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Cost Inflation Dampens Earnings Outlook

We maintain our ‘SELL’ rating on The Ramco Cements Limited (TRCL) with a revised target price of INR 860/share. TRCL has not yet conducted its quarterly earnings call; hence, our analysis is based solely on the press release and investor presentation. Our revised target price factors in a sharp rise in cement cost, materially higher than peer expectation, primarily due to elevated fuel price amid ongoing geopolitical uncertainty. Management has guided for an increase of ~INR 500/t in fuel cost, ~INR 120/t rise in packing material cost owing to higher polymer price and ~INR 50/t increase in logistics cost in the wake of diesel price hike. While the adverse effect of higher packing and diesel cost is projected to reflect from Q1FY27, the full setback of elevated fuel cost is forecast to be visible from Q2FY27. However, positive pricing momentum will offset some of the impact of the cost increase. Accordingly, we estimate a net cost escalation of ~INR 205/t, which is projected to moderately pressure FY27E EBITDA/t.

In addition, the stock currently trades at an FY28E EV/EBITDA multiple of 13.9x, which we view as expensive, as compared to peers, especially considering TRCL’s relatively weaker return ratios. The company balance sheet also remains stretched, with FY26 Net Debt/EBITDA at 2.47x, limiting financial flexibility and reducing scope for meaningful improvement in return metrics. In our view, such leverage levels, coupled with volatile profitability, may remain a key concern for investors. We expect TRCL’s EBITDA to expand at a CAGR of 11.5% over FY26– 29E, supported by our estimated volume growth of 4.0%/6.0%/7.0% and realisation growth of 3.5%/0.5%/0.5% across FY27E/FY28E/FY29E, respectively. We value TRCL using our EV/CE methodology and assign an FY28E EV/CE multiple of 1.8x, arriving at a revised target price of INR 860/share. At this target price, the stock would continue to trade at an FY28E EV/EBITDA multiple of 13.9x, which, in our view, remains expensive for a cement company of this scale.

Q4FY26 result: Earnings fell short of expectation

TRCL reported Q4FY26 revenue and EBITDA of INR 26,061 Mn (+9.0% YoY, +24.0% QoQ) and INR 3,728 Mn (-1.2% YoY, +11.1% QoQ), respectively, vs CIE estimate of INR 26,325 Mn and INR 4,55 Mn, respectively. Total volume for Q4 stood at 5.6 Mnt (vs CIE estimate 5.6 Mnt), up 4.8% YoY and up 21.0% QoQ. In FY26, TRCL earned INR 5,740 Mn as profit from the sale of land. Further, in view of the change in definition of wages under the new Labour Codes, 2025, the company expensed INR 200 Mn. PAT for the quarter reached INR 1,464 Mn.

Blended Realisation/t came in at INR 4,693/t (+4.0% YoY and +2.4% QoQ), which was in line with CIE’s estimate of INR 4,664/t. Total cost/t came in at INR 4,022/t (+2.9% YoY and +1.3% QoQ). As a result, EBITDA/t came in at INR 671/t, up 66/t YoY and down 59/t QoQ.

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