Positive on Heidelberg and Mangalam Cement: ICICI Direct

Vijay Goel, Research Analyst, ICICI Direct, says that the numbers of ACC and Ambuja Cement are in line with the expectation. He however feels that JK Lakshmi Cement has fallen short of expectations. In the cement space, he is positive on Orient Paper and Industries, Heidelberg Cement India and Mangalam Cement.

Below is the edited transcript of his interview to CNBC-TV18. Q: What is your view on ACC numbers?
A: ACC numbers are in line with our estimates. We expected a PAT of Rs 437 crore but it came at Rs 418 crore. Because of higher volumes and realizations the numbers are better y-o-y basis. The topline grew 16% because of increase in volume by 2% and 13% in realizations.
On y-o-y basis, margins have improved by Rs 150 per tonne to Rs 1076 per tonne. Q: Are these margins for ACC sustainable?
A: Prices should be lower in the next two quarters because of some seasonal weakness due to monsoon and some pressure on prices because of CCI order. But in the long-term margins will improve going forward because of improvement in utilisation rates and the incremental the demand will outpace the incremental supply. Q: What is your view on Ambuja Cements numbers?
A: They are also in line with our estimates. PAT came at Rs 469 crore, we expected Rs 457 crore. Volume growth was around 7% and realisation growth was around 10%, which led to topline growth of around 18%. Margins grew by around Rs 170 per tonne on y-o-y basis to around Rs 1300 per tonne. Q: Do you have buys out on these two names or do you think valuations are restrictive?
A: I think valuations are quite on the higher side, both the stocks are trading at fair valuations. We have a hold rating on both the stocks. Q: What is your view on JK Lakshmi Cement, which announced encouraging numbers yesterday?
A: The numbers were lower than our estimates because of increase in cost on the power & fuel and freight side, but we were positive on JK Lakshmi because of cheap valuations, volume growth and realisations. Q: What are your top picks from the cement space now?
A: We are positive on Orient Paper and Industries, Heidelberg Cement India and Mangalam Cement in the cement pack.