Sell The Ramco Cements Ltd for the Target Rs. 860 by Choice Institutional Equities
Key Company Presentation Highlights
Specific cost and regulatory drivers
* Impact of new taxes: A significant cost headwind was the Mineral Bearing Land Tax (MBLT) introduced in Tamil Nadu in April 2025. This levy of INR 160/t of limestone added approximately INR 86/t to the variable cost of cement
* Labour Code Expenses: Due to the new Labour Codes of 2025, the company incurred a one-time exceptional expense of INR 200 Mn related to past service costs for gratuity and compensated absence
* Interest saving: Interest cost fell from INR 4,590 Mn to INR 4,190 Mn, driven by a combination of repo rate cut and the strategic repayment of borrowings during the fiscal year
Operational and asset efficiency
* Fuel mix strategy: The company significantly shifted its energy mix, reducing petcoke usage to 47% (down from 63% in FY25). While the cost per Kcal rose slightly from INR 1.53 to INR 1.59, total power and fuel cost per ton decreased due to better efficiency
* Infrastructure improvements: Depreciation increased to INR 7,360 Mn following the commissioning of new facilities, including a Waste Heat Recovery System (WHRS) at RR Nagar and a railway siding at Kolimigundala
* Clinker efficiency: There was a marginal improvement in the clinker conversion ratio, moving from 1.42 to 1.43, which assisted in overall cost management
Leverage and debt profile
* Improved debt metrics: Beyond the absolute reduction in debt, the company's financial health strengthened as the net debt-to-EBITDA ratio improved from 3.51x to 2.47x
* Reduced cost of debt: The average cost of debt decreased from 7.90% in FY25 to 7.29% in FY26
Market dynamics and short-term outlook
* Immediate price hike: Last month, the company increased the price by INR 15 per bag in the trade segment and INR 25 per bag in the non-trade segment as compared to March 2026 exit prices
* Election impact: Cement demand last month was noted as “muted” specifically due to the state elections held in Tamil Nadu, Kerala, and West Bengal
* Deferred fuel impact: While diesel and packing material cost increases will hit in Q1FY27, the full impact of the higher fuel price is not expected until Q2FY27 due to the company's existing fuel inventory ? Capex: The company incurred INR 9,970 Mn in capital expenditure in FY26 and has provided a capex guidance of INR 8,000 Mn for FY27E
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SEBI Registration no.: INZ 000160131
