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Volume growth to accelerate

The Ramco Cements’ (TRCL) Q4FY21 EBITDA at Rs4.5bn (up 61% YoY) was broadly in-line with consensus estimates. Realisation remained flat QoQ, while costs/te increased 2% QoQ resulting in EBITDA/te declining 8% QoQ to Rs1,399/te (still up 47% YoY). On a YoY basis, realisation was up 7%, while costs/te was down 3%. TRCL’s capacity addition of 1.5mnte clinker unit in Jayanthipuram and 2.25mnte clinker unit in Kurnool has been delayed by a quarter owing to covid resurgence and is now expected to be commissioned during Q1FY22 and Q2FY22, respectively. Hence, TRCL is expected to report strong volume growth over FY22-23E. Factoring in better realisation, we increase our FY22-23E EBITDA by 5% and raise our target price to Rs1,120/sh (earlier Rs1,050/sh). Maintain BUY. Key risk: Lower than expected demand/ prices

Revenue increased 17% YoY to Rs16.3bn:

Volumes grew 9.5% YoY / 23% QoQ to 3.21mnte (92% clinker utilisation) despite extended monsoon in South markets. Cement realisation remained flat QoQ (up 7% YoY) to Rs5,058/te owing to higher prices in the South market. Trade sales for FY21 stood at 76% with overall improvement in blending ratio by 300bps YoY. Management stated the company operated at 90% utilisation levels in Apr’21 and due to the lockdown being imposed in various states 10th May’21 onwards, capacity utilisation fell down to 65%. The management remains positive on demand to bounce back once the lockdown is lifted.

Cement EBITDA/te grew 48% YoY to Rs1,417/te (I-Sec: Rs1,525/te).

Cost/te declined 3% YoY / increased 2% QoQ to Rs3,681/te. Raw material plus power & fuel cost/te rose only 2% YoY and 4% QoQ despite 0.15mnte external clinker purchase, due to low cost fuel inventory and increased usage of relatively lower priced fuel viz. imported coal and alternate fuels, despite significantly higher input prices. Petcoke usage was down to 23% in Q4FY21 against 57% in Q4FY20. Freight cost/te increased 5% YoY/ 7% QoQ on higher diesel prices and increased lead distance of (341kms in Q4FY21 vs 301kms in Q4FY20). Other expenses/te increased 5% QoQ due to higher packing bag costs. Windmill segment reported EBITDA loss of Rs58mn.

TRCL incurred capex of ~Rs17.7bn in FY21

of which Rs6bn was incurred in Q4FY21. The company plans to incur capex of Rs5-6bn in FY22E. With the current phase of expansion nearing completion, TRCL may announce its next phase of expansion soon. Balance 9MW of WHRS out of the planned 27MW (18MW commissioned in FY21) is expected to be commissioned in FY22. 1mnte grinding unit, 12MW WHRS and 18MW TPP in Kurnool are expected to commission during FY23.

OCF generation in FY21 was strong at Rs18.4bn

aided by working capital release of Rs5.1bn. Net debt broadly stood flat YoY at Rs29.9bn as of Mar’21. The average cost of interest-bearing borrowings in FY21 reduced to 6.1% from 6.71% in FY20.

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