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Weak realization drags performance

Net debt reduces by INR4.9b QoQ to INR46.2b as of Dec’24

* TRCL’s 3QFY25 EBITDA was below estimates, mainly due to lower-thanestimated realization/t (3% miss). EBITDA declined ~29% YoY to INR2.8b (~14% miss) and EBITDA/t declined 35% YoY to INR639 (est. INR742). OPM contracted 4.6pp YoY to ~14% (est. ~16%). PAT (adjusted for profit on the sale of non-core assets) declined 97% YoY to INR32m (vs. estimated PAT of INR329m).

* The company’s net debt declined by INR4.9b QoQ to INR46.2b as of Dec’24, aided by proceeds from the disposal of non-core assets (monetized INR4.4b in 9M vs. its target of INR10.0b by Jun’25). It also received an advance of INR100m, the sale for which is under progress. It is expanding its clinker/grinding capacity by 3.2mtpa/1.5mtpa at Kolimigundla, AP (line II). The company has further plans of debottlenecking/adding GUs at existing facilities with minimal capex to reach its capacity target of 30mtpa by Mar’26 vs. 24mtpa currently.

* We cut our EBITDA estimates by 10%/8%/7% for FY25/FY26/FY27 due to the weak realizations estimate in its core market (South). We value TRCL at 12x Dec’26E EV/EBITDA to arrive at our revised TP of INR870 (earlier INR950). We reiterate our Neutral rating on the stock.

Volume increases ~9% YoY; realization/t down 14% YoY

* Revenue/EBITDA/adj. PAT stood at INR19.8b/INR2.8b/INR32m (down 6%/ 29%/97% YoY and down 2%/14%/90% vs. our estimates) in 3QFY25. Sales volume increased ~9% YoY to 4.37mt (in line). Realization declined 14% YoY to INR4,523/t (flat QoQ; ~3% below our estimate).

* Opex/t declined ~9% YoY, led by a 10%/1% YoY reduction in variable/freight cost/t. Other expense/employee cost per ton declined ~20%/12% YoY, led by a reduction in the overall expense and positive operating leverage. OPM contracted 4.6pp YoY to 14% and EBITDA/t declined 35% YoY to INR639. Depreciation/ interest costs grew ~5%/10% YoY, and other income increased ~62% YoY.

* In 9MFY25, Revenue/EBITDA/PAT stood at INR61.0b/INR9.1b/INR643m (down 9%/20%/77% YoY). Sales volume grew ~2% YoY, while realization declined ~11% YoY. EBITDA/t declined ~22% YoY to INR690. We estimate Revenue/EBITDA/PAT to increase ~2%/7%/9% YoY in 4QFY25. Additionally, we estimate volume growth of ~8% YoY and EBITDA/t of INR757 vs. INR760 in 4QFY25.

Highlights from the management commentary

* Increased allocation for capex and 50-year interest-free loans to states for infrastructure development under the recent budget will be key positives for cement demand growth.

* Improvement in the C:C ratio to 1.4x vs. 1.3x in 3QFY24 and reduction in fuel consumption cost at INR1.45/Kcal vs. INR1.64/kcal in 3QFY24 enabled the company to reduce the variable cost/t ~10% YoY.

* Capex of INR2.6b was incurred in 3QFY25 and INR8.0b in 9MFY25. Capex for FY26 is estimated at INR12.0b. For Karnataka greenfield projects, the company has acquired 53% of mining land and 13% of factory land so far.

View and valuation

* TRCL’s earnings were below our estimates, mainly due to lower realization. Higher competitive intensity in the company’s core market in the South has kept cement prices under pressure. Further, the company’s volume share in the South surged to ~79% in 3QFY25 vs. ~76% in 3QFY24.

* We expect the company’s volume growth to moderate to ~7% CAGR over FY25- 27 vs. ~18% over FY21-25E. Higher competition and pricing pressure in its key markets, leveraged balance sheets, and low return ratios (RoE/ROCE in midsingle digits till FY26/FY27) will keep the stock price range-bound.

* At CMP, the stock trades at 14/12x FY26E/FY27E EV/EBITDA. We value TRCL at 12x Dec’26E EV/EBITDA and reiterate our Neutral rating with a revised TP of INR870 (earlier INR950).

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