Reliance Securities
Ramco
Cements (Buy)
CMP: ₹751.55
Target: ₹850
Ramco Cements (RCL) gained over 2 per cent on Wednesday despite selling pressure seen in most of cement counters.
Likely revival of demand scenario in Tamil Nadu market due to easing out of sand issues (led by recent order by the Supreme Court) augurs well for RCL.
While RCL’s strategy of growing in outside Southern markets started paying-off, demand revival in TN market will aid it to save on operational costs and better pricing.
Further, commissioning of 3-million tonne new satellite capacity in next 18 months is likely to aid RCL to improve volumes and profitability.
We envisage improved operating efficiency with no meaningful capex would lead to healthy free cash flow (FCF) generation to the tune of ₹2,200 crore through FY18E-FY20E. We reiterate our fundamental ‘buy’ rating on the stock with target price of ₹850.