Buy The Ramco Cements Ltd For Target Rs. 1,045 By JM Financial Services
The Ramco Cements’ (Ramco) 1QFY26 EBITDA increased by 24-25% both YoY and QoQ to INR 4bn, in line with our and consensus estimates. Blended EBITDA/tn increased 32% YoY and 59% QoQ to INR 966 (JMFe: INR 950). The sharp improvement in cement prices in South region led to significantly better profitability on a sequential basis. Capex intensity is set to remain elevated, with FY26 guidance at INR 12bn as Ramco targets total grey cement capacity of 30mt. Net debt increased by INR 1.3bn QoQ to INR 46.1bn as of Jun’25. Factoring in 1Q performance, we have cut our FY26 EBITDA estimates by ~3% and broadly maintained FY27-28 estimates. We maintain our HOLD rating with a revised target price of INR 1,045/share based on 13x Sep’27E EV/EBITDA post half yearly roll-over.
* Result summary: EBITDA increased ~24-25% YoY and QoQ to INR 4bn, in line with our and consensus estimates. Blended EBITDA/tn grew ~32% YoY/ 59% QoQ to INR 966 (vs. JMFe: INR 950), an increase of INR 359/tn sequentially mainly led by improved cement realisation. Volume (including construction chemicals) declined ~6% YoY/ 22% QoQ to 4.1mt, in line with estimates. Cement volume declined ~7% YoY/ 23% QoQ to ~4mt. Blended realisation increased 5% YoY/ 11% QoQ to INR 5,027 (JMFe: INR 4,987). Total cost/tn was flat YoY/ increased 3.7% QoQ to INR 4,061. Variable cost got impacted by levy of mineral bearing land tax on limestone in Tamil Nadu from Apr'25; the impact was ~INR 300mn (~INR 73/tn) in 1QFY26. Net debt declined INR 3.6bn YoY/ increased INR 1.3bn QoQ to INR 46.1bn as of Jun'25.
* What we liked: Better-than-expected realisation.
Other key highlights: 1) The company is on track to achieve cement capacity of 30mt by Mar’26 with the commissioning of line-2 in Kolimigundla along with de-bottlenecking of existing facilities/ adding grinding capacities in existing locations with minimal capex. 2) The management has maintained capex guidance of INR 12bn in FY26; it has already incurred INR 3.2bn capex in 1QFY26. 3) Net debt declined INR 3.6bn YoY/ increased INR 1.3bn QoQ to INR 46.1bn as of Jun'25. 4) Project updates: i) 5MW of WHRS each in RR Nagar is expected to be commissioned in Aug’25 and Sep’25 respectively (vs. earlier 1QFY26). Further, another 15MW of WHRS is expected to be commissioned in Kolimigundla along with kiln line-2 in FY27. ii) For Karnataka greenfield project, 57% of total mining lands and 13% of total factory lands have been acquired so far. 5) Sale of non-core assets: As on date, out of the targeted INR 10bn, the company has monetised non-core assets worth ~INR 5bn. The balance is expected to be monetised before Sep’25 (vs. Jul’25) due to delay in regulatory approval. 6) It has commissioned its fifth construction chemical plant at its cement GU in Jajpur, Odisha (vs. guidance of Jun’25). With this addition, the total installed capacity of the construction chemical division now stands at ~0.5mt.
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SEBI Registration Number is INM000010361
