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Strong top-line growth: Ramco Cements reported strong Q4FY24 numbers with revenue growth of 4.1% YoY/26.9% QoQ to Rs 2,678.2cr. The growth was largely driven by volumes of 5.5MnT which grew by 15% YoY and 35.2% QoQ, however realization declined by 9.5% YoY and 6.1% QoQ.

Margins remain under pressure: Its gross profit grew by 0.7% YoY/15.4% QoQ to Rs 2,056.6cr however margins declined to 76.8% down by 257bps YoY/765bps QoQ due to healthy increase in raw material cost. Further, its power & fuel cost declined YoY however other expense and employee cost witnessed an increase which impacted the EBITDA margin by 36bps YoY. Sequentially, EBITDA too saw a decline to the tune of 314bps because of higher other & power & fuel expenses. On per ton basis, Fuel cost/ton declined by 30.2% YoY/17.3% QoQ to Rs 1,142 and also total cost/ ton declined by 9.1% YoY/2.5% QoQ to Rs 4,179 but despite this EBITDA/ton too witnessed decline od 11% YoY/20.6% QoQ to Rs 800 due to lower cement price. PAT declined by 13.8% YoY but increased by 54.8% QoQ to Rs 130cr while PAT margin stood at 4.9% with a decline of 101bps YoY but increased by 88bps QoQ..

Healthy growth in FY24: Ramco posted revenue of Rs 9.376cr higher by 14.9% YoY led by healthy volumes of 18.4 MnT with growth of 22% YoY. Despite an increase in raw material prices by 28% YoY, iIts gross profit improved by 12.4% YoY but margin declined by 187bps YoY. However, EBITDA/PAT grew by 31.9% and 14.7% YoY while EBITDA margin improved by 215bps to 16.7% but PAT margin remained flat.

Key Highlights: 1) Share in premium products was 29% in South and 20% in East for 4FY24. 2) Cement prices remained weak for the quarter. 3) Right cement for the right application strategy is well on track. 4) Capacity utilization for FY24 was 83% and 96% in Q4FY24. 5) Green power share remains flat at 36% for Q4FY24 and 34% for FY24. 6) Expansion of Dry Mortar Plant in Andhra Pradesh & Odisha (2 units) will be commissioned during June-September 2024 quarter. 7) Around 660 acres of mining land acquired for new project in Karnataka. 8) For FY24, the company spend Rs 1,922cr as capex and fFor FY25, they are expected to spend ~Rs 1,200cr. 9) The current spot CIF prices of pet coke is at USD 110. 10) By FY26, The company plans to reach a capacity of 19 MTPA for Clinker and 26 MTPA for cement.

Outlook & Valuation: Overall Q4FY24 results of Ramco Cements were in-line with expectations as volumes were healthy and margins remain impacted due to muted cement prices. Further, strong demand, government spending, management focus on its growing premium product along with capacity expansion plan bodes well for growth ahead. Besides, they are also focusing on improving utilization levels, increasing green energy usage as well as a cost optimization plan to aid overall growth. On the financial front, we have estimated its revenue/EBITDA to grow by 13.5%/17.1% CAGR over FY24-26E and have maintained a Buy rating but due to sharp correction in stock price our target price is revised downwards to Rs 989.

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