Top Cement Stock Available At 48% Lower From 52-Week High Price, Buy Stock Now: Top Brokerage

Ramco Cements, a leading cement manufacturer in India has strengthened its focus on the sales of premium products. In the last one year, the share of premium products has grown steadily and stood at 24% in Q1FY23 against 19% in Q1FY22. Top brokerage firm KR Choksey has suggested investors to buy the stocks of Ramco Cements Ltd. for high returns. The stock is now available at around 48% lower price on NSE than its 52-week high price.

Stock To Buy: Target Price

The Current Market Price (CMP) of Ramco Cements Ltd. is around Rs. 755. KR Choksey has estimated a Target Price for the stock at Rs. 843. This stock has the potential to give a 13.5% return, in the upcoming 1 year. It is a mid-cap stock with a market capitalization of around Rs. 17,419 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 755
Target Price	Rs. 843
Potential 1 year return	13.50%
52 week high share price	Rs. 1,119.60
52 week low share price	Rs. 575.65

Capacity expansion

The company is on track with its expansion plans and has recently commissioned its fifth integrated cement plant at Kurnool with a clinker capacity of 2.25 mtpa. The modernization of the RR Nagar plant along with the lime-stone beneficiation plant will get commissioned during March 23. Ramco also aims to expand the capacity of its dry mix products in Tamil Nadu, Orissa and Andhra Pradesh to produce high-value premium products viz. water proofing, repair products, and flooring screeds including liquid products besides other regular dry mix products.

Rising fuel price: impacts on margin profile

For the last few quarters, Ramco has faced downward pressure on its margins due to a sharp rise in the input cost, especially power and fuel and logistics costs. Ramco's EBITDA margin stood at 26.6%, 14.7%, 17.2% and 17.0% respectively for Q2F22, Q3FY22, Q4FY22 and Q1FY23. With crude prices now correcting significantly from its peak along with correction in pet coke and coal prices, Ramco is expected to improve its margin profile in the coming quarters.

Stock Valuation

According to KR Choksey, "At the current market price of Rs. 755, the stock trades at 15.0x/11.9x its FY23E/FY24E EV/EBITDA. We apply an EV/EBITDA multiple of 13.4x to FY24E EBITDA, which yields a target price of Rs. 843 per share, giving an upside of 13.5% over the CMP. Accordingly, we recommend a buy rating on the shares of Ramco Cements. We believe a higher share of premium products will boost its revenue in the subsequent quarters."

Company Portfolio

Ramco Cements Ltd. is one of the prominent cement manufacturers in India with a total installed capacity of 21 mtpa. The company has five integrated cement units, six grinding units, one RMC plant, one dry mortar plant and wind farm division.

Disclaimer

The above stock was picked from the brokerage report of KR Choksey. 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.