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Prabhudas Lilladher
The Ramco Cements (Hold)
CMP: ₹812.7
Target: ₹740
The Ramco Cements reported Q4FY19 earnings above our expectation on the back of strong volume growth and better realisations. Led by highly efficient operations, Ramco 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 (West Bengal) and Vizag (Andhra Pradesh) 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 per cent/14.5 per cent for FY20e/FY21e. Ramco remains the best play in the Southern region. Stretched valuations limits material upside from current levels as stock price has rallied by about 25 per cent in the past couple of months. Hence, we maintain ‘Hold’ with a target price of Rs740 (earlier ₹654), EV/EBITDA of 13x FY21E
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