The Ramco Cements
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
25 May 2021
4QFY21 Results Update | Sector: Cement
CMP: INR973
TP: INR960 (-1%)
Adverse regional mix leads to weaker margins
TRCL IN
236
229.5 / 3.1
1120 / 570
-4/-2/5
649
Neutral
Maintain Neutral – valuation prices in strong growth outlook
The Ramco Cements (TRCL)’s 4Q result highlights the adverse impact of
higher sales in the East India market, resulting in QoQ decline in EBITDA/t to
INR1,399 – weighed by both lower realization and higher cost.
Our FY22E/FY23E estimates are broadly unchanged. We retain our
Neutral
rating as we believe the valuation at 13.1x FY23E EV/EBITDA prices in the
expectation of a strong 16% volume CAGR over FY21–23E.
Revenue/EBITDA/PAT rose 17%/61%/47% YoY to INR16.3b/INR4.5b/INR2.1b
(+2%/+3%/-11% v/s our estimates).
Volumes were up 9% YoY to 3.21mt (v/s our est. of 3.15mt), whereas
EBITDA/t declined 8% QoQ to INR1,399/t (+47% YoY). Blended realization
declined 1% QoQ to INR5,080/t (in line with our est.), due to higher share of
sales in East India, while it was up 7% YoY on higher prices in South India.
Cost/t fell 3% YoY to INR3,681/t on better fixed cost absorption (from higher
volumes) and lower power and fuel costs (due to low-cost inventory).
FY21 OCF/capex stood at INR17.3b/INR18.0b (v/s INR7.0b/INR18.8b in
FY20). FCF was negative for FY21/FY20 at INR0.7b/INR11.8b on account of
capex.
FY21 revenue/EBITDA/PAT stood at INR52.7b/INR15.5b/INR7.6b (-
1%/+39%/+27% YoY). Volumes declined 11% YoY to 9.98mt. The EBITDA
margin stood at 29.4% (v/s 20.9% in FY20).
Clinker expansion projects at Jayanthipuram (1.5mtpa) and Kurnool
(2.25mtpa) have been delayed to Jun’21 and Sep’21, respectively, due to
labor availability issues. At Kurnool, the commissioning of a 1mtpa grinding
unit, a 12MW waste heat recovery system (WHRS), and an 18MW thermal
power plant (TPP) have been postponed to FY23.
The petcoke mix stood at 23%/41% in 4QFY21/FY21 v/s 57%/48% in
4QFY20/FY20. TRCL benefitted from low-cost inventory in 4QFY21 and
continues to carry this even in 1QFY22. This should keep the power and fuel
cost increase in check despite higher petcoke and coal prices.
Clinker utilization stood at 92%/73% in 4QFY21/FY21.
Gross debt stands at INR31.0b, including INR2.2b interest-free debt. Average
cost of debt stands at 6.1% p.a. v/s 6.71% p.a. in Mar’20. Net debt/EBITDA
stands at 1.89 v/s 2.52 in Mar’20.
The company would not earn any fiscal incentive on its new projects.
TRCL is expected to gain market share in its operating regions (South/East),
led by capacity expansions over the next six months. We expect a 16%
volume CAGR over FY21–23E, supported by a low base and expansions.
The stock trades at 13.1x FY23E EV/EBITDA and USD142/t capacity, at a
significant premium to peers. We value it at 13x FY23E EV/EBITDA (in line
with the 10-yr average) to arrive at TP of INR960. We maintain
Neutral.
Financial Snapshot (INR b)
Y/E Mar
2021 2022E 2023E
Sales
52.7 61.1 70.8
EBITDA
15.5 16.2 18.4
Adj. PAT
7.6
8.1
9.4
EBITDA Margin (%)
29.4 26.5 26.0
Adj. EPS (INR)
32.3 34.5 39.8
EPS Gr. (%)
26.5
6.9 15.5
BV/Sh. (INR)
239
268
302
Ratios
Net D:E
0.5
0.5
0.3
RoE (%)
14.4 13.6 14.0
RoCE (%)
9.8 10.1 10.8
Payout (%)
9.3 14.5 15.1
Valuations
P/E (x)
30.2 28.2 24.4
P/BV (x)
4.1
3.6
3.2
EV/EBITDA(x)
15.2 15.2 13.1
EV/ton (USD)
152
151
142
Div. Yield (%)
0.3
0.5
0.6
FCF Yield (%)
-0.3
0.8
6.0
EBITDA up 61% YoY
Highlights from management commentary
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
42.5
42.6
42.7
26.6
26.3
27.9
8.3
8.0
8.9
22.6
23.1
20.6
FII Includes depository receipts
Valuation and view
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com)
Research analyst - Basant Joshi
(Basant.Joshi@motilaloswal.com);
Jayant Gautam
(Jayant.Gautam@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
25 May 2021
1
Investors are advised to refer through important disclosures made at the last page of the Research Report.