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2025A2026E84,951.095,645.4-22.50-97,130.012,318.517,176.8 2027E106,23032.83107,636.019,883.3 Prateek Kumar * | Equity Analyst91 22 4224 6154 | prateek.kumar@jefferies.comRaghav Malik * | Equity Associate91 22 4224 6316 | rmalik1@jefferies.com The Long View: Ramco CementsInvestment Thesis / Where We DifferRamco Cements is a strong play on southern and eastern India. Thecompany has gained share in its key markets and ranks high on efficiency.Stabilisation of recent/upcoming additions would boost volume growthin FY24. Ramco is focusing on cost savings by heavily investing in WHRand increasing contribution by launching products in the higher-marginpremium segment. Delays in project execution, upward revisions in ongoingcapex across units, and newer projects have weighed on the company'sdeleveraging plans. While the levers for growth are there, an increasedvolume mix from the East, delayed deleveraging, and steep earningsdependence on (highly volatile) price discipline in the South could keepvaluations in check.Base Case,INR930, -8%In our base case, we estimate volume CAGR at8% over FY25-FY27E, and unit EBITDA at Rs935/T for FY27 vs ~Rs680/T in FY25. We expectstrength in rural housing demand to continuealongwith recovery in urban and non-tradesegments. Cement prices, however, are likely tobe volatile in the southern/eastern regions due tosupply overhang and lower visibility on earningsoutlook. We build operating EBITDA CAGR at27% over FY25-FY27E. We value Ramco at 12.5xFY27E EBITDA to arrive at a PT of Rs890.Sustainability MattersTop Material Issue(s):Cement is one of the most widely used materials in construction (housing,infrastructure) and is unlikely to find substitute in near to medium term. Cement production,however, is one of the most vulnerable to long-term climate risks, given the Cement production (andtransportation) is a major source of global CO2inherently hazardous and faces safety issues. ESG/climate impact could broadly be addressed byresponsible fuel sourcing, migration to green sources of power, circularity, water conservation, bettersupply chain mix, and focus on Employee Health & Safety.Company Target(s): 1)Aims to align with SBTi and TCFD by FY25.2)Aims to reduce Scope 3emissions by 15% by FY25 from baseline year of FY20.Qs to Mgmt: 1)How are you targeting to trim down on your carbon emission and achieve the targets?2)How much capex could be required to invest in alternate fuel and Green Power projects?Please see important disclosure information on pages 7 - 12 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. Upside Scenario,INR1200, +19%In our upside scenario, we estimate volumeCAGR at 12% over FY25-FY27E, and unit EBITDAat Rs1000/T for FY27 vs ~Rs680/T for FY25.We expect a sharp recovery in industry demand,supported by strong macro, pent-up demand,higherfarm incomes and pricing discipline.Capacityadditions for Ramco should drivestrong headline growth and industry disciplinedriving margins up. Resultant operating EBITDAshould see an EBITDA CAGR at 40% over FY25-FY27E. We value Ramco at 14x FY27E EBITDA toarrive at an upside PT of Rs1,200.emissions at 7%. Further, manufacturing Industry is Downside Scenario,INR700, -30%In our downside scenario, we estimate volumeCAGR at 4% over FY25-FY27E, and unit EBITDAat Rs780/T for FY27 vs ~Rs680/T for FY25. Weexpect the demand momentum to slow downas pent-up demand is exhausted and furtherdelay in discipline bouncing back. We forecast adecline in utilisation rates, driven by aggressivecapacityadditions by competition to impactpricing. Resultant operating EBITDA should seean EBITDA CAGR at 10% over FY25-FY27E. Wevalue Ramco at 11x FY27E EBITDA to arrive at adownside PT of Rs700.CatalystsNegative•Competition for market share and demanddisappointment are the key pricing risks•Balance sheet is net debt;however,thecompanyplanstoreducecompletion of the current phase of capex•Concentrated exposure to south makes itvulnerable to regional pricing and demandshocksPositive•Among the lowest-cost producers,whichhelps in case of pricing volatility•A key beneficiary of a demand recovery in thesouth debtafter2 Exhibit 2 - 4QFY25 result summary.(INRm)Net salesExpenditureEBITDAOther incomeInterestDepreciationPBTTaxPATEBITDA margin (%)EPS (Rs)Source: Company, JefferiesExhibit 3 - Per ton analysis.(INRm)Volumes (mmt)Raw materialStaff CostPower & FuelFreightOther ExpensesTotal costRealisation/tonEBITDA/tonSource: Company, JefferiesExhibit 4 - Ramco Cements - Key assumptions.(Rsm)Volumes (MT)Volume growth (%)Realisation (INR)Realisation growth (%)Capacity (MT)Utilisation (%)Cement EBITDA/t (INR)Net DebtSource: Company, Jefferies estimatesPlease see important disclosure information on pages 7 - 12 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. Exhibit 5 - Quarterly volume trend.0123456Q1FY16Q2FY16Q3FY16Q4FY16Q1FY17Q2FY17Q3FY17Q4FY17Q1FY18Q2FY18Q3FY18(