Mar 23, 2012, 12.18 PM | Source: CNBC-TV18
HeidelbergCement India has target of Rs 60 in next 12 months, says SP Tulsian, sptulsian.com.
SP Tulsian (more)
CEO, sptulsian.com | Capital Expertise: Equity - Fundamental ,IPO
Tulsian told CNBC-TV18, "HeidelbergCement India is keeping in line with the present trend and the present theme that the all India increase in the cement prices is being seen and in fact budget has not been very negative for the cement industry. It has been more of a neutral in spite of the realignment of the excise duty having made for the cement industry, which is seen as a pass through and their kind of pricing power which is seen returning back to the companies. I thought that maybe some of the midcap cement companies are looking good and Heidelberg falls in that category.”
He further added, “If you recall the old name was Mysore Cement which was acquired by the Cementrum of Netherlands who are now holding about 62-63% stake in the company. This company has four plants, one in Ammasandra in Karnataka, second in Damoh, third in Jhansi and fourth in Raigad in Maharashtra. So that means they are catering to the central and western part of the country where the realizations are quite high.”
“The present capacity of the company has been at about 3-3.1 million tonne, which is getting expanded to about 6.1 million tonne which will get completed maybe in next six months or so in the phases.”
“The company’s financial year ending is on calendar year that is 31st December, 2011. They have closed their year with topline of about Rs 1,000 crore and PAT of about Rs 25 crore. But to achieve the economies of scale and the multinational, promoters now focusing more on the higher scale of production they have taken up the expansion and this expansion was initiated last year and the first phase, part of that capacity will go on stream in maybe next couple of weeks or so. So the calendar year 2012 is going to be quite good for the company.”
“Till last year if you see calendar year 2011 it was a debt free company, but for carrying out this expansion, company is availing term loan of close to about Rs 750-800 crore and if you take the enterprise value for the entire 6 million tonne it is even now available at a valuation of close to about USD 55 per metric tonne.”
“If you recall today we have seen a news report that Adhunik Metal is being acquired by Ultratech Cement at a valuation of close to about USD 115-120 that to 1.5 million tonne capacity. So I think going by all these things this looks quite economically priced. I would say that this looks the cheapest stock considering the parentage, considering the expansion plan, considering the revival in the working and fortunes of the company. So I am keeping a price target of about Rs 60 in next 12 months or so. This is not a stock for the quick gains but one needs to keep a horizon of about one year and can expect a return of 50% plus."