SPA Research is bullish on Mangalam Cement (MCL) and has recommended buy rating on the stock with a target of Rs 193 in its February 13, 2013 research report.
“MCL reported a sharp decline of 10.8% YoY in volumes at 0.45 mn tn in the last quarter largely due to lower clinker sales. Clinker sales volume declined by 96% to 3093 tn against 76000 tn in Q3FY12 mainly due to improvement in utilization rate of Unit I where the production was impacted last year. Excluding clinker, cement volumes improved by 4.3%. Blended realisations increased 9.1% YoY to INR 3710/tn to partially offset the increased cost pressure due to hike in freight and fuel charges. Although volumes improved sequentially by 5.3%, realisation remained muted declining by 1.4% as demand failed to meaningfully pick-up post monsoons.”
“EBIDTA/tn declined by 13.1% to INR 677/tn in Q3FY13 from INR 780/ tn in Q3FY12 and INR 823/tn in Q2FY13 due to hike in power & fuel cost, freight and employee expenses. The adjusted raw material cost however declined by 24.5% to INR 282/tn as MCL successfully reduced its high grade limestone consumption on the back of using petcoke as a fuel. Freight cost increased by 18.9% to INR 1102/tn on the back of an increase in railway fright rates. Employee cost also increased 15.7% to INR 208/tn. The EBITDA margin has declined by by 468 bps YoY and 363 bps QoQ to 18.3%.”
“We remain positive on the cement sector and MCL having strong foothold in Northern & Central India, is well placed to benefit from growth opportunities in the regions. 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. Currently the stock trades at attractive valuations of FY14E P/BV of 0.7x & PE of 4.0x and EV/tonne of US$40 its FY14E capacity. We change our rating from hold to buy on the stock with a target of INR 193,” says SPA Research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment
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