MOSL: THE RAMCO CEMENT (Buy)-Robust traction in volumes-expansion plans bode well for the same
The Ramco Cement: Robust traction in volumes; expansion plans bode well for the same
(TRCL IN, Mkt Cap USD2.6b, CMP INR765, TP INR880, 15% Upside, Buy)
- Healthy volumes/realizations: Volumes increased 20% YoY to 3.29mt in 4QFY19, driven by strong growth in the eastern region. Moreover, cement realizations increased 1.5% YoY to INR4,640/ton due to higher prices in south. Consequently, revenue grew 22% YoY to INR15.29b (our estimate: INR13.8b) in the quarter.
- Profitability restricted by higher cost: Blended EBITDA/t was down 1% YoY to INR979, with cost/t increasing 2% YoY to INR3,670. However, EBITDA grew 20% YoY to INR3.2b (in-line) due to volume gains. Margin contracted 0.5pp YoY to 21.1%. Adj. PAT was up 22.5% YoY to INR1.68b (in-line).
- FY19 performance: Volumes grew ~19%, sales increased 17% to INR51.2b, while EBITDA/PAT was down 5%/9% YoY to INR10b/INR5.1b.
- Key highlights from management interaction: (1) Average diesel prices increased 17% YoY in FY19, leading to higher logistics cost. (2) Petcoke prices were ~USD102-106/t during the first half of the year, but softened thereafter. (3) TRCL expects commissioning of the 3mt grinding capacities by FY20 and of the 1.5mt clinker at Jayantipuram by July'20.
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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