'Hold' Ramco Cements Shares, Maintains Systematix Post Mixed Q1 Results — Check Target Price
The outlook for cement demand remains strong, driven by continued government focus on infrastructure and resilient economic activity, adds the brokerage.
(Representative image. Source: Envato)
Cement capacity utilization for the quarter stood at 66% in Q1 FY26 (vs 75% YoY), impacted by early monsoons in Kerala and weak demand in the East due to project completions and unseasonal rains. Ramco Cement's adjusted PAT saw a sharp improvement and more than doubled YoY to Rs 0.9 billion vs Rs 0.4 billion in Q1 FY25. PAT margin stood at 4.2%.
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Systematix Report
The Ramco Cements Ltd.’s Q1 FY26 performance was a mixed bag as revenue was below estimate due to lower-than-expected volumes but Ebitda and profit after tax beat expectations due to stronger realization.
Standalone revenue declined marginally by 1% YoY and 13.5% sequentially to Rs 20.7 billion vs our estimate of Rs 21.8 billion owing to decline in volumes.
Volume degrowth was more than offset by improvement in realizations. Volume declined by 6.8% YoY (-24.2% QoQ) to 4.0mt (our estimate 4.6 mt).
Blended Realization/tn improved by 6.3% YoY and 14.2% QoQ to Rs 5,175 benefited by strong price hikes during the quarter. Consequently, Ebitda grew by ~25% YoY to Rs 4 billion. Ebitda/tonne surged 33% YoY to Rs 994 on the back of higher realizations.
Cement capacity utilization for the quarter stood at 66% in Q1 FY26 (vs 75% YoY), impacted by early monsoons in Kerala and weak demand in the East due to project completions and unseasonal rains. Adjusted PAT saw a sharp improvement and more than doubled YoY to Rs 0.9 billion vs Rs 0.4 billion in Q1 FY25. PAT margin stood at 4.2%.
The share of blended cement was 69% while premium products accounted for 29% of the portfolio. We retain our estimates largely unchanged as lower volume growth was offset by slightly higher prices.
We forecast a revenue/Ebitda/PAT CAGR of 9%/35%/218% over FY25-FY27E.
We value Ramco Cement at 13x on FY27E EV/Ebitda (earlier 12x on better pricing environment) and arrive at a target price of Rs 1,100. We maintain a Hold rating on the stock.
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