REPORTS SEQUENTIAL IMPROVEMENT IN OPERATIONAL PERFORMANCE - RAMCO CEMENT LATEST QUARTERLY UPDATE

Ramco Cements – Q3FY23 First Cut

(CMP: Rs 697; MCap: Rs 16,470 crore)

Q3FY23 Earnings Summary

Revenues came in at Rs2011.6 crore (up 29.9% YoY, 12.1% QoQ), that was higher than our estimates (Rs1943.0 crore) largely due to better realizations.

Sales volume was up 18.6% YoY, 7.9 QoQ to 3.57MT (vs I-direct est: 3.6MT). Realizations were higher by 9.5% YoY, 4.0% QoQ to Rs5635/t that was better than estimates of Rs5397/t

Fuel cost declined sequentially by 2.3% to Rs1967/t. However, it still remained higher by 42.6% on YoY basis. The blended fuel consumption per ton is equivalent to $191 vs $149 last year

Imposition of busy season surcharge by railway from 1st Oct led to 11% QoQ jump in the freight cost to Rs1359/t. It was up by 6.9% on YoY basis

Despite QoQ jump in the freight cost, total cost of production broadly remained flat QoQ while it was up by 10.6% to Rs4842 per tonne on YoY basis. With better realizations, company managed to mitigate the margin pressure with sequential margin expansion of 361bps to 14.1%. On YoY basis, it was down by 83 bps only

Absolute EBITDA/tonne improved that came in at Rs793/tonne (vs I-direct estimate Rs 753/tonne). It was up 3.4% YoY, 39.8% QoQ

However, net profits were lower by 20.5% YoY to Rs 65.6 crore (marginally lower than I-direct estimate Rs 72.1 crore) on higher interest & depreciation costs due to commissioning of Jayanthipuram Line III and Kurnool

Updates on ongoing projects

The 5 MW of WHRS in Kolimigundla was commissioned in Nov-22. Another 3 MW will be commissioned in Feb-23 and balance 4 MW of WHRS will be commissioned in May-23 (vs earlier target of Mar-23). TPP of 18 MW and railway siding will be commissioned in 2023-24

The modernization of RR Nagar plant will be commissioned before Mar-23. After completion of this project, the clinker capacity at RR Nagar will increase from 1.09 MTPA to 1.44 MTPA. With regard to expansion of capacity of its dry mix products, one unit in Tamil Nadu began operation in Dec-22 and another unit will be commissioned in Feb-23. The remaining two units in AP & Orissa will be commissioned during 2023-24

During the Q3, the company has incurred Rs390 crore towards capex, including for the above-mentioned ongoing capacity expansion programme. The net debt for the company as on 31-12-2022 is Rs4,556 crore, out of which Rs564 crore is short-term loan. The average cost of interest-bearing borrowings for the Q3 of CV is increased to 7.13% from 5.44% in the Q3 of PY

View: Current demand for cement is healthy in IHB as well as in infra segments. The medium-term outlook is also encouraging in view of promising factors like good monsoon, water levels in reservoirs, focus on infra spend by the Government and upcoming elections. In addition, the current CIF spot prices of pet coke are ranging from $175 to $180 vs average fuel cost of $191 for Q3. This would help in further margin expansion going forward.

Impact: Positive