Stocks to Buy Today: On 25 September 2023, the financial services firm Geojit Limited published the latest research report on Ramco Cements shares, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
Geojit Limited is Bullish on Ramco Cements and has recommended a ‘buy’ rating on the stock with a target price of Rs 1034. Let’s take a closer look at their recommendations for the Ramco Cements share price target set by Geojit Limited.
In a recent research report, Geojit has provided insights on The Ramco Cements Ltd. (TRCL), the flagship company of the Ramco Group. Currently standing as the 5th largest cement company in India, TRCL has an impressive production capacity of approximately 22MT, divided between South (19MT) and East (3MT). With an added energy capacity through a captive thermal power unit of 175MW and a windmill capacity of 126MW, TRCL showcases considerable self-sufficiency in energy needs.
Reinforcing confidence in the company, Geojit upholds its ‘BUY’ rating on TRCL shares, setting a target price at Rs. 1,034. This confidence stems from the robust performance indicated by a 26% YoY revenue growth in Q1FY24. A significant contributor to this growth has been a 28% YoY surge in volumes. Notably, even amidst supply disruptions caused by rail accidents that lasted 20 days and weaker prices in the East, TRCL’s revenues remained strong.
Although there has been a slight concern as the EBITDA margin receded by 170bps YoY, falling to 15.2% due to heightened fuel prices, there’s optimism about the future. The recent decrease in fuel costs is likely to enhance margins in upcoming quarters. Simultaneously, there has been an observation of a rise in operating profit, marking a 14% YoY growth.
Delving deeper into TRCL’s financials, a pronounced capex during FY19-FY23 resulted in elevated debt levels, touching Rs. 44bn from a previous Rs. 10.3bn in FY19. On a brighter note, the net debt-to-EBITDA ratio shows a decrease, settling at 3.7x compared to 4.5x during the last capex cycle. The deleveraging process seems to have commenced, as is evident from a net debt reduction from Rs. 47.4bn in Q2FY23.
Efforts towards cost efficiency by TRCL are evident with initiatives like Waste Heat Recovery and the transition of windmill power to captive use. These measures project a potential cost saving of Rs. 130-180 per ton. Furthermore, TRCL has been expanding its capacity with the commissioning of a 1MT grinding capacity at R.R. Nagar (TN). An additional 0.9MT is anticipated in Odisha by the end of FY24. This increased capacity, along with a higher premium mix targeted at 30-35% in the next 2-3 years (up from the present 27%), is expected to bolster realization and volumes.
TRCL has also ventured into expanding the capacity of dry mix products. Two plants were commissioned in FY23, and two more are in the pipeline for AP & Odisha by FY24. These plants, with an impressive margin of around 25-30%, are expected to contribute Rs. 80cr in revenue each. Based on the company’s guidance, a robust volume growth of about 20% is projected for FY24. Geojit expects TRCL’s revenue to climb at a 12% CAGR from FY23-25E.
Lastly, with regards to valuation and outlook, TRCL is anticipated to benefit significantly from its capacity expansions, especially given the Government of India’s emphasis on Infrastructure and Housing. The shifting focus towards deleveraging post FY24, combined with declining input costs, is expected to bolster valuation. Currently, TRCL’s stock is trading at approximately 14x 1Yr Fwd EV/EBITDA. Based on a valuation of around 14x FY25E EV/EBITDA (in line with a 5-year average), Geojit has posited a target price of Rs. 1,034, solidifying its BUY rating for TRCL.
- CMP — Rs. 859
- Target — Rs. 1034
- Type — Buy
- Report — Click Here
Company Details
| Market Cap (Rs. crore) | 20,236 |
| Enterprise Value (Rs. crore) | 24,553 |
| Outstanding Shares (crore) | 23.6 |
| Free Float | 54% |
| Dividend Yield | 0.2% |
| 52-week High (Rs.) | 953 |
| 52-week Low (Rs.) | 635 |
| 6-month Average Volume (crore) | 0.05 |
| Beta | 0.96 |
| Face Value (Rs.) | 1 |
| Shareholder Category | Q4FY23 (%) | Q1FY24 (%) |
|---|---|---|
| Promoters | 42.3 | 42.1 |
| FII’s | 7.6 | 8.0 |
| MFs/Institutes | 32.5 | 32.4 |
| Public | 11.2 | 10.7 |
| Others | 6.5 | 6.8 |
| Total | 100.0 | 100.0 |
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