Ramco Cements is expected to benefit from the push of the Kerala and Tamil Nadu state government towards infrastructure and housing sectors as highlighted in their respective state budget 2021-22. In Kerala, Construction of three industrial corridors (Rs 50000 cr investment) will begin in 2021-22. Ramco Cements share price today is Rs 972, up Rs 9 0r 1%.

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For property transactions, the stamp duty will be reduced from 8% to 4% and the registration fee will be reduced from 2% to 1%. A policy to encourage the eco-friendly construction of buildings will be formulated which include incentives like a reduction of 20% in local building tax, 50% reduction in one-time building tax, and 1% reduction in stamp duty during the transaction.

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Apart from that there is increased expenditure on transport, Water Supply, Sanitation, Housing and Urban Development, Irrigation and flood control Likewise, Tamil Nadu in the recent interim Budget 2021-22 highlighted that it has granted approval to 62 investment projects worth Rs 39941 cr. It has also seen allocation towards PM Housing scheme (Rs 3700 cr), phase 2 of road development projects (Rs 5171 cr), Chennai-Kanyakumari industrial route project (Rs 6448 cr), Greater Chennai Corporation development projects (Rs 3140 cr).

Further, Ramco Cements is expected to gain from the strong pricing discipline in the southern region since May 2020. As per channel checks, average cement prices in the south are up 9% yoy (down 3.2% mom) in February 2021. The southern region has been able to retain the major portion of the hike, with January February 2021 prices still up by 12.9% as compared to Q4 FY20. As witnessed in Q2 FY21 and Q3 FY21, blended realizations rose 16.8% yoy and 12.7% yoy respectively which aided in 2x yoy rise in EBITDA/tone for the same periods despite weak volume offtake.

During Q4 FY21, Sharekhan expects Ramco cements to benefit from sustained pricing discipline maintained in Q4 FY21 till date leading to maintaining healthy uptick in operational performance. Although the stock is trading near the historical average valuation at an EV/EBITDA of 15.8x/13.9x its FY2022E/FY2023E earnings, Sharekhan believes there is further room for an upside. Hence, Sharekhan maintains Buy rating with a revised price target of Rs 1150.

Ramco Cements Key Risks:

Weak demand and pricing environment in South India would affect profitability