Buy Mangalam Cement; target of Rs 193: SPA Research

SPA Research is bullish on Mangalam Cement and has recommended buy rating on the stock with a target of Rs 193 in its May 9, 2012 research report.

“Mangalam Cement reported tepid set of numbers for Q4FY12. While the topline grew higher than our expectations by 50% YoY to INR 2009 mn, bottomline came below our expectation declining by 7% YoY to INR 180 mn on account of surge in operating costs. EBIDTA margin has declined by 358 bps to 15.26% due to increase in freight rates & pet coke prices (increased by 10% to Rs 7550/tn). MCL witnessed a sharp increase of 45% in volumes to 0.59 mt . MCL's plans of increasing its clinker and cement capacity by 0.50 mt & 1.25 mt remains on track and is scheduled to commission operations by Mar 13 & Aug 13 respectively. The company has declared a dividend of INR 6/share for FY12. We introduce FY14 estimates and retain our BUY rating on the stock with a revised target price of INR 193.”

“MCL reported robust revenue growth of 50% on YoY basis to INR 2009 mn in Q4FY12 (+16% on sequential basis) on the back of healthy improvement in volumes. Improving rural demand and pick-up in construction activities across regions enabled the company to register impressive volume growth of 45% YoY & 17% QoQ to 0.59 mt in Q4FY12. Realisations improved by 3% to INR 3398/tn (flat on sequential basis) due to higher clinker sales in the last quarter. MCL registered a growth of 23% YoY in EBIDTA to INR 337 mn (declined by 20% QoQ). Margins have declined sharply to 15.3% in Q4FY12 as against 18.8% in Q4FY11 & 23.0% in Q3FY12 due to surge in freight rates (increased by ~20% by railways in Q4) & increase in pet coke prices (by 10% to INR 7550/tn vs. INR 6900/tn in Q3FY12). EBIDTA/tn declined 15% YoY & 32% QoQ to INR 533 in Q4FY12.”

“We continue to remain positive on MCL as it is available at lower valuations. Capacity expansion plans lined up along with self sufficiency in power coupled with usage of petcoke as fuel will enable it to continue its growth momentum. We have introduced FY14E estimates and expect the company to register a CAGR of 17% & 4% in topline and bottomline over FY12-14E. At the CMP of INR 132, the stock trades at attractive valuations of FY14E P/BV of 0.7x & PE of 5.8x and EV/tonne of US$40 its FY14E capacity. We retain our BUY rating on the stock with a revised target price of INR 193. At our target price, the stock would trade at a EV/tonne of US$50,” says SPA Research report. 

Public holding more than 90% in Indian cos

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