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Ramco Cements up after adding a plant in Andhra Pradesh, CLSA bullish on cement firms despite low utilisation

Ramco Cements up after adding a plant in Andhra Pradesh, CLSA bullish on cement firms despite low utilisation

Ramco Cements up after adding a plant in Andhra Pradesh, CLSA bullish on cement firms despite low utilisation
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By Asmita Pant  Sept 29, 2022 10:43:03 AM IST (Published)

CLSA says that despite low utilisation, players in the sector including the new entrant Adani Group, will continue expanding on the back of their growth aspirations, regional preferences, strong balance sheets and utilisation of existing mines.

Shares of Ramco Cements Ltd rose as much as 2.2 percent on Thursday, a day after the company said it had commissioned a fifth integrated cement plant with a clinkerisation capacity of 2.25 million tonnes per annum at Kolumigundla, Kurnool District, Andhra Pradesh.

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The project cost of the plant is Rs 3,000 crores. Ramco Cements stock was trading 0.7 percent higher at Rs 747.3 on BSE at the time of writing.
The company has announced that the cement manufactured from this plant will be marketed in Andhra Pradesh, Karnataka, north Tamil Nadu, Maharashtra and Madhya Pradesh.
The plant has a waste heat recovery system capacity of 12.2MW. "6 megawatt would be commissioned by October 2022 and the remaining in 2023," the company has said.
On the overall cement sector, brokerage firm CLSA says that the "sector is in the midst of a demand upcycle driven by strong housing and infrastructure growth".
However, the brokerage house believes that the capacity expansion will likely move at a similar run rate, keeping utilisation lower for longer.
CLSA says that despite low utilisation, players in the sector, including the new entrant Adani Group, will continue expanding on the back of their growth aspirations, regional preferences, strong balance sheets and utilisation of existing mines.
The brokerage house expects 7-8 percent volume growth over the next three years and EBITDA to grow at 4 percent CAGR driven by more cost cuts than price hikes.
The brokerage house prefers UltraTech and has given a outperform call on the company's shares. CLSA has upgraded to 'outperform' from 'underperform' on the shares of ACC and downgraded shares of Ambuja to 'sell' from 'underperform'.
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