The Ramco Cements volume growth offsets near-term cost pressure amid capacity expansion

Investment View and Rating

Motilal Oswal Financial Services Ltd., in its August 7, 2026 results update, retains its Neutral rating on The Ramco Cements with a target price of Rs 900, compared with the CMP of Rs 934. The broker says operating performance in Q1 FY27 was above expectations, supported by stronger cement volumes and better-than-expected realisation per tonne.

However, profitability is expected to remain under pressure in the near term because of continued cost inflation. Capacity expansion execution and volume growth remain key monitorables.

Q1 FY27 Financial Performance

TRCL reported Q1 FY27 revenue of Rs 2,270 crore, up about 10 per cent year-on-year and approximately 5 per cent above Motilal Oswal's estimate. EBITDA declined about 23 per cent year-on-year to Rs 310 crore, although it was around 8 per cent ahead of the broker's estimate. Adjusted PAT fell 74 per cent year-on-year to Rs 22 crore, but was 2.1 times Motilal Oswal's estimate.

Cement sales volume increased about 12 per cent year-on-year to 4.62 million tonnes, around 4 per cent above estimates, despite demand disruption in key markets due to state elections. Realisation was Rs 4,917 per tonne, down about 2 per cent year-on-year but up 5 per cent quarter-on-quarter and approximately 1 per cent above the broker's estimate.

Margin Pressure and Cost Trends

Margin performance remained weak. Operating margin contracted 5.7 percentage points year-on-year to about 14 per cent, versus Motilal Oswal's estimate of approximately 13 per cent. EBITDA per tonne fell about 31 per cent year-on-year to Rs 666, compared with the broker's estimate of Rs 639.

Operating cost per tonne increased about 5 per cent year-on-year, broadly in line with estimates. Variable cost, other expenses and freight cost per tonne rose 6 per cent, 8 per cent and 2 per cent respectively, while employee cost per tonne declined about 5 per cent. Depreciation increased about 4 per cent year-on-year, interest cost declined 9 per cent and other income rose about 11 per cent.

Operating Performance and Management Commentary

Management reported cement capacity utilisation of about 70 per cent in Q1 FY27, compared with about 68 per cent in Q1 FY26 and approximately 83 per cent in Q4 FY26. Cement volume was 4.48 million tonnes, while construction chemical volume rose 13 per cent year-on-year to 0.135 million tonnes.

• The South and East accounted for about 73 per cent and 27 per cent of cement volume respectively.
• Trade prices increased approximately 5 per cent in the South and 6 per cent in the East from March 2026-end levels.
• Green energy contributed 37 per cent of power requirements.
• Blended coal consumption cost was US$127 per tonne, or Rs 1.85 per kcal.
• Average lead distance was 264 km.
• Mineral-bearing land tax in Tamil Nadu added Rs 84 per tonne of cement cost in Q1 FY27, equivalent to Rs 39 crore at the company level.

Capacity Expansion and Capital Expenditure

TRCL plans to increase cement capacity to about 31 million tonnes per annum from 26.4 million tonnes per annum during FY27 through debottlenecking of integrated units and brownfield expansion at Kolimigundala, Andhra Pradesh.

A 15 MW waste-heat recovery system and Kiln Line-2 at Kolimigundala are expected to be commissioned in FY27. Management has guided for FY27 capex of Rs 800 crore, after spending Rs 180 crore in Q1 FY27. For the Karnataka greenfield project, approximately 60 per cent of mining land and 13 per cent of factory land had been acquired.

Balance Sheet and Asset Monetisation

Net debt was Rs 3,940 crore at June 2026, compared with Rs 3,660 crore at March 2026, while gross debt stood at Rs 4,010 crore. The cost of debt declined to 7.03 per cent from 7.64 per cent in Q1 FY26.

TRCL has monetised Rs 1,100 crore of non-core assets over the past two years and continues to pursue the sale of identified assets worth about Rs 150 crore. Of this amount, Rs 24 crore was realised in Q1 FY27.

Earnings Outlook and Valuation

Motilal Oswal maintains its FY27E and FY28E EBITDA estimates. The broker forecasts FY26-FY28 revenue, EBITDA and PAT compound annual growth of about 9 per cent, 13 per cent and 51 per cent respectively, with volume compound annual growth of about 7 per cent.

Motilal Oswal expects net debt to decline to Rs 2,700 crore by FY28E from Rs 3,630 crore in FY26, supported by disciplined capex and non-core asset monetisation. Net debt-to-EBITDA is estimated to decline to 1.5 times in FY28E from 2.5 times in FY26.

The broker views the stock as fairly valued at 17 times FY27E and 13 times FY28E EV/EBITDA. It values TRCL at 13 times FY28E EV/EBITDA to derive the target price of Rs 900 and maintains its Neutral rating.