Ramco Cement’s Q4 Profits Dragged Down by Costs; Buy Rating Maintained

Overview

This report provides commentary on The Ramco Cement’s fourth-quarter results for fiscal year 2026. While the company demonstrated solid performance in volumes and pricing—broadly in line with market expectations—higher-than-expected operating costs, driven by increased raw material taxes and longer logistics distances, resulted in slightly weaker-than-expected EBITDA. Nevertheless, given continued balance sheet improvement and a clear capacity expansion roadmap, Nomura maintains its 'Buy' rating and INR 1,150 target price, viewing the current forward EV/EBITDA multiple as reasonably valued.

Core views

Stable demand and revenue performance: In 4QFY26, cement volumes reached 5.5 million tonnes, up 5% YoY; blended realizations rose 2% QoQ to INR 4,693/tonne. Management noted that trade and non-trade channel prices were hiked by INR 15/bag and INR 25/bag respectively since late March, indicating some pricing power despite intense competition. Cost overruns were the primary reason for the earnings shortfall: 4QFY26 EBITDA came in at INR 3.7 billion—2.5% below Nomura’s forecast and 11% below Bloomberg consensus. Blended EBITDA per tonne was INR 671, up 10% QoQ but still 4% below expectations. The key issue lay in operating costs: raw materials and power/fuel costs rose 6% QoQ, exceeding forecasts by 6%; freight costs increased 3% QoQ, surpassing estimates by 2%. Notably, the Mineral Bearing Land Tax (MBLT) implemented in Tamil Nadu from April 2025 significantly impacted costs, adding INR 86/tonne to raw material expenses in FY26, with a single-quarter impact of approximately INR 370 million in 4Q. Additionally, average haulage distance increased from 256 km in 3Q to 276 km in 4Q, further elevating logistics costs. Outlook and capital allocation: Management flagged near-term headwinds from rising prices of petcoke, gypsum, packaging materials, and diesel. Due to existing inventory buffers, fuel cost increases are expected to impact margins starting in 2QFY27, while packaging and logistics cost pressures may begin affecting results as early as 1QFY27. On the expansion front, the company plans to increase cement capacity to ~31 million tonnes in FY27 through debottlenecking at existing integrated plants and brownfield expansion at Kolimigundala. It also expects to commission a 15MW waste heat recovery system and the second kiln line at Kolimigundala in FY27. Capex for FY27 is budgeted at INR 8 billion. Financial health and valuation: Net debt declined by ~INR 8.2 billion YoY to INR 36.64 billion as of FY26-end, with net debt/EBITDA improving significantly from 3.51x in FY25 to 2.47x. The stock currently trades at a one-year forward EV/EBITDA multiple of 14.4x—slightly above Nomura’s target multiple of 14x—but the firm still allows room for a premium given improving earnings quality and growth prospects.

Analysis framework

Nomura employed a classic 'volume-price-cost-profit' decomposition framework to evaluate cement sector earnings. First, it validated revenue drivers (volume growth and realizations per tonne) to confirm whether demand-side performance met expectations. Next, it focused on unit economics, attributing EBITDA deviations to specific cost components (e.g., raw materials, energy, freight) and quantifying the impact of policy-driven taxes (like MBLT) and operational variables (such as haulage radius). Finally, it incorporated balance sheet trends (deleveraging progress) and future capacity rollout timelines to derive a target price using EV/EBITDA multiples. This analytical structure helps investors distinguish between 'temporary cost disruptions' and 'structural changes in profitability.'

Methodology notes

• Valuation MethodEV/EBITDA valuation

  Using Enterprise Value-to-EBITDA (EV/EBITDA) as the core valuation anchor for capital-intensive industries like cement

  The cement industry is characterized by high capital expenditure and depreciation, making net profit susceptible to accounting policies. Therefore, institutions prefer EV/EBITDA—which strips out capital structure and depreciation effects—to assess true operating returns and enable cross-company comparability.

• Company Fundamentals & Financial Framework

  Unit Economics Breakdown

  Translating total revenue and costs into per-tonne metrics to track marginal changes in realization per tonne, raw material cost per tonne, freight cost per tonne, etc., thereby precisely identifying micro-level sources of profit volatility rather than relying solely on aggregate figures.

• Industry/ Sector Analysis FrameworkVolume-price decomposition

  Core volume-price split analysis logic in the cement industry

  In cyclical sectors like cement, revenue growth is decomposed into two independent factors—'volume growth' and 'price changes'—to determine whether earnings drivers stem from market share gains or industry-wide supply-demand dynamics enabling price increases.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• The Ramco Cement (TRCE.NS)

  Direct coverage subject of the report; benefits from deep presence in southern markets and upcoming capacity expansion

  Strengths

  Significantly reduced net debt lowers financial risk; strong leadership position in southern India; new capacity nearing commissioning

  Weaknesses

  High exposure to regional mineral tax policies; extended haulage distances eroding margins; intense competition limiting pricing power

  Risks

  Lower-than-expected sales growth in southern region; delays in expansion projects leading to market share loss

Key data

• 4QFY26 EBITDAINR 3.7 billion2.5% below Nomura’s estimate, 11% below consensus
• 4QFY26 Volumes5.5 million tonnesUp 5% YoY, in line with expectations
• 4QFY26 Blended RealizationINR 4,693/tonneUp 2% QoQ, in line with expectations
• Blended EBITDA per TonneINR 671/tonneUp 10% QoQ, but 4% below expectations
• Impact of Mineral Tax (MBLT)INR 86/tonneIncremental cost per tonne in FY26; single-quarter impact of INR 370 million in 4Q
• Net Debt/EBITDA2.47xAs of FY26-end, significantly improved from 3.51x in FY25
• FY27 CapexINR 8 billionAllocated for capacity expansion to 31 million tonnes and waste heat recovery projects

Impact & implications

The report views the earnings shortfall as primarily driven by one-off tax impacts and seasonal increases in haulage distance—not a deterioration in core competitiveness. With new capacity coming online and deleveraging largely complete, the company retains meaningful medium- to long-term earnings upside. Investors should monitor cost pass-through dynamics starting in 1QFY27 and whether competitive intensity in southern India affects new capacity absorption. Current valuation does not appear to overprice future growth, supporting a constructive stance.

Risks

• Actual cement realizations below expectations
• Sales growth in southern region below expectations
• Project delays leading to loss of capacity market share in southern region

What to watch

• Realization of packaging and logistics cost pressures in FY27 Q1
• Impact of fuel cost increases on margins in FY27 Q2
• Commissioning progress of new Kolimigundala production line
• Changes in competitive intensity in southern region