The Ramco Cements | Fundamental Analysis

By | 27th March 2018

CMP: 800.45          Target Price: 918.00          Upside:15%

Reasons to Invest:

  • The Ramco Cements Limited, formerly Madras Cements Limited, manufactures cement, ready-mix concrete and dry mortar products. The Company operates in two segments: Cement and Power generation from Windmills. The Ramco Cements Limited is also engaged in the sale of surplus electricity generated from its windmills and thermal power plants.
  • The Ramco Cements Limited is planning to increase its capacity through satellite grinding plants and this would enable the company to increase its presence in Andhra Pradesh, Odisha and West Bengal. The plans are to increase the capacity to 7.1 mtpa from 4 mtpa. The expansion will be taken up at Vizag, Kolaghat and with a new grinding unit in Odisha. The proposed expansion will be completed in 18 months and the cost will be met through internal accruals and borrowings. The aggregate estimated cost of expansion is Rs 1,095 crore.
  • With the increased spending by the government on infrastructure and affordable housing scheme, it is expected to propel the growth for the cement demand in future. The Ramco Cements Limited is among the best plays in the southern cement market with its high operating margin and signs of volume pick-up.
  • The Ramco Cements Limited believes in continuous upgradation of technology to improve the quality of its production and productivity to achieve newer and better products for its clients.
  • Going forward, The Ramco Cements Limited believes that the volume growth is expected to sustain due to Government’s focus on low-cost “Housing for All” scheme, higher infrastructure spends in AP &Telangana, off-take in Government projects of irrigation coupled with the development of smart cities and affordable housing sector demand in East.
    The company has been reducing debt. In FY17, its debt fell to Rs 1437.22 crore from Rs 2140.81 crore in FY16. The Company manages its capital structure and makes adjustments in the light of changes in economic conditions and the requirements of the financial covenants. You might like this : Book Review: Brightest Investment Minds

Valuation

Going forward, it is expected that The Ramco Cements Limited is well placed with surplus capacity to tap the robust demand growth potential in its core market coupled with changing the geographical mix. Thus, it is expected that the company would see good growth going forward and the stock will see a price target of Rs.918 in 8 to 10 months time frame on a two-year average P/E of 27.14x and FY19 (E) earnings of Rs.33.82. You may like this: Get your investment process back on track in a new financial year

Face Value Rs.: 1.00
52 Week High/Low 839.95/570.00
M.Cap Rs. in Cr.: 18856.74
EPS Rs.: 25.92
P/E Ratio (times) 30.88
P/B Ratio (times) 4.95
Dividend Yield (%) 0.38
Stock Exchange BSE

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Disclaimer:

My descriptions, videos, presentations are only for educational and information purposes and under no circumstances should be used for making investment decisions. I cannot guarantee the accuracy of any information provided.
The stocks picks are based on my own research and personal views and sometimes are from newspapers, tv channel program, magazines, etc. No part of compensation is or will be directly or indirectly related to the views and recommendations of this research. I have not served as an officer director or employee of company and have not been engaged in market – making activity of the company covered in the research report. Consult qualified financial advisor before making any investment decision.

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