HDFC Maintains Buy Call To This Small Cap Cement Stock For 26% Potential Gains, Details Inside

Inventory Outlook

Sagar Cements’ inventory on Friday closed at Rs 183.30/share after a pointy acquire of two.96% from its earlier. The inventory’s 52-week low stage is Rs 154/share, whereas the 52 week excessive is Rs 317/share. The inventory’s CMP is Rs 29.3 above its 52-week low stage and Rs 130.7 under its 52-week excessive stage.

ROE of the inventory is 5.50%. PE ratio is 310.68. The P/B ratio is 1/49. Its face worth is Rs 2. TTM EPS is .0.59. The dividend yield is 0.38.

The inventory within the final week gained 9.2%, and final 1 month it has moved up 10.36%, respectively. Whereas in previous 1 12 months, its share has fallen practically 27.95%. Within the final 3 years and 5 years, it has gained 47.34% and 10.2%,. respectively.

Q1FY23 efficiency

Quantity grew by 35% YoY resulting from strong demand in south and manufacturing ramp-up from Jajpur and Jeerabad crops. CU stood at 58% vs 61/55% YoY/QoQ. The share of blended cement improved to 50% vs ~45% QoQ/YoY. In a muted worth atmosphere within the south, realisation additionally registered a great uptick of 6% QoQ. A pointy rise in gas prices led to a spike in opex by 29% YoY/ 7% QoQ. Enter price rose ~Rs 395/915 per MT QoQ/YoY and got here in increased than our estimate. Sagar lowered its lead distance ~5% QoQ to 268km. Greater price led to five% QoQ contraction in unitary EBITDA to Rs 514 per MT. Capability additions led to a surge in capital prices resulting in a internet loss. Jeerabad/Jajpur crops operated at 46/8% CU in Q1. Jajpur rampup was delayed resulting from delays in composite cement approvals (now acquired). Low utilisation at these crops led to detrimental EBITDA contribution, flattening consolidated unitary EBITDA by ~Rs 150 per MT.

Outlook

“Cement costs are broadly flat MoM in July. P&F prices are anticipated to be flat QoQ in Q2. The Jeerabad/Jajpur crops are getting stabilised and administration expects that, at ~50/40% CU, the crops would flip EBITDA break-even (anticipate this to occur on this monetary 12 months itself). These crops are anticipated to additionally increase quantity development to 5mn MT (+40% YoY) in FY23 and enhance share of blended cement from FY23 onwards. If all goes effectively, Sagar will full the acquisition of Andhra Cements in Q3FY23 (2.6mn MT cement and 1.65mn MT clinker) and make it operational by This autumn. Internet debt is anticipated to peak out at Rs 15bn, publish acquisition. Sagar stays dedicated to doubling its capability each 10 years. We keep our earnings estimates for FY23/24E in addition to our BUY score,” the brokerage stated.

HDFC Securities Maintains Purchase with goal worth of Rs 230/share

The brokerage within the report said, “We keep our BUY stance on Sagar Cements with an unchanged Goal Worth of INR 230/share (7.5x Mar-24E consolidated EBITDA). We like Sagar for its prudent capability development, rising regional diversification, and elevated concentrate on inexperienced gas/energy consumption and blended cement manufacturing. In Q1FY23, Sagar reported in-line efficiency. Whereas wholesome demand in south and ramp-up of Jeerabad/Jajpur crops drove up volumes, elevated gas prices and detrimental EBITDA contribution from the brand new crops pulled down margin, resulting in a internet loss. Sagar expects its P&F price to be flat QoQ in Q2. The brand new crops are additionally anticipated to show EBITDA break-even in FY23. Sagar can be anticipating to amass Andhra Cements by Q3, which can enhance its capability to ~11mn MT.”