Buy Ramco Cements target of Rs 750: ICICI Securities

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ICICI Securities research report on Ramco Cements

The Ramco Cements’ (TRCL) Q4FY20 EBITDA at Rs2.8bn (down 20% YoY) was inline with our estimates. While realisation surprised with 5.3% QoQ increase (+1.6% YoY), the same was offset by higher ad / sales promotion expenses. Volumes were down 11% YoY impacted by Covid-19 lockdown in Mar’20. Net debt almost doubled YoY to Rs29.3bn owing to the on-going capex (Rs19bn in FY20). Channel checks suggest sharp +20% QoQ / 10% YoY price increase in South during Q1FY21E. Besides, costs are unlikely to increase owing to better cost efficiencies (WHRS, GUs) and likely rationalisation of discretionary costs like ad spend (~3% of sales or Rs150/te) and other fixed costs in FY21.

Outlook

Factoring higher realisation, we raise our FY21-22E EBITDA by 13-16%, EPS by 23% and increase our target price to Rs750/share (earlier: Rs635) based on 12x Mar’22E EV/E. Maintain BUY.

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