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HDFC Securities
Ramco Ind (Buy)
CMP: ₹90.35
Target: ₹104.126
Ramco Industries — part of the Chennai-based Ramco Group — is primarily engaged in the manufacturing of asbestos based fibre cement (FC) sheets, which find application as a roofing material.
Triggers: Growth in Indian economy with higher per capita income, will lead to better demand for housing products; cotton and apparel demand high in domestic and export markets; value unlocking, if undertaken, can benefit the shareholders; investments — the hidden treasure, main trigger currently.
Risks/concerns: Raw material prices and forex fluctuation; highly dependent on rural prosperity, this in turn is dependent on agricultural productivity and MSP; seasonality and capacity additions in the industry.
Though Ramco is comparatively a smaller player in the fibre cement industry, the management is trying to nullify the cyclicality nature of business by venturing into new product range of calcium silicate board and through its textile business. Once the momentum in the new product segment picks up, Ramco will start getting a better valuation such as its peers Everest Industries (which has significant exposure to steel buildings) and HIL (which has blocks and panels which are considered as green products).
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