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ICICI Securities Report
Having displayed volume aggression in the past six quarters (averaging more than 30% YoY), we find Ramco Cements Ltd. to be well placed as a major beneficiary of the improving price sentiment in south India.
The ideal combination of net debt ‘peaking-out' (net debt/Ebitda to improve from 3.6 times in FY23 to 1.4 times in FY26E) and margins ‘bottoming-out' (from 14.6% in FY23 to ~20% in FY26E) makes Ramco Cements a compelling investment story.
Factoring in visibility of sustained volume growth (boosted by its recent acquisition of limestone mines in Andhra Pradesh) and improving return on equtiy (from ~5% in FY23 to ~13% in FY26E), we value Ramco Cement at 13 times September-25E enterprise value/Ebitda (a notch lower versus its long-term average of 14 times).
With a target price of Rs 1,051/share, we re-initiate coverage on Ramco Cement with a ‘Buy'.
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