MOSL: THE RAMCO CEMENT (Buy)-Margins exceed estimate led by better realizations
The Ramco Cement: Margins exceed estimate led by better realizations
(TRCL IN, Mkt Cap USD1.9b, CMP INR603, TP INR695, 15% Upside, Buy)
- Volumes, realizations above estimates: TRCL’s volumes grew 15% YoY to 2.5mt (our estimate: 2.4mt) in 2QFY19, driven by strong growth in the underlying markets. Cement realizations of INR4,622/ton (-3.4% YoY, +2% QoQ) were above our estimate of INR4,577 due to higher prices in the focus markets. Thus, revenue increased 11% YoY to INR11.8b (our estimate: INR11.2b). Revenue from Wind stood at INR394m.
- Sequential higher realizations drive margins: Blended EBITDA/t increased 10% QoQ (-27% YoY) to INR989 (our estimate: INR779) due to higher-than-estimated realizations. Cost/t increased 6% YoY (+2% QoQ) to INR3,793 (our estimate: INR3,835) due to higher P&F cost/t (+19% YoY, led by higher petcoke prices) and freight cost/t (+12% YoY, led by higher diesel prices). Power segment reported EBITDA of INR342m in 2QFY19, while Cement EBITDA/t stood at INR851 (-30% YoY/+1% QoQ). Hence, EBITDA declined 16% YoY to INR2.4b (our estimate: INR1.9b). Margins stood at 20.7% (-6.7pp YoY, +1.2pp QoQ). PAT stood at INR1.1b (-29% YoY; our estimate: INR918m).
- 1HFY19 performance: Volumes grew 18% YoY in 1HFY19. Sales increased 15% YoY, while EBITDA/PAT declined 16%/26% YoY. For 2HFY19, we expect volumes to increase 11% YoY. Sales/EBITDA/PAT are expected to grow by 14%/5%/14% YoY in 2HFY19.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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