Geojit Financial Services has downgraded The Ramco Cements to an Accumulate rating while raising its target price to Rs 1,319, citing improving balance sheet strength and medium-term earnings recovery, even as near-term margin pressures persist. The brokerage values the company at 15x FY28E EV/EBITDA, implying a 16% upside from the current market price of Rs 1,140. While Q3FY26 performance reflected modest revenue growth and stable EBITDA, adjusted profitability weakened sharply due to cost pressures. However, deleveraging, capex nearing completion, and anticipated margin recovery from FY27 onward underpin the constructive long-term thesis.

Accumulate Call with Target of Rs 1,319

Geojit Financial Services has assigned an “Accumulate” rating with a 12-month target price of Rs 1,319. The brokerage has slightly tempered its stance due to the recent sharp rally in the stock, yet maintains a positive bias supported by structural deleveraging and expansion-led growth visibility.

At the current market price of Rs 1,140, the implied upside stands at approximately 16%. The valuation framework rests on a 15x FY28E EV/EBITDA multiple, reflecting confidence in earnings normalization and improving return ratios over the next two years.

Q3FY26: Volume Recovery but Margin Compression

The December quarter marked a phase of gradual demand recovery across key southern and eastern markets.

Revenue increased 6% year-on-year to Rs 2,102 crore, while cement volumes grew 4% YoY to 4.4 million tonnes. Capacity utilization improved sequentially, indicating strengthening operational momentum.

However, EBITDA remained largely flat at Rs 281 crore, and EBITDA per tonne declined by nearly 2.9%, pressured by elevated input costs. The blended cost rose 8% YoY to Rs 1.57 per Kcal, driven primarily by higher limestone expenses following the mineral-bearing land tax in Tamil Nadu.

Cement realizations improved 2.7% YoY but fell 6.6% sequentially, reflecting price volatility in the South. Encouragingly, price trends in both South and East regions have shown early signs of recovery post-January 2026.

One-Time Gain Masks Underlying Weakness

A significant accounting element influenced quarterly profitability.

The company reported a one-time gain of Rs 505 crore from the sale of land. As a result, reported PAT rose 15% YoY to Rs 376 crore. However, stripping out this extraordinary item, adjusted PAT fell 79% YoY to just Rs 16 crore.

This divergence highlights the strain from higher power, fuel, and raw material costs. Total expenses grew 3.6% YoY, with power and fuel costs rising 4% and other expenses up 8.3%.

Per Tonne Cost Dynamics

The cost structure reveals a nuanced operational picture:

While cost pressures remain evident, green energy initiatives and waste heat recovery systems (WHRS) are partially offsetting rising power expenses.

Capex Nearing Completion; Deleveraging Gains Traction

The strategic inflection point lies in balance sheet repair.

Net debt reduced to Rs 4,145 crore from Rs 4,481 crore in FY25. The debt-to-equity ratio stands at 0.6x, while net debt-to-EBITDA has improved to 2.8x from 3.5x in FY25.

FY26 capex is estimated at Rs 1,100 crore, of which Rs 823 crore has already been deployed in the first nine months. With major expansion projects nearing completion, deleveraging is expected to accelerate meaningfully from FY27 onward.

Additionally, the company has monetized Rs 559 crore in 9MFY26 from non-core asset sales and disposed of assets worth Rs 1,017 crore over the past two years, with another Rs 200 crore pipeline under consideration.

Capacity Expansion and Operational Efficiency

Operational initiatives are strengthening regional competitiveness.

Debottlenecking at the Ariyalur plant in Tamil Nadu has raised grinding capacity from 3.5 MTPA to 5.5 MTPA. Similar initiatives are underway at Ramasamy Raja Nagar and Jayanthipuram plants.

Furthermore, a 15 MW WHRS at Kolimigundla is scheduled for commissioning in FY27, which should lower power intensity and stabilize margins.

Average lead distance improved to 256 km from 259 km YoY, enhancing logistics efficiency.

Financial Projections: Earnings Inflection from FY27

Geojit’s forward projections suggest a pronounced earnings revival.

EBITDA margins are projected to expand from 16.8% in FY26 to 20.6% by FY28, supported by operating leverage and renewable energy integration.

Return on equity is expected to rise from 3.6% in FY26 to 10.1% by FY28, signaling structural improvement in capital efficiency.

Valuation Perspective

At the CMP of Rs 1,140, the stock trades at:

97x FY26E earnings

45.4x FY27E earnings

30x FY28E earnings

EV/EBITDA compresses from 20.2x in FY26E to 12.9x by FY28E, reflecting anticipated earnings growth and debt reduction.

The brokerage believes that sustained deleveraging, combined with government infrastructure push and housing demand, positions Ramco Cements for a cyclical upturn.

Investment Strategy and Risk Factors

Investors with a medium-term horizon may consider gradual accumulation on dips.

Immediate resistance lies near the 52-week high of Rs 1,214, while strong support is visible around Rs 968–1,000 levels. A sustained move above Rs 1,214 could trigger momentum toward the Rs 1,319 target.

Risks include continued raw material inflation, delayed price recovery in the South, and execution risks in expansion projects.

Bottomline for Investors

The Ramco Cements stands at a pivotal juncture. Near-term earnings remain subdued, but structural drivers — expansion completion, debt reduction, renewable energy integration, and improving regional pricing — could catalyze a multi-year rerating.

Geojit’s Accumulate rating underscores a disciplined approach: patience over exuberance. For investors seeking exposure to India’s infrastructure and housing cycle, Ramco Cements offers a deleveraging-led recovery story with measurable upside potential over the next 12 months.