Ramco Cements Stock Hits 10-Month High As Record Q2 Profit Prompts Target Price Hikes
A worker with Element Construction puts cement on brick before installing it on the side of a commercial building (Photographer Patrick Fallon/Bloomberg)

Ramco Cements Stock Hits 10-Month High As Record Q2 Profit Prompts Target Price Hikes

The Ramco Cements Ltd. reported the highest ever profit in the three months ended September, the first full quarter of operations after India eased lockdown curbs.

Net profit increased 40% year-on-year to Rs 235.77 crore in the July-September period, according to an exchange filing. That compares with the Rs 163-crore consensus estimate of analysts tracked by Bloomberg.

  • Revenue from operations, however, fell 5% year-on-year to Rs 1,257 crore, in line with the Rs 1,265.3-crore forecast. That came as sales volume dropped 19% year-on-year due to lockdown and heavy rains.

  • Operating profit, or earnings before interest, tax, depreciation and amortisation, rose 50% year-on-year to Rs 441.9 crore, compared with the estimated Rs 325.5 crore.

  • Ebitda margin expanded to 35.2% from 22.4% a year earlier.

The company reported blended Ebitda per tonne of Rs 2,035 against Rs 1,118 a year ago. "This is a landmark. No other player (ex-northeast) has ever achieved," Jefferies analysts Vivek Maheshwari and Jithin John said in a post-earnings note.

The cement maker's Ebitda and Ebitda per tonne were also the highest ever.

Shares of Ramco Cements gained as much as 3.9% to Rs 833.8 and are up for the fourth straight day. The stock is trading at the highest level in ten months.

Also read: Cost Cuts May No Longer Drive Cement Makers As Demand Rises

Analysts Bullish But See Limited Upside

Most analysts remain bullish, while a few even raised price targets for the cement maker, citing improving realisations and better product mix. But they see limited upside for the stock, barring an immediate reaction, due to premium valuations.

Of the 32 analysts tracking Ramco Cements, 13 have a 'buy' rating, 10 recommend a 'hold' while the rest suggest a 'sell'. The average of Bloomberg consensus 12-month price targets implies a downside of 7.1%.

Here’s what analysts had to say:

Jefferies

  • Maintains 'buy' rating; raises price target to Rs 1,000 from Rs 900 apiece

  • Weak volumes but better realisations

  • Raises FY21 EPS estimates by 60% and build-in partial gains for FY22-23

CLSA

  • Upgrades to 'underperform' from 'sell'; hikes price target to Rs 805 from Rs 685 apiece

  • Q2 Ebitda above consensus estimates

  • Growth driven by healthy mix of both regions and products

  • Profitability may trend down as volumes pick up and mix normalises

  • Upside following initial reaction will be capped due to premium valuation

  • Raises FY21-23 Ebitda estimates by 11-19% on better profitability

Emkay

  • Maintains 'hold' rating, with a price target of Rs 801 apiece

  • Q2 results surprised positively led by better realisations

  • Expects sequential decline in cement realisations in the south

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