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Ramco Cements rises 7%, fueled by H2 outlook

Stocks
2 min Read Nov 12, 2024
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Shares of Ramco Cements surged 7% on the BSE during intra-day trading on Tuesday, reaching a nine-month high of ₹927. This rally comes amid strong expectations of improved earnings in the second half of the financial year 2024-25 (H2FY25). Investors looking to invest in stocks like Ramco Cements are hoping for recovery and growth, as the stock has reached its highest level since February 2024.

Challenges in Q2FY25 results

Ramco Cements reported a 75% year-on-year (Y-o-Y) drop in profits for the July-September quarter (Q2FY25), with earnings falling to ₹26 crore. The decline was primarily due to subdued demand during the monsoon season and a reduction in cement prices. The company’s revenue dropped 12.5% Y-o-Y to ₹2,038 crore, attributed to a 10% Y-o-Y fall in cement prices and a 3% decline in volume. Weak demand during the monsoon contributed to the volume decline.

EBITDA, or the earnings before interest, tax, depreciation, and amortisation per tonne, fell 20.5% Y-o-Y (down 4.7% sequentially) to ₹700, driven by lower cement realisations. Capacity utilisation also dropped from 82% in Q2FY24 to 75% in Q2FY25 due to new capacities created in Q2FY25 and the commissioning of additional facilities in Orissa.

Debt reduction and asset sales

Despite challenges, Ramco Cements took steps to strengthen its balance sheet. In October 2024, the company repaid ₹326 crore of its debt using proceeds from the sale of non-core assets. It has also entered into an agreement to sell lands worth ₹74 crore, expected to be realised in Q3FY25. The company continues to make progress on other asset sales and is on track to meet its earlier targets.

Analysts predict recovery in H2FY25

Industry analysts expect Ramco’s operational performance to improve in the second half of FY25, with a demand pick-up in the South and East regions, alongside rising prices and better operational efficiencies. The company is working to expand its total cement capacity to 30 million tonnes per annum (mtpa) by FY26 from 24 mtpa at present, which is expected to drive volume growth in the medium to long term.

Key takeaways

  1. Ramco Cements stock surged 7% to ₹927, reaching a nine-month high.

  2. Q2FY25 results showed a 75% Y-o-Y fall in profits, driven by lower prices and weak demand.

  3. Debt reduction and asset sales are helping improve the company's financial position.

  4. Analysts expect a recovery in H2FY25 with improved demand and operational efficiencies.

  5. Ramco Cements is expanding capacity and focusing on operational improvements for future growth.