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Aligned with industry, inflated cost drifts margin

Result Synopsis

The Ramco Cements (TRCL) reported better-than-expected EBITDA/te of Rs924 (beat YSEC est. of Rs774) due to higher-than-expected NSR of Rs5368/te (+2% than YSEC est.) and in-line total cost of Rs4444/te in Q4FY22. The extended monsoon and weak demand in the southern region resulted flat y/y volume growth to 3.2MT (miss of 9% to YSEC est.) translate in revenue of Rs17.1bn miss of 7% to YSEC est. in Q4FY22. For FY22, TRCL posted a volume growth of 11MT (+11% y/y; YSEC est. 11.3MT) with NSR rise of +3% y/y resulting in +14% revenue growth, however EBITDA decline by 17% y/y as operating cost surged by +26% y/y in FY22. The inflated fuel/diesel cost eroded the EBITDA/te to Rs1168 decline by 25% y/y in FY22, but sequential price hikes and anticipated cost normalization should uphold the EBITDA/te at +Rs1150 for FY23E. We trimmed our EBITDA/PAT est. by 30/40% and 16/21% for FY23/24E. We believe TRCL to generate healthy operating cash flow of Rs26.6bn and its fund ongoing capex (Rs8.5bn) also deleverage its B/S (10bn) over FY23-24E. This would aid TRCL to lower the Net Debt/EBITDA to 1.2x by FY24E v/s 2.8x FY22. Thus, we retain our BUY recommendation with a TP of Rs1135 (earlier Rs1188 on FY23E), valuing the stock at 15x EV/EBITDA on the FY24 estimates.

Result Highlights

Reported volume grew by +6% q/q (flat y/y) to 3.2MT against YSEC est. of 3.5MT and NSR grew by +4% q/q (+6% y/y) against YSEC est. +2% q/q translated in the revenue miss of +7% to YSEC est. to Rs17.1bn (+10% q/q and +5% y/y) in Q4FY22.

Despite surge in sequential power/freight/other cost per tonne by +6/16/7% (+90/1/21% y/y) the total cost/te increase by +1% (+20% y/y) due to decline in RM/te by 24% (11% y/y) translate in EBIDTA/te of Rs924 up by +21% (decline by 34% y/y; YSEC est. Rs774) in Q4FY22.

Due to healthy topline and Tax reversal, the EBITDA/PAT grew by +29/57% q/q, while remained lower by 34/45% on y/y basis in Q4FY22.

In FY22, Volume grew by +11% y/y with the NSR increase of +3% y/y driven the revenue increase by +14% y/y to Rs60bn (2% lower than YSEC est.).

EBITDA decline by 17% y/y to Rs12.9bn led by jump in total cost by +17% y/y translate in EBITDA/te of Rs1168 decline by 25% y/y, whereas due to the Tax reversal PAT grew by 13% y/y to Rs8.8bn in FY22.

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