The Ramco Cements capacity expansion targets volume growth and FY28 margin recovery

Investment View and Valuation

ICICI Securities’ August 10, 2026 result update on The Ramco Cements identifies an improving volume-growth outlook, supported by capacity additions, utilisation gains and better demand. However, the broker retains a HOLD rating as profitability is expected to remain under near-term pressure before recovering from H2FY27.

The target price has been revised to Rs 1,060, based on 14.5x FY28E EV/EBITDA. The current market price is Rs 965.

Capacity Footprint and Expansion

The Ramco Cements is primarily a southern-region cement manufacturer with installed capacity of 26.4 million tonnes per annum. Its South-region capacity is 22.5 million tonnes per annum, while the balance 3.9 million tonnes per annum is located in the East.

Volume growth is expected to be supported by 1 million tonnes per annum of de-bottlenecking in Tamil Nadu, followed by 0.7 million tonnes per annum in Andhra Pradesh. The 3 million tonnes per annum Kolimigundla Line 2 brownfield project in Andhra Pradesh is expected to be commissioned by FY27E, taking total capacity to about 31 million tonnes per annum. The company is also pursuing land acquisition for a Karnataka greenfield project to gain South-region market share.

Q1FY27 Operating Performance

In Q1FY27, consolidated operating income increased 9.6 per cent year on year to Rs 2,273.1 crore, supported by 12.1 per cent volume growth. Revenue declined 12.9 per cent sequentially as volume fell 16.9 per cent quarter on quarter. Realisations declined 2.2 per cent year on year but improved 4.8 per cent sequentially.

Capacity utilisation improved to 70 per cent from 68 per cent in Q1FY26. However, cost per tonne rose 4.7 per cent year on year and 5.7 per cent sequentially, principally due to power and fuel costs, packaging costs and negative operating leverage.

Volume Growth and Margin Recovery Outlook

ICICI Securities expects sales volume to grow at about 11 per cent CAGR during FY26-FY28E, compared with 1 per cent CAGR during FY24-FY26. The improvement is expected to be aided by the planned de-bottlenecking projects and the Kolimigundla Line 2 expansion.

The broker expects FY27E EBITDA per tonne to decline to Rs 704 before improving to Rs 850 in FY28E, versus Rs 764 in FY26. The expected improvement from H2FY27 is based on better realisations, changes in fuel mix, freight and fuel-cost management, higher green-energy usage and positive operating leverage.

Green energy represented 37 per cent during Q1FY27, compared with 31 per cent in Q1FY26.

Financial Estimates

Key Risks

• Demand slowdown.
• Delays in capacity expansion.
• Higher commodity prices.
• Intense competition.