IGI Logo

4Q EBITDA miss; cyclical upturn largely priced in; retain Hold

* Ramco’s Q4FY21 EBITDA grew 61% YoY to Rs4.5bn (8% below our forecast of Rs4.9bn), but in line with consensus, because of higher-than-expected freight cost, as lead distance was up 40kms YoY. Cement EBITDA/ton increased 48% YoY to Rs1,417 (Emkay: Rs1,478).

* TRCL is nearing completion of 40% capacity expansion projects to 20mt and is poised to benefit from the cyclical volume upturn, which should boost its RoIC to mid-teens by FY23E and well over 20% over the next 4-5 year, in our view.

* We maintain FY22-23 estimates, and our Hold rating; our DCF-derived TP of Rs1,020 (Jun’22E) implies a 13.5x 1-year forward EV/EBITDA. Current EV/EBITDA multiple of 16x indicates ongoing expansion and cyclical upturn are largely priced in. Please find our sector initiation report: 

* Revenue increased 17% YoY to Rs16.3bn.

Volumes grew 10% YoY to 3.21mt (Emkay3.32mt), implying clinker capacity utilization at 92% in Q4FY21 (120% in Mar’21). Cement realization remained flat QoQ (increased 7% YoY) to Rs5,058/ton, broadly in line with estimates. Management mentioned capacity utilization declined to 65% post 10th May with state-wide restrictions, while cement prices were better QTD-FY22 compared to Q4FY21.

* Blended EBITDA/ton improved 47% YoY to Rs1,399 (Emkay: Rs1,465).

Total Cost/ton declined 3% YoY (+2% QoQ) vs. our estimate of a 4.5% decline, largely owing to higherthan-expected freight cost. The average lead distance for cement stood at 341kms in Q4FY21 vs. 301kms in Q4FY20. Petcoke usage in fuel mix declined to 23% vs. 57% in Q4FY20 and 41% in FY21 vs. 48% in FY20. Management expects variable cost/ton to remain flat QoQ, owing to the commissioning of WHRS, increasing usage of lignite and procurement of fuel at a cheaper rate to suffice for 2-3months (coal inventory at USD70- 80/ton vs. spot price of USD90+).

* Commissioning of 2.25mt clinker unit at Kurnool, Andhra Pradesh has been delayed by a quarter to Q2FY22, while 1MW grinding unit, 12MW of WHRS and 18MW of CPP are expected to be commissioned in FY23. Balance project capex of Rs5-6bn is likely to be spent in FY22E in addition to maintenance capex of Rs1-1.5bn p.a.

* FY21 review:

Revenues declined 2% YoY to Rs53bn led by 11% decline in volumes to 10mt. EBITDA grew 36% YoY Rs15.6bn with cement EBITDA/ton increased 54% YoY to Rs1,529 owing to sharp increase of 10% YoY in realization. Consolidated FCF stood at Rs746mn post working capital release of Rs5bn and capex of Rs18bn. It was largely utilized for dividend payment. Accordingly, net debt remained flat YoY at Rs29.6bn as of Mar’21. As the net debt has already peaked out, we expect the capex cycle to restart once the balance sheet is sufficiently deleveraged.

To Read Complete Report & Disclaimer Click Here

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer