CRISIL maintains fair value of Rs 202 to Sagar Cements

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CRISIL maintains fair value of Rs 202 to Sagar Cements

CRISIL Research has come out with its report on Sagar Cements. The research firm has maintained the fundamental grade of 2/5 to the company, in its October 20, 2011 report.

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Sagar Cement BSE | NSE 30/05/12 Are Mutual Funds betting on Sagar Cement?

CRISIL Research has come out with its report on Sagar Cements . The research firm has maintained the fundamental grade of 2/5 to the company, in its October 20, 2011 report.

Sagar Cements Ltd's (Sagar's) Q2FY12 revenues and margins exceeded CRISIL Research's expectations. Revenues grew by 94% y-o-y primarily due to increase in realisations which exceeded our expectation. We maintain the fundamental grade of 2/5. We will likely raise our earnings estimates post interaction with the management.

Q2FY12 result analysis
• Q2FY12 revenues grew by 94% y-o-y to Rs 1,673 mn. The growth was driven by increase in realisation as well as higher volume. Realisations increased 61% y-o-y to Rs 4,561 per tonne while cement volume increased 31% y-o-y to 0.406 mn tonne in Q2FY12. Realisations continue to top our forecast due to production discipline by cement players. Most of the sales volume happened outside Andhra Pradesh.

• EBITDA margin for the quarter was 14.6% compared to negative 5.6% in the corresponding period last year. However, margins fell by 887 bps q-o-q primarily as power and fuel cost increased due to higher coal prices. In Q2FY12, 48% of the dispatches were outside Andhra Pradesh compared to 20% in Q1FY12 which increased the company's transportation cost. EBITDA per tonne in Q2FY12 is Rs 606 as compared to losses in Q2FY11 at the operating level and Rs 990 in Q1FY12.

• Other income declined sharply from Rs 102 mn in Q2FY11 to Rs 1 mn in Q2FY12.

• PAT margin was at 3.5% in Q2FY12 primarily due to increase in tax rate.

• Adjusted EPS declined by 73% to Rs 3.4 q-o-q.

• The company's expansion plan on the Vicat-Sagar facility is on course and is expected to be operational in mid-2012.

Valuation: Current market price has strong upside
We continue to value Sagar based on the sum-of-the-parts method. We maintain the fair value of Rs 202 per share and valuation grade of 5/5.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"

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