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Indian Express
6 days ago
- Business
- Indian Express
Ramco Cements: A cyclical turnaround in the making?
Cement prices have remained flat for a decade, with South India bearing the brunt. However, with consolidation among major players and early signs of price recovery, Ramco Cements, which is trading near its 2017 peaks, could be poised for a turnaround. Owing to excess capacity, per bag prices of cement have increased by only 1.7% CAGR over the last 10 years, well below the average inflation rate over the period. Nowhere has this impact been felt more than in South India, where excess capacity has been the highest among regions. But the silver lining is that prices are expected to inch up owing to the consolidation drive by Ultratech Cement and Ambuja Cement. If there is recovery in pricing, one major player in the southern region – The Ramco Cements – could be a major beneficiary. While the stock is barely above the peak price it hit in 2017 of Rs 866 per share, there are enough reasons to dig deeper into the company. A climb and then a dip in sales and volumes From FY21 to FY24, Ramco Cements more than doubled cement volumes — from 8.3 million metric tonnes (MMT) to 18.0 MMT — driving revenue from Rs 5,303 crore to Rs 9,483 crore. However, despite surging volumes, EBITDA margins slid from ~29.8 percent in FY21 to ~15 percent in FY22 as global coal, petcoke, and diesel prices rose faster than selling prices in South India. By FY23, improving energy costs helped margins recover to around ~15 percent, and revenue climbed to Rs 8,172 crore. In FY24, volumes hit 18 MMT and revenue reached Rs 9,483 crore, with EBITDA margins at ~16 percent. Yet, in FY25, volumes plateaued near 18.2 MMT and revenue dipped 9 percent to Rs 8,554 crore, as renewed input inflation outpaced modest price hikes. Ramco's aggressive capacity additions fuelled top-line growth, but fluctuating energy costs and competitive pricing kept margins under pressure throughout FY21-25. At 14%, Ramco Cements' EBITDA margins are where they were nearly 10 years ago in 2014. With expected improvement in pricing discipline, margins should inch up from here. Profits and cash flow: Volatile but resilient While sales has been in an uptrend, owing to declining EBITDA margins (29-14%) and surging interest payments (Rs 88 crore-459 crore), profit after tax (PAT) has shrunk significantly from Rs 784 crore to Rs 270 crore (after exceptional items – other income of Rs 199 crore). But cash flows tell a different story. Cash flow from operations (CFO) remains strong. Though much of the CFO is used for debt servicing and capex, it reflects operational health. Hence, EV/EBITDA, not P/E, is a more appropriate valuation metric. Debt and interest coverage: A tight corner In a bid to maintain market share, Ramco has grown capacities aggressively, which it funded through debt. When margins were healthy, interest was a small blip (FY21, FY22). But as profitability dropped, interest coverage (EBITDA ÷ interest expense) tumbled from 14x in FY2021-22 to 3x in FY2024-25. Put simply, that means Ramco now has to spend a much larger share of its profit on interest. Management has sold non-core land assets (about Rs 455 crore realised so far, with another Rs 545 crore expected soon) to reduce debt and ease pressure. But until EBITDA climbs back up, investors must be watchful of the coverage ratio. Ramco financed its expansion with debt. As margins shrank, interest coverage dropped from 14x in FY22 to 3x in FY25 — a clear sign of stress. Understanding Ramco's business and the cement cycle How Ramco makes money: The basics Ramco sells bagged cement (OPC, blended cements) to builders, contractors, and cement distributors. It also sells ready-mix concrete and dry mortar (a small part of revenue). Its core markets are Tamil Nadu, Kerala, Andhra Pradesh, Karnataka, Odisha, and West Bengal. Ramco's advantage historically comes from: Scale & Integration: 11 plants, 22 MTPA capacity, captive limestone mines — this helps control costs. Green Power: Over 200 MW of wind farms + 43 MW waste-heat recovery — lower electricity costs. Distribution Network: 9,400+ dealers, 23,500+ sub-dealers — gets cement to tens of thousands of customers in villages, towns, and cities. Industry consolidation and competition After a slowdown in 2018-19, the Indian cement industry has seen consolidation. Giants like UltraTech and Ambuja have snapped up smaller players, especially in South India. In FY24 and FY25, Ramco had to keep plants running at high capacity to spread fixed costs, even when demand was weak. Meanwhile, pricing was lacklustre, i.e., supply outpaced demand. From FY21 through early FY2024, South Indian cement prices languished near multi-year lows. Ramco's response has been to expand in other regions, cut costs, and bank on its brand. They boosted green power use from 22% of total energy in FY22-23 to a planned 34% in FY2023-24. They built rail sidings to ditch diesel trucks. They also sold off non-core real estate to pay down debt. Demand outlook: Signs of a turnaround After years of weak pricing, South Indian cement prices finally began to stabilise in early FY25-26. Drivers included a combination of modest demand recovery (government infrastructure projects, rural housing) and relatively slower capacity additions in that region. South India cement prices had seen an uptick in April 2024, compared to April 2023, however, the price hikes did not sustain through the rest of the year. According to Nuvama Research, 'In May 2025, cement prices saw an increase across all regions, with the southern region leading the trend, followed by the eastern, central, and western markets. This price hike was mainly driven by an improvement in demand.' Given that the South Indian cement market is significantly consolidated compared to a year ago, the expectation is that these hikes will sustain themselves. And because South accounts for ~75% of Ramco's volumes, that would directly lift revenue and profitability. That's why, despite a grim FY25, FY26 could be much better. With most expansion behind them (no massive capex outlays planned beyond maintenance), Ramco can use existing capacity to serve recovering demand, so each incremental tonne sold adds right to the bottom line. A significant cost pressure has emerged with the introduction of a new Mineral Bearing Land Tax of Rs 160 per tonne of limestone in Tamil Nadu, effective from April 4, 2025. This rate is reported as the highest in India (e.g., Jharkhand levies Rs 40 per tonne). This tax is expected to increase the cost of cement production in the state by approximately Rs 200 per tonne. Given Ramco Cements' strong footprint in South India, this tax poses a direct and substantial threat to production costs and profitability. The cement industry has appealed to the Tamil Nadu government for relief. The outcome of this request will be critical — an unfavorable decision could result in a structural cost hike for Ramco. Valuation: Is Ramco a good buy now? At Rs 988 per share, Ramco's trailing P/E is roughly 85x earnings. That may sound high, but cement stocks often trade at high P/Es because profits are low. For comparison: UltraTech Cement: 54 P/E Ambuja Cements: 33 P/E Shree Cement: 94X P/E Ramco: 85X P/E Ramco's P/E at 85X reflects a cyclical trough in earnings (not a premium growth multiple). Thus P/E is usually not a great valuation metric for 'cyclical stocks'. P/B comparison: Cheaper on book value P/B is a better metric for comparing valuations for cement companies. Let's take a look : UltraTech and Shree trade at 4.5x and above Ambuja Cement trades at 2.5x book value Ramco trades at ~3.1× book value That tells us that Ramco's assets (plants, land, mines) are valued more cheaply relative to some of the larger peers. Based on its 10-year historical media value of 3.5x, Ramco trades at a reasonable discount. The bottom line: Betting on a cycle turn Ramco is a cyclical bet. You're wagering that the Indian cement cycle is on the upswing—volumes rising, prices firming, costs stabilizing. If that plays out, the stock today is a 'value' (relative to peers) at mid-teens EV/EBITDA and 2.7x P/B. But if your horizon is a few quarters, wait for clearer signals of demand and pricing. If you can hold for more than 12-18 months, Ramco's cyclical upswing could lead to far better performance by the company. Note: We have relied on data from and throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He has also worked at an AIF, focusing on small and mid-cap opportunities. Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
Mint
23-05-2025
- Business
- Mint
A catalyst for Ramco Cements stock is set to play out. But is that enough?
South India-focused The Ramco Cements Ltd had a tough March quarter (Q4FY25). Cement sales volume declined more than expected by around 4% year-on-year to 5.29 million tonnes. The region has seen an increased pace of consolidation lately, and elevated competition for market share gains has kept cement prices under pressure. In fact, according to Nomura Global Markets Research, Ramco is the only major cement producer in its coverage to report a decline in year-on-year volumes in Q4FY25; Ramco's decline was as against 5% year-on-year growth for the industry. 'Blended realization (at ₹4,522 per tonne) came in 4% below our estimate and was flat quarter-on-quarter, as against a 3% improvement quarter-on-quarter for the industry," added the Nomura report. The Ramco management said that at the start of FY26, price hikes of ₹30-35/bag in the trade segment and ₹60-70 per bag in the non-trade segment were implemented in the south. If these sustain, there is a scope of Ramco's realisations to mend. Plus, increased thrust on green energy should help the company manage operating costs better. Here, it is worth noting that the government of Tamil Nadu imposed a new levy – the mineral bearing land tax of Rs160 per tonne of limestone with effect from 4 April 2025. The management expects this to result in additional cost implication of around Rs200 per tonne of cement produced in Tamil Nadu, where Ramco has significant exposure. Cement manufacturers in Tamil Nadu, through industry association, have represented to the government seeking relief, which is under consideration, it added. Also Read: UltraTech Cement set for higher volumes, tighter grip on costs Reducing debt A company-specific monitorable for Ramco is the pace of debt reduction. It is comforting that Ramco is deleveraging by paring non-core assets. Net debt declined sequentially to ₹4,481 crore as of March 2025, aided by proceeds from the disposal of non-core assets. The company has monetized ₹460 crore so far out of its targeted ₹1,000 crore. The management said that it is on track to achieve the target of monetizing non-core assets before July as committed earlier. It expects the key net debt-to-Ebitda ratio to ease to 2.50-2.75x in FY26 from 3.51x in FY25. 'We believe that recent price hikes and ongoing balance sheet deleveraging are key near-term catalysts that could support the stocks' performance," said Motilal Oswal Financial Services Ltd report dated 23 May. However, sustained profitability, disciplined capital allocation, and meaningful market share gains will be critical structural drivers for a more durable re-rating, it added. In this calendar year so far, the Ramco shares have given mere 3% returns. While efforts to reduce debt are encouraging, Ramco's capital expenditure intensity is likely to remain elevated as it adds more capacity. In FY25 Ramco's capex stood at ₹1,024 crore and the management guided for ₹1,200 crore capex for FY26. Ramco is expanding its clinker and grinding capacity by 3.2mtpa and 1.5mtpa respectively at Kolimigundla Line 2 in Andhra Pradesh. Mtpa is million tonnes per annum. It also plans debottlenecking and adding grinding units at existing facilities with minimal capital expenditure. Ramco aims to reach its capacity target of 30 mtpa by March 2026 from 24 mtpa currently. An Antique Stock Broking report dated 23 March points out that Ramco's net debt is likely to remain greater than ₹4,000 crore over FY25–27E even after factoring in the sale of non-core assets worth ₹1,000 crore. 'The Ramco Cements currently trades at around 11.9x FY27 estimated EV/Ebitda and $105 EV/ton. The stock may continue to trade below its historical valuation given lower than historical profitability and higher leverage," added the Antique report. EV is enterprise value. Also Read | Best cement stocks 2025: Demand revival, pricing trends and growth prospects
Yahoo
22-05-2025
- Business
- Yahoo
Ramco Cements posts slump in profit, forecasts higher south India prices
(Reuters) -Ramco Cements said on Thursday it sees improving cement prices in its key south India market, after reporting a fourth-quarter profit slump hurt by lackluster prices and lower volumes in a seasonally strong period. Adjusted net profit from the cement business sank over 76% to 384.3 million rupees ($4.5 million) in the quarter ended March 31. The company registered a one-time gain of 108.3 million rupees, tied to sale of surplus lands and investments. "In southern region, during the first two months of FY26, the average cement prices have improved... the company believes the prices would sustain amid rising pace of cement capacity additions (in the region)," it said. South India, which gives Ramco three-fourths of its total volumes, has lagged other regions of the country in terms of pricing growth for many quarters but is now climbing out of that lull, Jefferies said earlier this month. That is set to benefit companies like Ramco and Dalmia Bharat - which are heavily-focussed in the south - and also other big players like UltraTech and Ambuja who have struck back-to-back capacity expansion deals in the market. Ramco said its sales volumes fell 4% in the reported quarter - usually seasonally strong as favorable weather spurs construction activities and drives cement demand. Meanwhile, average all-India cement prices were also 2% lower on-year for the reported quarter, Ambit Capital's data showed. That pushed revenues down by over 10%, much bigger than the 0.4% fall estimated by analysts on an average. Ramco also said that Tamil Nadu state's recent levy on mining limestone - from which cement is made - would increase the per ton cost of production by 200 rupees. The levy "is the highest in the country... the cement manufacturers in Tamil Nadu, through industry association, have represented to the government seeking relief, which is under consideration," the company said. ($1 = 85.9750 Indian rupees) Sign in to access your portfolio
Reuters
06-02-2025
- Business
- Reuters
India's Ramco Cements posts adjusted profit slump as low prices bite
Feb 6 (Reuters) - India's Ramco Cements ( opens new tab on Thursday posted a 97% slump in third-quarter adjusted profit, hurt by a drop in prices of the key construction material. Profit before exceptional items and tax for the company's cement business fell to 43.5 million rupees ($496,774) during the October-to-December period from 1.35 billion rupees a year earlier. The company reported a one-time gain of 3.29 billion rupees from the sale of its surplus land and investments, it said, opens new tab. Revenue from the cement business fell 6% on-year to 19.77 billion rupees, below analysts' average expectation of 20.19 billion rupees, according to data compiled by LSEG. For further earnings highlights, click KEY CONTEXT Cement prices have been falling for most of last year, but showed signs of recovery in the reported quarter. Still, at the end of the December-quarter - a seasonally weak one as the pace of construction activity slackens - the average pan-India cement price was 11% lower on-year. In south India, Ramco's key market, the price drop was even higher at 14%, it said, opens new tab, as increased dealmaking in the region spurred competition. Cement makers have reported a mixed set of earnings for the December quarter. Market leader UltraTech ( opens new tab and its closest rivals, the Adani group-owned Ambuja ( opens new tab and ACC ( opens new tab, have benefitted as their acquisition sprees have helped bolster volumes. However, smaller peers such as Shree Cement ( opens new tab and Dalmia Bharat ( opens new tab have been hit by low prices. PEER COMPARISON (WITH OTHER SOUTH REGION-FOCUSSED CEMENT MAKERS) * The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell ** The ratio of the stock's last close to analysts' mean price target; a ratio above 1 means the stock is trading above the PT OCTOBER-DECEMBER STOCK PERFORMANCE -- All data from LSEG -- $1 = 87.5650 Indian rupees
