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Mixed growth in topline: Ramco Cements posted revenue of Rs 2,246.7cr, up by 26.3% YoY but down by 12.7% QoQ. Its volume growth witnessed a mixed trend with growth of 29.9% YoY but a decline of 8.5% QoQ to 4.3MTPA. Realizations remain muted to Rs 5,225/ton, down by 2.8% YoY/4.5% QoQ. In Q1 sales volumes remained impacted due to the non-availability of sand in Kerala, supply disruption due to rail accidents in Orissa and West Bengal and active monsoon. However, going ahead, the company plans to continue its focus on right products for right application strategy which will aid in focusing on premium products as well as build a stronger brand.

Easing raw material cost but still no relief for operating margins: Gross profit grew by 26.7% YoY but de-grew by 6% QoQ to Rs 1919.9cr and margins improved marginally by +30bps YoY but significant improvement of 610bps on sequential basis due to easing raw material prices. Further, power & fuel/ton as well as weak cement prices in South & East impacted operating performance. Fuel/ton was at elevated levels of Rs 1,757/ton as compared to Rs 1,548/ton, up by 10.9% YoY and Rs 1,635/ton up by 7.4% QoQ. So, there was not much relief on operating margins and it declined by 175bps YoY and 71bps QoQ. Further, PAT was down by 30.6% YoY and 47.9% QoQ to Rs 78.6cr due to increase in depreciation and interest cost. Further, the impact was due to an increase in average cost of borrowings from 7.68% in Q1FY24 to 5.41% in Q1FY23 as well as commissioning of additional line and dry mortar plants in the Southern area. PAT margins came in at 3.5% which declined by 287bps YoY/236bps QoQ.

Key Highlights: 1) Share in premium products - South was 29% (vis-a-vis 27% in Q1FY23) and East was 18% (vis-a-vis 15% in Q1FY23). 2) Amongst the Volumes, South/ East contributed 79%/21% as compared to 73%/27% in Q1FY23. 3) Capacity utilization was at 79% in Q1FY24 as compared to 68% in Q1FY23 and 85% in Q4FY23. 4) The company incurred Rs 284cr capex during Q1FY24 5) Average lead distance for 1QFY24 was 274 Kms vis-a-vis 301 Kms in 1QFY23 & 310 Kms in 4QFY23. 6) Usage of green power improved to 29% in Q1FY24 from 19% in Q1FY23 and ahead management expects green power share to increase to 40% in FY24 which would reduce cost and aid margin improvement.

Outlook & Valuation: Ramco Cement results were below our expectations. Volume growth was mixed while operating margins remained impacted. Going ahead, we believe cement companies would benefit from industry tailwinds along with that Ramco plans to continue with its strategy to focus on right products for right application, increasing share of premium products and higher usage of green power. We expect revival from Q3 onwards driven by demand and pickup in volumes. On the financial front, we have estimated its revenue/EBITDA to grow by 17%/29% CAGR over FY23-25E while EBITDA/ton to improve to Rs 985/ton levels in FY25E. Further, we are anticipating better growth prospects from medium to long term perspective and have maintained a Buy rating with a target price of Rs 964.

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