MOSL: THE RAMCO CEMENT (Buy)- Margins impacted by poor realizations
The Ramco Cement: Margins impacted by poor realizations
(TRCL IN, Mkt Cap USD1.9b, CMP INR575, TP INR680, 18% Upside, Buy)
- Healthy growth in south and east aids volume: TRCL's volumes grew 21% YoY to 2.75mt (our estimate: 2.5mt) in 3QFY19, driven by strong growth in the south and east markets. Cement realizations at INR4,392/t (-5% YoY, -5% QoQ) were below our estimate of INR4,542/t due to lower prices in focus markets. Thus, revenue increased 15% YoY to INR12.07b (our estimate: INR11.4b). Revenue from wind stood at INR9m.
- Margin contraction led by lower realizations: Blended EBITDA/t decreased 23% YoY (-22% QoQ) to INR768 (our estimate: INR850) due to lower-than-estimated realizations. Cost/t remained flat YoY (-4% QoQ) at INR3,627 (our estimate: INR3,728) as higher P&F cost/t (+31% YoY, led by higher petcoke prices) and freight cost/t (+2% YoY, led by higher diesel prices) were offset by lower raw material costs/t. Power segment reported EBITDA loss of INR44m in 3QFY19, while Cement EBITDA/t stood at INR784 (-21% YoY/-8% QoQ). Hence, EBITDA declined 7% YoY to INR2.1b (our estimate: INR2.13b). Margins stood at 17.5% (-4.1pp YoY, -3.2pp QoQ). Adj PAT came in at INR1.01b (-8.4%YoY) as against est. of INR959m as 3QFY18 had extraordinary income of INR 124m related to reversal of provisions for DMF and tax for earlier years.
- 9MFY19 performance: Volumes grew 19% YoY in 9MFY19. Sales increased 15% YoY, while EBITDA/PAT declined 13%/20% YoY. For 4QFY19, we expect volumes to increase 5% YoY. Sales/EBITDA/PAT are expected to grow by 3%/-5%/-9% YoY in 4QFY19.
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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