Ramco Cements stock plunges 5% as investors book profit on strong Q2 results

India’s Ramco Cements second quarter profit grew nearly nine times to Rs 101 crore as strong housing sales and firm infrastructure spending outpaced higher expenses

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Investors booked profit in shares of The Ramco Cements on November 10, a day after it touched 52-week high threshold (Rs 1,040 apiece on November 9, 2023). The stock slumped 5 percent to day’s low of Rs 970 per share on November 10 after the company posted strong July-September quarter (Q2FY24) results. The S&P BSE Sensex was down 142 points or 0.2 percent to 64,689 levels, as of 10:30 am.

In the past three months, the stock of this South-based cement producer has surged 17 percent as against 1 percent decline in the benchmark Sensex.

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India’s Ramco Cements second quarter profit grew nearly nine times to Rs 101 crore as strong housing sales and firm infrastructure spending outpaced higher expenses. The company’s revenue from operations, too, jumped about 31 percent on-year to Rs 2,300 crore owing to higher input prices and transportation costs.

The management has also guided higher operating margins in the coming quarters, given cement price improvement from October 2023 onwards and fuel prices. In Q2FY24, the company’s profit margins expanded to 18 percent from 11 percent in the year-ago period.

Growth levers in place

Analysts at DAM Captial shared a ‘buy’ rating on The Ramco Cements, with a target price of Rs 1,130 per share, adding that the cement’s price recovery would sustain in the near to medium term. “Over FY23-25, we factor volume/Ebitda compounded annual growth rate (CAGR) of 13 percent/40 percent,” they wrote in a post result-review note.

Global brokerage firm Macquarie was ‘neutral’ on the counter, sharing a target price of Rs 1,000 apiece for The Ramco Cements. They said that the company’s focus is on growth that would eventually help improve their balance sheet.

On the other hand, InCred Equities shared a ‘hold’ call for The Ramco Cements with a target price of Rs 1,060 apiece. “We raise FY24-25E Ebitda estimates by 4 percent due to strong volume and lower anticipated costs,” analysts added.

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Heavy debt-book a concern

Meanwhile, analysts at Motilal Oswal said that the company’s net debt increased in first half of fiscal year (H1FY24) due to higher capital expenditure and decline in profitability. This, therefore, could restrict volume growth in FY25/26E.

“The company’s continued increase in leverage is a key concern, and we expect debt to remain elevated as the company will need to increase clinker capacities going forward. We value The Ramco Cements at 13x Sep’25E EV/EBITDA (v/s Mar’25E earlier) and maintain our ‘neutral’ rating with a revised target price of Rs 1,045 per share,” the brokerage firm cited.

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