The shares of Ramco Cements Ltd have been given a buy call rating by ICICI Direct, a well-known brokerage house. The brokerage has set a target price of Rs. 1,130 for the stock, which it predicts to rise 32% in the next 12 months from its current market price of Rs. 856.75 as of 3:30 p.m. IST on January 25. Ramco Cements Limited is a large-cap company with a market capitalization of Rs 20,481.82 crore. The company is the country's fifth-largest cement manufacturer and the most widely used cement brand in South India.
Q3FY22 results of Ramco Cements Ltd (RCL) according to the brokerage
- Margins eroded sharply on cost pressure; Revenues broadly remained in line with estimates.
- Revenue increased 15.3% YoY to Rs 1,549.1 crore. Volumes were up 17.6% YoY to 3.07 MT, realisations were down 2% YoY due to the monsoon impact.
- Cost pressure, high base lead to margin contraction of 1472 bps YoY to 14.9%.
- Net profit was also down 59% YoY to Rs 82.6 crore.
Key investment rationale according to ICICI Direct
- Incremental volumes from new units (1 MT Odisha GU, 1.5 MT & 2.25 MT clinker unit in Jayanthipuram & Kurnool) would help to grow the business from FY23E onwards.
- Expect sales volume compound annual growth rate (CAGR) of 15.2% during FY21-23E.
- Debt levels to peak out in FY22E; The company aims to become debt-free in three years thereafter.
Buy With A Target Price of Rs. 1,130
ICICI Direct has said in a report that "Long operational history, brand equity and cost efficiency has helped the company to raise debt at competitive rates. Post completion of major CAPEX, debt levels would peak out while growth accelerate with a revenue CAGR of 17.2%. Hence, maintain BUY rating. We value Ramco at Rs 1,130 i.e.17x FY23E EV/EBITDA."
The stock has been picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.