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Miss on EBITDA due to lower volume Reiterates capacity target of 30mtpa by Mar’26 vs. 24mtpa currently

• The Ramco Cements (TRCL)’s 1QFY26 EBITDA was below our estimate due to lower-than-estimated volume. EBITDA increased by ~24% YoY/QoQ to INR4.0b (~11% miss), and EBITDA/t increased ~32% YoY to INR966 (est. INR995). PAT increased ~142% YoY to INR860m (~27% below our estimates).
• The management indicated cement sales volume declined ~7% YoY due to weak demand led by the early monsoon in Kerala and eastern markets. While the construction chemical business posted a strong growth of 79% YoY, albeit on a low base. It reiterated the capacity target of 30mtpa to be achieved by Mar’26 with the commissioning of line-2 and debottlenecking of existing capacity at the Kurnool plant and adding grinding capacities in existing plants with nominal capex. TRCL has monetized INR5.0b so far, through sales of non-core assets out of the targeted INR10.0b. The balance is likely to be monetized before Sep’25 vs. earlier expectations of by Jul’25, a slight delay due to pending approvals.
• We cut our EBITDA for FY26E/FY27E by ~6%/4%, led by a reduction in our volume estimates. We introduce our FY28 estimates with this note. The stock is currently trading at 17x/15x FY26E/FY27E EV/EBITDA. We value the stock at 13x Jun’27E EV/EBITDA to arrive at our TP of INR1,050. Reiterate Neutral.

Overall volume dips ~6% YoY; realization/t up 5%/11% YoY/QoQ

• Revenue/EBITDA/adj. PAT stood at INR20.7b/INR4.0b/INR860m (-1%/+ 24%/+142% YoY and -9%/-11%/-27% vs. our estimates) in 1QFY26. Sales volume declined ~6% YoY to 4.1mt (~8% below our estimates). Realization/t increased 5%/11% YoY/QoQ to INR5,027/t (in line).
• Opex/t remained flat YoY as the benefit of the reduction in variable/freight costs per tonne by ~2% (each) was offset by an increase in other expenses/ employee costs per ton by ~7%/10% YoY (due to lower volume). OPM surged 3.9pp YoY to ~19% (vs. estimate of ~20%), and EBITDA/t increased ~32% YoY to INR966.
• Depreciation increased ~10% YoY, while interest cost declined 7% YoY. Other income decreased ~24% YoY. ETR stood at 26.2% (similar to 1QFY25).

Highlights from the management commentary

• Cement capacity utilization stood at ~68% vs. ~77%/~85% in 1Q/4QFY25. Lower capacity utilization YoY was also due to the 1.3mtpa grinding capacity being commissioned post-1QFY25 through debottlenecking.
• The C:C ratio improved to 1.45x vs. 1.41x/1.40x in 1Q/4QFY25, helping to offset the inflationary impact of raw material cost (fly ash, slag, and gypsum). The fuel consumption cost stood at INR1.55/Kcal vs. INR1.49/kcal in 1QFY25 and INR1.50/Kcal in 4QFY25.
• Capex of INR3.2b was incurred in 1QFY26. Estimated capex for FY26 is at INR12.0b. For Karnataka greenfield projects, the company has acquired 57% of mining land and 13% of factory land so far.

View and valuation

• TRCL’s operating performance was below our estimates due to lower volume, as realization and opex/t were in line. The company has shown improvement in profitability, led by a sharp price hike in its core markets (south and east). Our channel check suggests a price correction in the south region during Jun-Jul’25 (overall trade price declined by INR15-20/bag and non-trade by INR20-30/bag). However, current prices are still higher by INR25-35/bag vs. Mar’25. We estimate ~9%/24% CAGR in revenue/EBITDA over FY25-28 and ~108% CAGR in PAT (on a low base). We estimate the company’s net debt peaked out in FY25 at INR44.3b (net debt to EBITDA at 3.6). We estimate its net debt to decline to INR35.0b (net debt-to-EBITDA at 1.5x) by FY28.
• The stock is currently trading at 17x/15x FY26E/FY27E EV/EBITDA (vs. its longterm average of 15x) and USD140/USD120 EV/t (vs. long-term average of USD130). We value the stock at 13x Jun’27E EV/EBITDA to arrive at our TP of INR1,050. Reiterate Neutral.

Highlights from the management commentary Capex and project update

• The company plans to increase cement capacity to 30mtpa by Mar’26 through the commissioning of line II at Kolimigundla, along with de-bottlenecking and adding grinding capacities at existing facilities with minimal capex.
• The company has monetized INR5.0b out of its targeted INR10b from non-core assets. Balance is expected to be monetized before Sep’25 vs. the earlier estimate of by Jul’25 due to a delay in regulatory approval.
• An additional 5MW WHRS at R R Nagar is scheduled for commissioning by Aug’25, and the balance 5MW is expected by Sep’25. An additional 15 MW of WHRS at Kolimigundla, AP, is expected to be commissioned in tandem with Kiln line II in FY27.
• At Kolimigundla, AP, a railway siding has been commissioned in Jul’25, and the first outward & inward movements have taken place.
• Construction chemicals capacity in Odisha was commissioned in Jul’25.
• The company has acquired ~57% of the mining land and ~13% of factory land for a Greenfield project in Karnataka.
• The total capex incurred was INR3.2b in 1QFY26, and capex is pegged at INR12.0b for FY26.

Capacity utilization and volume

• Cement capacity utilization stood at ~68% vs. ~77%/~85% in 1QFY25/4QFY25. Cement volume declined ~7% YoY to 4.0mt in 1QFY26. ? Volume share from South/East was ~79%/~21% in 1QFY26 vs. ~76%/~24% in 1QFY25. Operational highlights
• The share of premium products was ~29% in 1QFY26 vs. ~27% in 1Q/4QFY25 in the South region. In the East region, the share of premium products was ~22% in 1QFY25 vs. ~20%/23% in 1Q/4QFY25. The OPC share was ~31% of total volumes in 1QFY26 vs. 31%/32% in 1QFY25/4QFY25.
• Blended coal consumption cost was USD126/t (INR1.55/kcal) vs. USD137/ USD121 (INR1.49/INR1.50 per kcal) in 1QFY25/4QFY25.
• TRCL used 54% petcoke vs. 58%/66% in 1QFY25/4QFY25. Alternative fuel share remains low at 1-2%.
• Green energy contributed 31% of power requirements vs. ~33%/31% in 1QFY25/4QFY25.
• Avg. lead distance was 246kms in 1QFY26 vs 273kms in 1QFY25 and 278kms in 4QFY25.

Debt and other highlights

• Gross debt stood at INR47.3b vs. INR46.5b as of Mar’25. The cost of debt for 1QFY26 was at 7.64% as against 7.92% in 1QFY25.