Ramco Cements rallies 8%; hits 52-week high on healthy Q4 volume growth

Shares of Ramco Cements hit a 52-week high of Rs 834.85, as they rallied 8 per cent on the BSE in Friday’s intra-day trade after the company reported a healthy volume growth of 47 per cent year-on-year (YoY) to 4.7 million tons (MT) with capacity utilisation rate coming in at 85 per cent in March 2023 (Q4FY23) as against 66 per cent in Q4FY22.

During Q4FY23, the company’s net revenue increased 50 per cent YoY at Rs 2,581 crore, compared to Rs 1,719 crore in Q4FY22. With positive operating leverage kicking in, earnings before interest, taxes, depreciation and amortization (EBITDA)/T improved by Rs 83/t (QoQ) to Rs 876/t. Reported EBITDA grew 40 per cent YoY to Rs 411.7 crore. Profit after tax jumped 22.6 per cent YoY at Rs 151 crore.

While long term prospects of profitability look promising, the short term outlook is expected to improve from Q2FY24, Ramco Cements said. The margins impacted due to elevated fuel prices & levy of surcharge by railways, it added.

In the Southern region, demand has improved in both trade and non-trade (mainly in road projects) sectors. However, in the Eastern region trade demand remained flat, while it increased in the non-trade segment.

Line-3 upgradation at RR Nagar, Tamil Nadu, with 1mtpa clinker capacity was commissioned in March 2023. It is expanding its dry mix products capacity at four locations. It has commissioned two plants in Tamil Nadu in H2FY23, while the remaining plants in Andhra Pradesh and Orissa (1 unit at each location) will be commissioned in FY24.

The company has reported industry leading volume growth of 35 per cent in FY23 indicating market share gains in its core markets. It continues to focus on its strategy of right product for right applications. In FY23, Ramco Cements’ net debt spiked, due to higher working capital requirement and increase in capex, Motilal Oswal Financial Services said in result update.

Meanwhile, the CIF (cost, insurance and freight) spot pet coke prices are now trending at lower levels at US$125 (vs. US$178 in February 2023). The benefit of the same is expected to flow from H1FY24E. On the balance sheet front, the company generated OCF of Rs 1,400 crore and incurred capex of Rs 1,765 crore (negative FCF: Rs 365 crore), ICICI Securities said in a note.

Owing to healthy profitability, company has managed to reduce net debt by Rs 205 crore (on a QoQ) basis to Rs 4,351 crore. With capex intensity to reduce going forward (FY24 guidance: Rs 892 crore) and company generating higher OCF, the brokerage firm expect b/s deleveraging to pickup pace in FY24E.