Buy Ramco Industries at CMP and add on declines :: HDFC Securities

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Ramco Industries Limited (RIL) part of the Chennai based Ramco Group, is primarily engaged in the manufacturing of asbestos
based fibre cement (FC) sheets, which find application as a roofing material.
Triggers
 Growth in Indian economy with higher per capita income, will lead to better demand for housing products
 Cotton and apparel demand high in domestic and export markets
 Value unlocking, if undertaken, can benefit the shareholders
 Investments – the hidden treasure, main trigger currently

 Risks/Concerns
 Raw Material prices and forex fluctuation
 Highly dependent on rural prosperity, this in turn is dependent on agricultural productivity and MSP
 Seasonality and Capacity additions in the industry

Conclusion and Recommendation
Though RIL is comparatively a smaller player in the Fibre Cement industry, the management is trying to nullify the cyclicality
nature of business by venturing into new product range of Calcium silicate board and through its textile business. Once the
momentum in the new product segment picks up, RIL will start getting a better valuation like its peers Everest Industries (which
has significant exposure to steel buildings) and HIL (which has blocks and panels which are considered as green products). At the
current market price (of Rs 85) the company is trading at 1.4x FY15E consolidated P/ BV and 1.3x its FY16E consolidated P/BV.
We advice the investors to buy the stock at the CMP and add on declines to Rs.71-74 band (1.1x FY16E P/BV) for sequential
targets of Rs 104-126 on SOTP basis for the next 2-3 quarters.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010618