Why did Ramco Cements shares crash 6% despite 395% net profit growth?

Synopsis: Ramco Cements shares declined nearly 6% after CLSA downgraded the stock to Underperform, calling the recent rally unjustified, while Jefferies maintained a Hold rating, citing margin concerns despite deleveraging and diversification efforts.

The shares of this company are engaged in the manufacture of cement, Ready Mix Concrete (RMC) and Dry mortar products which primarily cater to the domestic market of India are now in the spotlight after falling by 6% in today’s session after a downgrade from CLSA and a hold rating from Jefferies. 

With a market capitalisation of Rs. 27,480 cr, the shares of The Ramco Cements Ltd were trading at Rs. 1,163 per share, decreasing nearly 6% in today’s market session, making a low of Rs. 1,136.35, down from its previous close of Rs. 1,203.65 per share. The stock has delivered 31% returns over the past year, with gains of 10% year-to-date, 9% in the last six months, and 8% over the past month.

Q3 Results

The Ramco Cement reported 6% YoY growth in revenue, with sales rising to Rs. 2,106 crore from Rs. 1,983 crore. EBITDA remained largely flat at Rs. 280 crore, indicating margin pressure despite higher topline. Net profit increased sharply by 112% YoY to Rs. 386 crore from Rs. 182 crore. EPS surged 111% YoY to Rs. 16.32 from Rs. 7.72.

On a sequential basis, revenue declined 6% QoQ from Rs. 2,239 crore to Rs. 2,106 crore. EBITDA fell steeply by 28% to Rs. 280 crore from Rs. 388 crore, pointing to significant margin compression. Net profit increased sharply by 395% to Rs. 386 crore from Rs. 77.9 crore. EPS jumped 399% QoQ to Rs. 16.32 from Rs. 3.27, largely due to quarter-specific factors. 

Capex 

The company plans to reach 31 MTPA cement capacity by March 27 through de-bottlenecking, a brownfield second line at Kolimigundla, and 15 MW WHRS. It has acquired 59% mining land and 13% factory land for a new Karnataka greenfield project.

During Q3FY26, blended fuel cost rose to $127/ton (Rs. 1.57/Kcal) from $122/ton YoY, impacted by 4% rupee depreciation; pet coke CIF prices stand at $119–120. Capex spend was Rs. 222 crore in Q3FY26 (Rs. 823 crore in 9MFY26), with FY26 capex guided at ~Rs. 1,100 crore, lower than the earlier Rs. 1,200 crore estimate.

Brokerage View

CLSA has downgraded Ramco Cements to ‘Underperform’, cutting its price target to Rs. 890 per share, which implies about a 23% downside from current levels. The brokerage believes the recent rally in the stock, largely driven by cement price hikes, is not fundamentally justified. 

While CLSA views the monetisation of non-core assets, including land parcels, as a positive development, it feels these measures are insufficient to offset the company’s underlying operational challenges. The brokerage also flagged the risk of sharp earnings estimate cuts in the near term.

In contrast, Jefferies has maintained a ‘Hold’ rating on the stock with a price target of Rs. 1,045, which is 10% downside from current levels. The brokerage highlighted that Ramco Cements continues to prioritise deleveraging, while also attempting to scale up non-cement segments such as construction chemicals. 

Jefferies noted that the recent discovery of a quartzite mine could open up opportunities to expand non-cement offerings, though the earnings contribution from these initiatives remains monitorable at this stage.

However, Jefferies has also taken a cautious stance on near-term profitability, trimming its FY26 and FY27 EBITDA estimates by 5–8%, reflecting concerns around operating performance and margin sustainability despite the company’s strategic diversification efforts.

The Ramco Cements Ltd is a major Indian cement manufacturing company and one of the country’s leading players in the building materials sector. It has grown from a small 200 TPD unit into a large producer with a total cement production capacity of over 24 million tonnes per annum, operating multiple integrated plants and grinding units across South and East India.

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