Prabhudas Lilladher
Ramco Cements (Buy)
CMP: ₹364.20
Target: ₹398
Marred by weak demand, cement volumes fell 14.8 per cent y-o-y at 18 lakh tonnes. Realisations grew 18.5 per cent y-o-y/₹785 (- 0.2 per cent q-o-q/₹99) at ₹5,021/t, missing our expectation of ₹5,207. Total cost/t was in line with our estimates rising 4.2 per cent y-o-y/₹155 at ₹3,859. Led by growth in realisation, EBITDA/t surged 118.2 per cent/₹630 y-o-y at ₹1,163 missing our expectation of ₹1,350 due to lower realisations. Hence, operating profit margins grew 63.3 per cent y-o-y at ₹220 crore, below our expectation of ₹270 crore. Thanks to a 2.5 per cent y-o-y fall in interest expense, PAT grew 169 per cent y-o-y at ₹97.5 crore, partially offset by a 17.7 per cent fall in other income.
Demand in the region continued to remain sluggish due to subdued demand across sectors. We expect recovery to kick-start in couple of quarters on the back of enhanced focus of State governments on infra spending, stabilisation of newly formed States and revival in small scale housing demand sponsored under various state government schemes. In this backdrop, we like Ramco Cements as the best play on recovery in the South underpinned by highly competitive operations and high quality management.
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