The September quarter results of Ramco Cements disappointed investors as the stock remained under pressure in trade on November 10.
Ramco Cements reported its Q2FY23 earnings on November 9 during market hours, following which the stock ended nearly 5% lower on BSE. The next day, the stock fell 8.16% to ₹646.65.
In a BSE filing on November 9, the company reported a drastic fall of almost 98% in its net standalone profit for the September quarter of the current financial year (Q2FY23) at ₹11.47 crore against ₹517.08 crore in the same quarter last year.
Net revenue for the September quarter rose 19% year-on-year (YoY) to ₹1,793 crore against ₹1,501 crore during the same quarter last year.
EBIDTA for Q2FY23 came at ₹193 crore against ₹402 crore in Q2FY22, down 52%, mainly due to a sharp increase in fuel prices and weak cement prices.
The company said it could not pass on the full cost increase arising out of the sharp fuel price hike, to its customers.
The stock has been under pressure in the last one year. It hit its 52-week high of ₹1,087.05 on BSE on November 10, 2021, and as of November 9, 2022, it is down more than 35% from that level.
Brokerages remain unimpressed
Brokerage firm Kotak Institutional Equities (Kotak Securities) maintained a sell call on the stock with a target price of ₹550, lower than the earlier target price of ₹575.
"We have cut our EBITDA estimates by 6%, 3% and 3% for FY2023, FY24 and FY25E, respectively, on lower margins, partly offset by higher volumes. Our fair value is revised to ₹550 per share ( ₹575 earlier) on lower earnings and rollover to December 2024E at 8 times EV/EBITDA (from 8.5 times)," said Kotak.
Brokerage firm HDFC Securities has downgraded the stock to a 'reduce' from an 'add', pegging the target price of ₹640.
"We downgrade The Ramco Cements to a 'reduce' from an 'add' earlier, with a lower target price of ₹640 per share (12 times Sep-24E EBITDA). We are cautious regarding its high fuel cost outlook in the second half of FY23 and gearing in the medium term as the company has increased its FY23 and FY24 capex guidance by 50%," said HDFC Securities.
"Factoring in the weak margin from Q2, and elevated energy cost outlook, we cut our FY23E, FY24E and FY25E EBITDA estimates by 11, 5 and 7%, respectively. We also reduce our valuation multiple to 12 times from 13 times earlier," said HDFC Securities.
ICICI Securities has an 'add' call on the stock but cut the target price to ₹785 from ₹830.
"We believe the company's capex guidance is a bit aggressive, given the current leverage position (FY24 net debt to EBITDA is more than 2.5 times) and the operating cashflow Ramco Cements may generate over the next two years (nearly ₹19bn)," said ICICI Securities.
"Factoring in higher-than-expected fuel costs, we cut our FY23-24E EBITDA by 1.5-17%. We also reduce our target price for the stock to ₹785 (earlier: ₹830) based on 12.5 times Sep’24E EV/E (earlier 13 times) on quarterly rollover," said ICICI Securities.
According to a MintGenie poll, an average of 32 analysts have a ‘hold’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of broking firms. These do not represent the views of MintGenie.
