Ramco Cements rallies 7%, hits 9-month high on hopes of healthy H2 outlook

After a muted H1FY25, analysts expect that operational performance would improve in H2FY25 led by demand pick-up in south/east region & improvement in prices and continuous operational efficiencies.

Ramco Cements share price: Shares of the Ramco Cements hit a nine-month high of Rs 927 as the scrip rallied 7 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes on expectation of earning improvement in second half of the financial year 2024-25 (H2FY25). 

 

Notably, the stock is trading at its highest level since February 2024.

 

For July to September quarter (Q2FY25), Ramco Cements posted 75 per cent year-on-year (Y-o-Y) fall in profit at Rs 26 crore, hurt by subdued demand in the monsoon season and falling prices. Revenue fell 12.5 per cent Y-o-Y to Rs 2,038 crore due to drop in cement prices by around 10 per cent Y-o-Y and drop in volume by 3 per cent. The volume de-growth due to weak demand due to the monsoon. 

 

Earnings before interest, tax, depreciation, and amortisation (Ebitda)/tonne declined by 20.5 per cent Y-o-Y (down 4.7 per cent sequentially) to Rs 700 per tonne, dragged by lower realisations.

 

Ramco Cements said the cement capacity utilisation has dropped from 82 per cent in Q2FY24 to 75 per cent in Q2FY25 due to additional capacities created by way of debottlenecking in Q2FY25 and commissioning of line 2 in Orissa in H2FY24.

 

The company registered a total sale volume of 8.85 million tonne in H1FY25 with a marginal de-growth of 1 per cent Y-o-Y in view of weak demand due to election, extended heat waves and monsoon. In spite of reduction in cost due to softening of fuel prices and improvement in manufacturing efficiency, the overall margins remain weak in view of pressure on cement prices, the company said.

 

Meanwhile, the company repaid Rs 326 crore of its debt in October 2024 using proceeds from the disposal of non-core assets. Further, the company has entered into a sale agreement for disposal of lands worth Rs 74 crore, which is expected to be realised during Q3FY25 and there is a good progress in respect of sale of other lands. The company is on track to achieve the target as committed earlier.

 

According to ICICI Securities, Ramco Cement’s overall operational performance during the quarter was impacted significantly due to muted volumes and lower realisations. After a muted H1FY25, the brokerage firm expects that operational performance would improve in H2FY25 led by demand pick-up in south/east region & improvement in prices and continuous operational efficiencies. 

 

Overall cost structure continues to see improvement led by reduction in power, fuel & logistics costs. On the capacity expansion front, the company is in process of increasing its total capacity to 30 mtpa by FY26E (from 24 mtpa at present), which gives medium to longer-term volume growth visibility. Moreover, continuous focus on operational efficiencies & positive operating leverage would also drive Ebitda per tonne improvement over FY25-27E. Company is also in the process of monetising its non-core assets worth Rs 1,000 crore (Rs 376 crore already been monetized in September), which would be utilised in capex, the brokerage firm said.

 

Despite the earrings beat in Q2, Motilal Oswal Financial Services said they largely maintain earnings estimates for FY 25-27 due to pricing pressure in the company’s core market (south) and higher competition in the near term in the South region due to capacity expansion by leading players.