ICICI Direct Places Buy On Two Cement Sector Stocks, Sees Potential Gains Up To 21%

ICICI Direct places Buy on two stocks from Cements Sector for decent returns. These two stocks are Ramco Cements Ltd. and Star Cement Ltd. Ramco Cements is a midcap stock having a market capitalisation of Rs. 20,911.88 crore, while Star Cement is a small-cap stock with a market capitalisation of Rs. 5,042.15 crore. Check below:

1. Ramco Cements Ltd.

ICICI Direct upgrades the rating on the stock from Hold to Buy with a target price of Rs. 980 apiece. If you buy the stock at the current market price, it can fetch a decent return of 11%.

Meanwhile, the share price of Ramco Cement last traded at Rs. 883.05/share, down 0.15% compared to its previous close. Its 52 week high is Rs. 893.60/share and 52 week low is Rs. 575.65/shares, respectively.

The stock jumped 11.92% in 1 week, and 21.3% in 1 month, respectively. It gave 33.95% positive return in 1 year, 54.61% in 3 years and 11.55% in 5 years, respectively.

Brokerage's Comments

According to ICICI Direct, The stock price of Ramco Cement in the recent times has been volatile owing to concerns regarding high debt levels (debt/EBITDA: 3.8x) and increased capex over the past two years (Rs. 3600+ crore in FY22-23). With capex intensity reducing, going forward (FY24 guidance: Rs. 892 crore) and the company generating higher OCF, we expect b/s deleveraging to pick up pace in FY24-25E. "With key growth and margin levers intact, we believe in the medium-term company's key focus area will be on consolidating the recently expanded capacities. We upgrade our rating from HOLD to BUY on the stock. We value Ramco at Rs. 980 i.e. ~12x FY25E EV/EBITDA," the brokerage has said.

2. Star Cement Ltd.

The brokerage firm reiterates Buy on the stock with a Target Price of Rs. 150/share. The brokerage sees a decent return of 21%, considering the given target price.

Meanwhile, the share price of Shree Cements last traded at Rs. 23,990.80/share, down 3.13% compared to the previous close. Its 52 week high is Rs. 27,049/share and 52 week low is Rs. 17,865.20/share, respectively.

The stock declined 1.69% in 1 week and surged 12.03% in 1 month. It gave 37.77% in 1 year, and 74.72% in 3 years, respectively. It declined 6.41% in 5 years.

Brokerage's Comments

According to ICICI Direct, The North Eastern Region has favourable demand supply dynamics with overall ~14 MT of grinding capacity and 12 MT of cement consumption. Star has embarked on a journey to further strengthen its market share in NER to 30%+ by FY26E by more than doubling its capacity. It continues to have a robust b/s, debt free status and cash & investment worth Rs. 480 crore. Star trades at reasonable valuations of 8x FY25E EV/EBITDA (US$70/t). "We remain positive and reiterate our BUY rating on the stock. We value Star at Rs. 150 i.e. ~9x FY25E EV/EBITDA," the brokerage has said.

Disclaimer - The stocks have been picked from the brokerage reports of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.