The Ramco Cements Report - Strong margin sustained - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

Ramco Cements (TRCL) reported a strong 4QFY21 performance. Standalone net sales/EBITDA/APAT grew 22/13/7% QoQ (17/61/47% YoY) to INR 13.3/4.5/2.1bn respectively. Unitary EBITDA cooled off 6% QoQ to INR 1,417/MT due to surge in freight and fixed costs. Healthy cash generation met its ongoing capex requirements; hence net debt remained largely flat YoY. TRCL continues to focus on its large retail presence and superior cost controls, which continues to support its industry-leading margin. TRCL's ongoing expansions will bolster volume growth FY22 onwards. We retain our REDUCE rating (owing to expensive valuations) with a revised target price of INR 1,008/share (12x its Mar'23E standalone EBITDA).

4QFY21 performance: Sales volume increased 23/10% QoQ/YoY to 3.21mn MT on robust demand in its market. It posted YoY growth after four quarters of decline. Utilisation firmed up to 66% (54/64% QoQ/YoY). Despite flattish NSR QoQ, NSR remained 7% up YoY. Unitary EBITDA fell 6% QoQ to INR 1,417/MT, pulled down by higher opex - mainly on account of surge in freight and fixed costs. The recently commissioned 18MW WHRS aided in cost rationalisation amid rising fuel prices.

FY21 highlights and outlook: Sales volume fell 11% YoY to 9.98mn MT on account of volume decline during 9MFY21. Utilisation stood lower at 52% vs 64% YoY. NSR firmed up 10% YoY as price hikes taken in early FY21 mostly sustained during the year. As a result, unitary EBITDA buoyed 55% to INR 1,520/MT, mainly led by higher realisation and all-round cost controls during the year. Net sales fell only 2% YoY to INR 52.7bn, despite 11% volume decline as realisation gain cushioned the fall. EBITDA/APAT grew by 36/27% to INR 15.5/7.6bn. TRCL's OCF jumped 155% YoY to INR 18.8bn on healthy profit growth and working capital reduction. Capex spent was INR 6.0/17.7bn during 4Q/FY21. TRCL's net debt largely remain flattish YoY at ~INR 29bn. Jayanthipuram and Kurnool clinker plants are expected to be commissioned in Q1 and Q2FY22 respectively. Another INR 6bn is due towards these Capex plans, which will be incurred in full in FY22E. While fuel prices continue to rise, TRCL expects to see a lesser impact owing to its low-cost fuel inventory. We have broadly maintained our earnings estimate.

Shares of The Ramco Cements Limited was last trading in BSE at Rs.947.8 as compared to the previous close of Rs. 972.7. The total number of shares traded during the day was 40951 in over 2438 trades.

The stock hit an intraday high of Rs. 974 and intraday low of 943.05. The net turnover during the day was Rs. 39256138.

Source : Equity Bulls

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