BSE SENSEX
28,095
S&P CNX
8,636
The Ramco Cements
CMP: INR556
TP: INR625 (+12%)
Buy
Optimistic on near-term prospects of Cement sector
Well poised to benefit from momentum in Indian economy
We went through The Ramco Cement's (TRCL) annual report for FY16. Our key
takeaways:
25 July 2016
Annual Report
Update
| Sector:
Cement
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Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)/ (USD b)
Avg Val, (INR m)
Free float (%)
Financials Snapshot (INR b)
Y/E Mar
2016
2017E
2018E
TRCL IN
238.1
595/300
-4/31/54
132.4/ 2.0
102
57.7
Net Sales
EBITDA
Net Profit
EPS (INR)
EPS Gr.(%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
EV/EBITDA(x)
EV/Ton(USD)
35.9
10.5
5.6
23.4
130.3
129.9
23.7
4.3
19.5
13.2
14.5
146
40.3
12.6
6.4
26.7
13.8
153.1
20.8
3.6
18.9
13.8
11.7
136
45.3
14.5
7.8
32.7
22.4
181.1
17.0
3.1
19.5
15.3
9.6
129
The management is optimistic on long-term cement demand and expects the industry
to grow 7-8% in FY17.
During the first two quarters of FY16, the southern markets declined 12%. However,
demand in AP and Telangana picked up in 2HFY16, leading to 8% growth. For FY16, the
decline was 5%.
FCF in FY16 was INR8.3b. With no immediate expansion plans, the visibility of
deleveraging is strong. In FY16, TRCL reduced borrowings by INR5.1b, leading to net
D/E of 0.7x versus 1x in FY15.
FY16 saw cost moderation of 8%, led by lower power, fuel and freight costs, which was
partially offset by higher limestone cost.
TRCL commissioned the 6MW thermal power plant project at Ariyalur in 4QFY16. With
this, the aggregate capacity of its thermal power plants has gone up from 157MW to
163MW.
Capital efficiencies (RoIC/RoE) were up 6.1bp/10bp, largely driven by strong volume
boost in the third and fourth quarters.
TRCL offers a strong play on southern recovery due to (a) superior brand, (b) edge on
cost efficiencies, aiding industry-leading profitability, and (c) visibility of deleveraging
(started in FY16). The stock trades at an EV of 9.6x FY18E EBITDA and USD129/ton. We
maintain Buy with a TP of INR625 (valuing the cement business at an EV of
USD144/ton and 11x FY18E EBITDA) – 12% upside.
Positive on sectoral prospects, led by signs of recovery in 2HFY16
Growth in FY16:
While all-India Cement industry growth was 4% in FY16 as against
6% in FY15, the southern states declined 5% due to lack of demand. Capacity
utilization was just 55% in the southern states against 75% in the remaining part of
the country. During the first two quarters of FY16, the southern markets de-grew
12%. From the third quarter, the southern markets began improving and de-growth
for the full year was restricted to 5%. During the fourth quarter, the southern
markets returned to the growth trajectory.
Outlook:
The present government’s policies are expected to give a big push to
economic activity. The thrust given in the Union Budget 2016-17 for development of
Roads & Highways, Ports, Flyovers & Bridges, Irrigation Schemes, Railway Projects,
Smart Cities, etc should boost cement demand. Lower interest rates, moderate
inflation, availability of loans for housing and tax benefits are expected to encourage
investments in residential housing. With the bifurcation of Andhra Pradesh into
Telangana and Andhra Pradesh, infrastructure activity in the region is likely to get a
fillip. As a result, the Cement industry is expected to grow 7-8% in FY17. Average to
above-average monsoon for the year would further help sustain growth. However,
continued Rupee depreciation and oil price volatility could be concerning.
Stock Performance (1-year)
The Ramco Cement
Sensex - Rebased
650
550
450
350
250
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Aashumi Mehta
(Aashumi.Mehta@MotilalOswal.com); +91 22 6129 1537
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

The Ramco Cements
Exhibit 1: Volume corroborated industry’s de-growth
Dispatch (mt)
23
12
3
-9
6.5
8.0
7.3
7.5
8.4
8.6
11
3
-11
7.7
-6
7.2
Growth (YoY %)
Exhibit 2: Capacity utilization remained low
Capacity (mt)
65%
64%
58%
60%
58%
Utilization(%)
59%
53%
47%
10.0
12.5
12.5
12.5
14.5
14.5
14.5
15.5
Source: MOSL, Company
Source: MOSL, Company
One of the lowest cost cement producers
TRCL’s cost/ton declined 8% in FY16, mainly led by the following:
1. Drop in power and fuel cost, as it raised its petcoke mix and crude prices fell
internationally
2. Reduction in freight cost (-11%), as it increased the share of road transport in its
logistics mix and diesel prices dropped by 15% in FY16
3. Lower reliance on imported limestone, as beneficiation resolved the quality
issue that its mines had faced in FY14-15 (due to which it had to import
limestone – INR800-1,200/ton costlier)
The moderation in cost helped offset the drop in realizations in 2HFY16.
Exhibit 3: Cement realization (INR/ton) one of the highest
among peers due to strong brand and retail mix
Exhibit 4: TRCL regained its superior cost structure in FY16
(INR/ton)
Ramco
RM cost
Staff cost
Power and Fuel
Freight
Other expenses
Source: MOSL, Company
Orient
ICEM
Dalmia
821
358
728
929
670
474
205
904
723
702
777
394
1,086
1,000
716
862
396
690
896
952
Source: MOSL, Company
Power plant capacity to reach 175MW by FY17
The 6MW project at Ariyalur was completed and commissioned in 4QFY16. With
this, TRCL’s aggregate thermal power capacity has gone up from 157MW to 163MW.
Further, its 6MW projects at Alathiyur and Jayanthipuram would be commissioned
in FY17. With the completion of these projects, TRCL’s aggregate thermal power
capacity would go up from 163MW to 175MW.
Due to lower demand, and consequently, lower production of cement in FY16, there
was surplus capacity with the thermal power plants. In FY16, TRCL sold 241.7m units
of thermal power, lower than 386.6m units in FY15. Lower realization coupled with
decrease in units sold resulted in lower profits from power plant operations.
25 July 2016
2

The Ramco Cements
Power from windmills continues to be a drag
The division generated 164.3m units in FY16 compared to 210.6m units in FY15.
There was a delay in the onset of the wind season during the year. TRCL continued
to face evacuation constraints imposed by TANGEDCO. There was frequent backing
down of the wind electric generators by TANGEDCO. Because of the above factors,
generation in FY16 was lower than in FY15. Income from the division was INR434m
in FY16 as against INR534m in FY15.
Exhibit 5: Power business a drag on return ratios (%)
25
20
15
10
5
0
FY11
FY12
FY13
FY14
FY15
FY16
Source: Company, MOSL
Cement
Power
Total RoCE
Visibility of deleveraging strongest among midcaps; capital efficiencies
improved
Deleveraging has already started, with INR5.06b reduction in net debt over FY16
(INR21.1b, 0.7x), which also led to reduction in interest cost. With no immediate
capex plan (barring 0.5mt of clinker de-bottlenecking), TRCL would generate INR7b-
9b of annual FCFE over FY17-18, aiding further debt reduction ahead.
Capital efficiencies improved considerably in FY16, led by volume boost in 2HFY16.
RoE/RoIC stood at 19.5%/11.2%, up 6.1bp/10bp YoY.
Exhibit 6: Better visibility of deleveraging on account of
strong OCF and limited capex plans
Net debt (INR b)
1.7
1.9
1.6
Net DER (x)
Exhibit 7: Capital efficiencies (%) improved, led by strong
recovery in cement demand
35
30
25
RoE
RoIC(%)
1.6
1.3
1.1
1.2
1.0
26.5
0.7
21.1
20
15
10
5
0
16.1
24.2
25.3
27.5
26.6
26.1
28.6
Source: MOSL, Company
Source: MOSL, Company
25 July 2016
3

The Ramco Cements
Performance of subsidiary
TRCL has a subsidiary, Ramco Windfarms Limited (RWL), whose capital is INR10m.
TRCL owns 71.5% of RWL, which has acquired six wind electric generators
aggregating to 6.6MW capacity from Thanjavur Spinning Mill Limited. With this,
RWL’s installed capacity has increased to 39.835MW, comprising of 127 wind
electric generators. It generated 22.7m units of power in FY16 compared to 27.9m
units in FY15. Revenue was INR85.4m in FY16 against INR105.3m in FY15 and net
profit was INR3m against INR13.5m.
Valuation and view
TRCL offers a strong play on southern recovery, given (a) its superior brand, (b)
capacity of 13m tons, (c) cost efficiencies, aiding industry-leading profitability, and
(d) visibility of deleveraging (started in FY16).
We expect demand to sustain and pricing to gradually improve in 2HFY17. Slowing
capacity additions and increasing consolidation in the industry would support long-
term cement prices.
Our assumptions of 8% volume CAGR (early sign of southern recovery) and 3% price
CAGR (already disciplined base) over FY16-18 would drive 14-15% EBITDA/PAT
CAGR. The stock trades at an EV of 9.6x FY18E EBITDA and USD129/ton. We
maintain
Buy,
with a target price of INR625 (valuing the Cement business at an EV of
USD144/ton or 11x FY18E EBITDA) – 12% upside.
25 July 2016
4

The Ramco Cements
Financials and Valuations
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2011
26,049
-4.0
6,181
23.7
2,208
3,973
1,399
399
-16
2,957
863
29.2
0
2,094
2,105
-40.5
2012
32,030
23.0
9,163
28.6
2,539
6,624
1,585
536
-1
5,574
1,723
30.9
0
3,851
3,852
83.0
2013
37,884
18.3
9,631
25.4
2,806
6,825
1,785
842
-5
5,877
1,846
31.4
0
4,032
4,035
4.8
2014
36,321
-4.1
5,116
14.1
3,063
2,054
1,881
1,141
230
1,543
166
10.8
0
1,377
1,172
-71.0
2015
35,939
-1.1
6,622
18.4
2,499
4,123
1,938
1,379
0
3,564
1,141
32.0
0
2,423
2,423
106.8
2016
35,872
-0.2
10,504
29.3
2,670
7,834
1,802
999
0
7,031
1,448
20.6
0
5,583
5,583
130.4
2017E
40,295
12.3
12,556
31.2
2,807
9,749
1,598
925
0
9,076
2,723
30.0
0
6,353
6,353
13.8
(INR Million)
2018E
45,344
12.5
14,510
32.0
2,843
11,667
1,336
1,107
0
11,437
3,660
32.0
0
7,777
7,777
22.4
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
E: MOSL Estimates
Balance Sheet
2011
238
17,107
17,345
27,912
5,890
51,147
51,105
13,175
37,930
5,457
2,673
10,988
3,923
1,751
400
4,913
5,900
4,564
1,335
5,088
51,147
2012
238
20,266
20,504
27,104
6,492
54,100
56,704
15,553
41,152
5,276
2,665
11,491
4,911
2,079
475
4,026
6,483
4,892
1,591
5,008
54,100
2013
238
23,470
23,708
26,671
7,164
57,542
64,388
18,359
46,029
1,480
2,658
14,547
5,948
3,028
536
5,035
7,172
5,300
1,873
7,375
57,542
2014
238
24,583
24,821
29,000
7,374
61,195
67,880
21,422
46,458
3,495
2,834
15,899
6,855
3,040
447
5,557
7,492
6,443
1,049
8,407
61,195
2015
238
26,214
26,452
27,119
8,271
61,841
72,727
23,920
48,807
2,575
3,558
15,763
5,206
3,802
618
6,136
8,861
7,238
1,623
6,901
61,841
2016
238
30,688
30,926
22,056
8,521
61,503
77,475
26,591
50,884
1,000
3,654
16,081
5,490
4,685
908
4,998
8,749
8,311
438
7,332
62,869
2017E
238
36,211
36,449
19,056
8,521
64,026
78,475
29,398
49,077
2,000
3,654
19,046
5,743
4,594
2,966
5,743
9,750
8,933
817
9,296
64,026
(INR Million)
2018E
238
42,882
43,120
15,056
8,521
66,697
79,475
32,241
47,234
3,000
3,654
22,876
6,175
4,596
5,643
6,462
10,067
9,335
732
12,809
66,697
25 July 2016
5

The Ramco Cements
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
EV/Sales
EV/EBITDA
EV/Ton (US$)
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2011
8.8
18.1
72.9
1.3
16.5
2012
16.2
26.9
86.2
2.5
18.0
2013
17.0
28.7
99.6
3.0
20.6
2014
4.9
17.8
104.3
1.0
20.2
2015
10.2
20.7
111.1
1.5
17.1
54.6
5.0
4.3
23.6
160
0.3
12.8
7.2
7.2
0.5
22
55
1.6
20.4
10.7
10.7
0.6
21
56
1.3
18.3
10.7
10.7
0.7
25
57
1.1
4.8
5.5
5.5
0.6
26
69
1.2
9.5
7.0
7.0
0.6
34
53
1.0
2016
23.4
34.7
129.9
3.0
14.9
23.7
4.3
4.3
14.5
146
0.5
19.5
13.2
13.2
0.6
41
56
0.7
2017E
26.7
38.5
153.1
3.0
13.1
20.8
3.6
3.6
11.7
136
0.5
18.9
13.8
13.8
0.6
36
52
0.4
2018E
32.7
44.6
181.1
4.0
14.2
17.0
3.1
3.1
9.6
129
0.7
19.5
15.3
15.3
0.7
32
50
0.2
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
Cash Flow Statement
2011
6,181
399
850
-824
-21
6,585
-5,273
1,312
-1,785
0
-7,058
16
2,247
-1,399
-346
517
44
356
400
2012
9,163
536
155
-1,121
-162
8,570
-5,419
3,152
8
0
-5,411
0
-808
-1,585
-692
-3,084
75
400
475
2013
9,631
842
-2,306
-1,174
-5
6,989
-3,888
3,101
7
0
-3,881
2
-434
-1,785
-830
-3,047
61
475
536
2014
5,116
1,141
-1,121
44
230
5,410
-5,507
-97
-176
0
-5,684
15
2,330
-1,881
-279
184
-89
536
447
2015
6,622
1,379
1,299
-244
0
9,057
-3,550
5,507
-724
0
-4,274
-378
-1,881
-1,938
-415
-4,612
171
447
618
2016
10,504
999
1,603
-1,198
0
11,908
-3,550
8,358
-95
0
-3,645
-278
-5,063
-1,802
-830
-7,974
289
618
908
2017E
12,556
925
-1,273
-2,723
0
9,486
-2,000
7,486
0
0
-2,000
0
-3,000
-1,598
-830
-5,428
2,058
908
2,965
(INR Million)
2018E
14,510
1,107
-837
-3,660
0
11,120
-2,000
9,120
0
0
-2,000
0
-4,000
-1,336
-1,107
-6,443
2,677
2,966
5,643
25 July 2016
6

PRODUCT GALLERY
Our recent reports on The Ramco Cements
Our recent reports on Cement Sector
Our recent reports on other Cement companies
3

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The Ramco Cements
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Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this
report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412
Pending Regulatory inspections against Motilal Oswal Securities Limited:
SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and
adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have requested to
SEBI vide our letter dated June 23, 2015 to provide pending list of documents for inspection.
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The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or
indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive
compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues
Disclosure of Interest Statement
Analyst ownership of the stock
Served as an officer, director or employee
The Ramco Cements
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Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which
would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures
Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has
an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to
SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities,
products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in
Hong Kong.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a
registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the
absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This
document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be
engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by
the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal
Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore,
may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the
Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
Varun.kumar@motilaloswal.com
Contact : (+65) 68189232
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
Kadambari Balachandran
kadambari.balachandran@motilaloswal.com
(+65) 68189233 / 65249115
For U.S
25 July 2016
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
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