Cement sector hasn’t seen the best of days this year, but one stock that has defied the trend is Ramco Cements. Despite weak sentiment clouding the space, the stock has gained more than 20% over the past 11 months, rallying 11% in the month of October alone. This was triggered by a strong performance in Q2FY20. Even amidst a weak demand scenario, its volume rose 10% YoY. Meanwhile, net sales and profit grew 12.36% and 47%, respectively. Analysts at Motilal Oswal Securities expect sales and profit growth of 10% and 30% for FY20.
Taking advantage of the sharp rally in the stock price, promoter PR Venketrama Raja-led entity Sri Vishnu Shankar Mill sold shares worth Rs.103 million. This was the promoter’s second disposal in the past three years, with its stake now falling to 1.38% from 1.43%. In September this year, the entity had sold shares worth Rs.51 million.
This move comes at a time when analysts believe upside potential is limited. Despite market share gain due to volume growth, they state that a weak pricing environment could be a major drag going forward. “Ramco’s capacity expansion in the East (West Bengal, Odisha) should help gain market share in the region. However, we expect pricing pressure to continue in the region owing to 30% capacity expansion in the East,” states the Motilal Oswal Securities report. They also note that Ramco Cements is seeing pricing pressure in the South, its core market, due to weak demand and lack of production discipline.
Even so, mutual funds marginally increased their stake from 20.93% in June this year to 21.51% in September 2019. Since December 2018, the largest mutual fund in the stock, L&T Mutual Fund, has reduced its stake from 5.28% to 5.06%, but Kotak Mutual Fund increased it from 4.15% to 4.76% during the same period. Foreign portfolio investors (FPIs) also raised their stake from 11.37% to 11.74%. Currently, Abu Dhabi Investment Authority is the only FPI with more than 1% stake in the company.