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Revenue/EBITDA beat; higher depreciation & finance cost dragged PAT

Result Synopsis

The Ramco Cements (TRCL) reported mixed bag performance; Where revenue/EBITDA came +3/9% above YSECe to Rs20.1/2.83bn (+30/24% y/y) but Adj. PAT missed by 13% to Rs516mn (?32% y/y) due to higher depreciation & finance cost. Volume witnessed a growth of +19% y/y to 3.57MT (v/s 3.52MT YSECe). Net realization grew by +9% y/y, mitigated total cost/te increase of +10% y/y which resulted in EBITDA/te of Rs793 (v/s Rs740/te YSECe) up by +4%y/y. Power cost/te remained elevated by 43% y/y but witnessed marginal decline of 2% q/q to Rs1967/te (Rs1858/te 9MFY23) in Q3FY23.

On account of improving utilization of newly added capacities, we expect volume to grow at ~14% CAGR over FY23?25E whereas upcoming election year to fuel the demand further. Given the ongoing energy cost correction and increasing operating leverage, we believe operating efficiency to improve steadily to +Rs1000/te by FY25E (v/s Rs759/te in 9MFY23). However, high exposure to the fragmented south market with higher OPC sales & volatile demand will keep operating efficiencies under check in the short run. We remain POSITIVE on TRCL for its 1) strong retail presence in the south 2) low?cost cement producer 3) steadily increasing capacity share. Additionally, we expect TRCL to generate OCF of ~Rs30.7bn over FY23?25E will aid to fund the capex partly.    Hence, net debt/EBITDA to remain elevated close to ~2.5x till FY25E and expected to lower the profitability due to higher interest outgo. At CMP, stock trades at 20/12x EV/EBITDA on FY24/25E. We rolled our estimate to FY25 and arrived at a Target Price of Rs931 with a BUY rating, valuing the stock at 15x EV/EBITDA on FY25E.

Result Highlights

* Both volume & NSR came 1% above YSECe, increased by +19% & +9% y/y (8% & 4% q/q) translates in revenue growth of 30% y/y and 12% q/q to Rs20.1bn (v/s Rs19.6bn YSECe)

* TRCL delivered in?line total cost/te up by +10% y/y and flat q/q resulted in EBITDA of Rs793/te (v/s YSECe of Rs740/te)

* Power cost/te remained elevated by 43% y/y but witnessed marginal decline of 2% q/q to Rs1967/te (Rs1858/te 9MFY23) in Q3FY23.

* EBITDA came in at Rs2.83bn (9% above YSECe) increased by +24% y/y and +51% q/q with EBITDA margins of 14.1% in Q3FY23 v/s 14.7% in Q3FY22  

* On account of higher?than?expected depreciation and finance cost, the Adj. PAT missed by 13% to Rs516mn v/s 31mn in Q2FY23 but declined by 32% y/y. 

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