The Ramco Cements is a South-based cement manufacturer with an installed capacity of 24 mtpa (million tonnes per annum). The company derives 75 per cent of its revenues from the South and 25 per cent from the eastern markets. It has a strong growth outlook, supported by capital expansion, though margin could come under pressure. In October 2022, we had given an ‘Accumulate’ rating on the stock when it was trading at ₹698 per share and a valuation ofone-year forward PE of 24.3 times and one-year forward EV/EBITDA 13.5 times.

Today, the stock is trading at a premium valuation of 40 times one-year forward earnings (33 per cent premium to last five-year average) or 14 times one-year forward EV/EBITDA (in line). Considering the rich valuations and margin pressures as measured against growth prospects, we recommend investors ‘hold’ the stock, and avoid adding to fresh positions for now.

Revenue drivers

The company’s cement realisations were on a declining trend during FY23-25 and after bottoming out, have recovered by 4.5 per cent in 9MFY26. Factoring these, the overall decrease in realisations for FY23-9MFY26 is at a CAGR of 4 per cent, similar to the Indian cement industry realisations. However, despite the weak base of cement prices combined with strong demand from housing and national infrastructure plan, only a nominal growth of 1-2 per cent year on year can be expected in the next two years. This is because the southern market, where Ramco Cements has the largest exposure, will remain a region with overcapacity in cement production. The company reported 1 per cent growth in cement realisations in Q3FY26 and recovery in prices faced competitive pressures. With other South-based players such as India Cements, Sanghi and Penna now acquired by larger players — UltraTech and Ambuja, expansion and production debottlenecking is underway at those plants adding to the capacity.   

Ramco is also expanding capacity, which should support revenue growth even if pricing remains weak. It plans to raise capacity from 24.4 mtpa to 31 mtpa by FY28, including 3 mtpa from debottlenecking existing plants and 3 mtpa from a brownfield expansion at its Andhra Pradesh plant. The debottlenecking is expected to be completed shortly, and the brownfield expansion by FY27-end. Improving utilisation at the expanded facilities is another lever for growth. Capacity utilisation was 83 per cent in FY24, but fell to 77 per cent in FY25 after the company added 2 mtpa (taking capacity to 24.4 mtpa). Utilisation may dip further as new capacity comes on stream; however, over the longer term, a return to the historical about 80 per cent level could support higher volumes.

The company has also launched the construction chemicals segment, which accounted for 4.2 per cent of Q3FY26 revenues, and the segment reported 73 per cent growth.

Overall, the company should deliver 12-13 per cent revenue growth in FY26-28, supported primarily by capacity expansion.

Margin headwinds

While the revenue outlook is strong, margin outlook is not. The company, like the cement/steel industry, is coming off from a period of input cost deflation. For Ramco Cements, this was led by power and fuel costs, which declined at 16 per cent CAGR (power and fuel cost per tonne) in FY23-9MFY26. This is owing to the deflation in coking coal costs and higher proportion of renewable energy in production. The company reported green energy share in total energy consumed at 47 per cent in Q3FY26 compared to 39 per cent last year. This is expected to rise further, as it hopes to add a 15-MW solar plant as well in the capex plan.

But coking coal costs are expected to rise and have already started rising from late-2025. This will be further amplified by the current US-Iran conflict, which will increase the shipping costs. The risk premium added to crude oil, even assuming a resolution to the conflict, will structurally increase the cost of imported coal for all users as coking coal is imported from Australia, in addition to that sourced domestically.

While other operating costs have declined as shown in the table, raw material costs have grown at 5 per cent CAGR in the FY23-9MFY26 period. This can be ascribed to the ₹160-per-tonne addition to limestone sourced from Tamil Nadu from FY25 on account of a levy (mineral bearing land tax). The levy is close to 20 per cent of 9MFY26 EBITDA per tonne.

Owing to declining realisations and raw material costs, Ramco’s EBITDA per tonne has been flattish in the same period. The consensus estimates of ₹1,000 per tonne by FY28 are reliant on waiver of the mineral tax, and contained power and fuel costs. The expectation also relies on higher green energy share and operating leverage from a higher capacity and improved utilisation; we expect these are more likely to be realised.

Financials

The company reported a 5 per cent year-on-year growth in 9MFY26 to ₹6,418 crore, but profit growth of 163 per cent to ₹163 crore, owing to improved realisations and lower power costs. It has a net debt to EBITDA of 2.8 times in December 2025, which has improved from 3.5 times in March 2025. The reduction has been driven by disposal of non-core assets of close to ₹1,000 crore in the last two years. The company has earmarked ₹200 crore more for disposal shortly. The next leg of capital expenditure includes debottlenecking and brownfield expansion, which should be low-cost.

Overall, Ramco Cements is at a position where revenue growth prospects are, to an extent, offset by margin pressures. At the same time, valuation at one-year forward EV/EBITDA of 14 times is not excessive, while at the same time not cheap, given its relatively-smaller size and regional focus in an industry dominated by UltraTech and Ambuja.

Peers UltraTech, Ambuja and Shree Cements trade at 18.6, 16 and 15 times respectively. Considering these, the risk-reward appears balanced.  

Published on May 9, 2026