Buy Mangalam Cement; target of Rs 119: SKP Securities

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Buy Mangalam Cement; target of Rs 119: SKP Securities

SKP Securities is bullish on Mangalam Cement and has recommended buy rating on the stock with a target of Rs 119 in its January 18, 2012 research report.

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SKP Securities is bullish on Mangalam Cement and has recommended buy rating on the stock with a target of Rs 119 in its January 18, 2012 research report.

"Mangalam Cement Limited (MCL), promoted in 1978, is a part of BK Birla Group. The company is engaged in the manufacturing of cement and has a capacity of 2 million tonnes per annum (MTPA) along with 48.65 MW of captive power plant. Its cement and power plants are located at Morak, Rajasthan and MCL sells its product under the brand name of Birla Uttam Cement."

"The company is implementing a Greenfield expansion of 1.25 mtpa clinker grinding unit at Aligarh, Uttar Pradesh at an investment of INR 4 billion which is expected to be completed by last quarter of FY13. The funding for the same will be done through a mix of internal accruals and debt in the ratio of 1:3. Along with that, MCL also plans to augment the clinker capacity by 0.5 mtpa at its existing facility at Morak, Rajasthan. Going forward, MCL plans to reduce its consumption of high grade lime stone to 6 percent from current ~17 percent by using pet coke, leading to cost savings. We expect an improvement in EBITDA/tonne, from INR 366.9/tonne in FY11 to INR 541.5/tonne in FY13. EBITDA margins are likely to rise by 368 bps over FY11-13E to 15.7 percent."

"We rate a BUY rating on the stock with a 15 months price target of INR 118.8/share, implying an upside potential of 25.1 percent from current levels. Our target price is based on the average of a target P/BV multiple of 0.75x FY13E, EV/EBITDA multiple of 5.5x FY13E and replacement cost of USD40/tonne," says SKP Securities research report. 

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To read the full report click on the attachment