Ramco Industries :: CENTRUM WEALTH: Top 10 Diwali Picks

Ramco Industries (RAMCO) is a part of the Rs.1,200 crore Ramco Group, having diverse business interests in cement, fibre cement products, cotton yarn and Information Technology. RAMCO operates one of the modern fibre cement roofing sheets and pipe plants in India and also has interests in fibre cement pressure pipes in India and Sri Lanka;
The company has 20.7% stake in Madras Cements. The market value of its investments in Madras Cement, Ramco Systems, HDFC, etc, is around Rs.1,130 crore, which is 50% more than the enterprise value of RAMCO at Rs.747 crore The value of investment in Madras Cements alone is worth Rs.1,035 crore, which is 1.4x the Enterprise Value of RAMCO;
Schemes from Government such as Indira Awas Yojna, the Golden Jubilee Rural Housing Finance Scheme, the Pradhan Mantri Adarsh Gram Yojna, the Productive Housing in Rural Area and the Rural Housing Fund, to provide shelter to the rural poor are expected to give boost to the roofing sector and RAMCO being one of the leaders is expected to benefit the most;
The company has adopted a strategy of building satellite plants spread over various regions in India to meet the growing demand for fibre cement roofing sheets and pressure pipes and also reduce the logistics cost;
While Q2FY2013 results appear weak at net profit level as the reported PAT declined by 7% to Rs.10.5 crore. However, the results from operational front is very impressive. Ramco registered 15.7% YoY growth in net revenue to Rs.161.2 crore during Q2FY2013. EBITDA margin expanded by 200bps on a YoY basis to 15.8%. EBT (excluding other income and forex gain/loss) more than doubled to Rs. 11.1 crore compared to Rs.5.5 crores during Q2FY2012. The reported net profit was down due to 1) other income was down to Rs.2.9 crore during Q2FY2013 as compared to Rs.7.1 crore in Q2FY2013 which could be due to lower dividend income arising out of its investments and 2) exceptional item of Rs.1.21 crore due to loss on sale of asset;
The stock is currently trading nearly 15% below its 52 week high at a P/E of 6.9x FY2014 consolidated EPS of Rs.9.23/. Considering positive outlook on industry, sound management and value of investments in book, we recommend BUY on Ramco Industries to investors with a long term perspective

�� -->