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Buy The Ramco Cements; target of Rs 1135: YES Securities

YES Securities is bullish on The Ramco Cements has recommended buy rating on the stock with a target price of Rs 1135 in its research report dated August 01, 2022.

August 03, 2022 / 10:25 PM IST
Rama Steel Tubes: Nomura Singapore buys 1 lakh shares in Rama Steel Tubes. Nomura Singapore bought 1 lakh equity shares in the company via open market transactions on June 15. These shares were acquired at an average price of Rs 371 per share.

Rama Steel Tubes: Nomura Singapore buys 1 lakh shares in Rama Steel Tubes. Nomura Singapore bought 1 lakh equity shares in the company via open market transactions on June 15. These shares were acquired at an average price of Rs 371 per share.

 
 
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YES Securities' research report on The Ramco Cements

The Ramco Cements (TRCL) reported better‐than‐expected performance by posting EBITDA/te of Rs916 (v/s YSEC est. of Rs870) due to flat cost/te sequentially (5% lower than YSEC est.) in Q1FY23. Despite sequentially flat NSR (‐7% y/y), the volume growth of 4% q/q (+55% y/y) resulted in revenue of Rs17.8bn (v/s YSEC est. of 16.7bn) in Q1FY23. Reported EBITDA/PAT stood at Rs3/1.1bn declined by 17/36% y/y due to surge in power & freight cost/te by +54% & 21% y/y respectively led jump in total cost/te by +10% y/y. Management expects ~12‐15% of volume growth for this fiscal with the increasing utilization of the newly added capacity. With the newly added capacities in east, TRCL to diversify its geographical existence thereby increase share of blended cement (~74% as of Q1FY23). Although, TRCL increasing exposure to low realization markets (AP/Telangana & East) will softened its NSR outlook, but the increasing share of blended cement sales will continue to improve the cost structure. However, in a short run TRCL’s margins will remained under pressure due to unprecedented surge in energy cost (blended fuel cost $178/te as of Q1FY23) along with high exposure to the south (highly OPC) overcapacity & volatile demand market. We continue to like TRCL for its 1) strong retail presence in the south 2) low‐cost cement producer – For Q1FY23 ~19% WHRS/renewable share 3) growth oriented – steadily increasing capacity share.

Outlook

We believe TRCL to generate healthy operating cash flow of Rs26.8bn and its fund ongoing capex (Rs8.5bn) and tends to deleverage its B/S (10bn) over FY23‐24E would aid to lower the Net Debt/EBITDA to 1.3x by FY24E v/s 2.9x FY22. Thus, we retain our BUY recommendation with a TP of Rs1135, valuing the stock at 15x EV/EBITDA on the FY24E.

For all recommendations report, click here

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The Ramco Cements -020822 - yes

Broker Research
first published: Aug 3, 2022 10:25 pm

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