Hold The Ramco Cements; target of Rs 740 Prabhudas Lilladher

Prabhudas Lilladher's research report on The Ramco Cements

The Ramco Cements (TRCL) reported Q4FY19 earnings above our expectation on the back of strong volume growth and better realisations. Led by highly efficient operations, TRCL performed better than the market despite stiff competition in the regions. Company managed to improve its market share in eastern region by efficiently serving material flow from Kolaghat (WB) and Vizag (AP) units. Ongoing capacity addition in Eastern region are on track and we believe that these capacities would generate strong margins at par with existing operations backed by highly competitive logistics network and blending advantage. Led by improvement in prices, we upgrade our EBITDA estimates by 12%/14.5% for FY20e/FY21e. TRCL remains the best play in the Southern region; stretched valuations limits material upside from current levels as stock price has rallied by ~20% in the past couple of months.

Outlook

Hence, we maintain Hold with a TP of Rs740 (earlier Rs654), EV/EBITDA of 13x FY21E § Higher volumes and better realisations led the beat: Cement volumes grew 20% YoY at 3.29mn (PLe:3.09mn) tonnes (t) on the back of strong demand in Telangana, AP and Eastern states.

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