MOSL: THE RAMCO CEMENT (Buy)-East market drives healthy volume growth
The Ramco Cement: East market drives healthy volume growth
(trcL IN, Mkt Cap USD2.8b, CMP INR798, TP INR918, 15% Upside, Buy)
- Volume growth led by eastern market: TRCL’s volumes grew 20% YoY to 2.74mt (est. of 2.6mt) in 4QFY18, driven by strong growth in the eastern market. South volumes also grew at a healthy pace. Cement realizations stood at INR4,571/ton (+2.7% YoY, -0.8% QoQ) v/s our estimate of INR4,539/ton due to weaker prices in south. Revenue grew 23% YoY to INR12.5b, better than our estimate of INR11.9b, due to the realization beat.
- Margins stable QoQ: Blended EBITDA/t fell 8% YoY (-2% QoQ) to INR985 (est. of INR1,009) due to cost push. Cost/t increased 6% YoY (-1% QoQ) to INR3,591 (est. of INR3,569) due to higher P&F cost/t (+29% YoY, led by higher petcoke prices) and freight cost/t (+18% YoY, led by higher diesel prices). Power segment reported EBITDA loss of INR40m in 4QFY18, while Cement EBITDA stood at INR1,000/t (-7% YoY/ flat QoQ). Hence, EBITDA increased 11% YoY to INR2.69b (est. of INR2.62b). Interest cost fell 48% YoY to INR105m due to debt reduction. Tax rate was higher at 38% v/s 22% in 4QFY17.
- Management commentary: 1) Freight cost/t increased due to an 8% YoY rise in diesel price. 2) Debt reduction has been to the extent of INR3.1b in FY18. 3) It announced clinker unit of 1.5mt at capex of INR6.8b; clinker addition is along with grinding capacity addition of 3mt.
Ramco Cements is engaged in the manufacture and production of cement, ready mix concrete and dry mortar products in India. Co. operates in three divisions: Cement; Drymix Products and Ramco Concete. In the Cement Division, Co.'s main product is Portland Cement, which is manufactured in eight production facilities that include integrated cement plants and grinding units. Co.'s Dry Mix Division manufactures pre mixed dry mortars such as plasters, wall putty and tile adhesive. Co.'s Ramco Concrete Division manufactures concrete based on customers requirements such as permutations based on concrete grades, workability and site conditions. Co. also operates a wind farm in India.
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