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The Ramco Cements Ltd. Q3FY24 volumes came at 4.0mnt, down 13.2% QoQ but up 11.1% YoY. The QoQ demand for cement was affected due to heavy rainfall and flooding due to cyclones in Tamil Nadu and Andhra Pradesh. Management expects volume for Q4 to be ~5mnt. During Q3FY24, revenue came at INR21,061mn, down 9.6% QoQ but up 4.8 YoY. Consequently, blended realization/t during the quarter came in at INR5,265, up 4.2% QoQ but down 5.6% YoY, the cement prices are under pressure during Q2. EBITDA/t came in at INR988/t, up 14.2% QoQ and 25.0% YoY. PAT for the quarter came at INR934mn, down 7.8% QoQ but up 38.6% YoY. EPS for the quarter came at INR3.9.

* CAPEX plan on track: The management has revised the capex guidance for the FY24E to INR20,000mn, with the remaining INR3,900mn earmarked for expenditure in the Q4FY24E. In the same quarter, the management aims to inaugurate an 18 MW thermal power plant in Kolimigundla. Additionally, the expansion of the grinding plant in Orissa from 0.9 MTPA to 1.8 MTPA is scheduled for commissioning in Q4FY24E. Plans are in place to commission railway sidings in Kolimigundla by the Q1FY25E. Looking ahead, the management forecasts a capex of INR17,000mn for FY25E. The company has identified opportunities for debottlenecking cement capacity by 1 MTPA in FY25E and proposes to double clinker capacity to 6.30 MTPA and cement capacity to 3 MTPA, along with the installation of a 15 MW Waste Heat Recovery System (WHRS) at an estimated project cost of INR12,500mn. This expansion is set to be commissioned in FY26E, raising the company's aggregate installed capacity to 19 MTPA for clinker and 26 MTPA for cement by FY26E, with the WHRS capacity reaching 68 MW.

* Total Cost came at INR4,277/t in Q3FY24: In Q3FY24, the Raw Material (RM) cost amounted to INR3,876mn, down 6.3% QoQ but up 12.8 YoY. This escalation in raw material cost was primarily driven by inflation affecting the prices of Fly ash, slag, and gypsum. Power and fuel costs for the quarter came at INR5,536mn, down 11.6% QoQ and 21.2YoY, primarily due to lower fuel expenses. The blended fuel cost per kcal in Q3FY24 was INR1.64 kcal, compared to 1.75 kcal in Q2FY24. The company's strategic shift in the utility of wind power sale to captive use has contributed to an overall reduction in power costs. Management expects the blended fuel consumption for Q4FY24E may decrease by $5-10. Freight expenses for the quarter reached INR4,293mn, down 9.1% QoQ but up 8.5% YoY. The company is actively working on reducing lead distances to mitigate freight expenses.

* Outlook and valuation: The current need for cement is strong, fuelled by both the individual home-building sector and infrastructure segments. The cement industry is expected to grow with a CAGR of 6-8%. The foreseeable future indicates a sustained surge in cement demand, driven by the government's emphasis on infrastructure spending and upcoming elections. Management has offered projections, anticipating volumes to reach ~17.5mnt for FY24E and around 19-20mnt for FY25E. The company is also directing its attention to capital expenditure plans as part of an effort to enhance its market presence. We expect Revenue/EBITDA to grow at a CAGR of 12.1%/23.1% respectively over FY23-FY26E. Our target EV/EBITDA multiple is 13x (unchanged) on FY26E EBITDA, hence we ascribe a target price of INR1,000, maintaining our rating to ADD.

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