Hold Mangalam Cement; target of Rs 193: SPA Research

SPA Research has recommended hold rating on Va Tech Wabag with a target of Rs 193 in its November 15, 2012 research report.

“Mangalam Cement reported strong set of numbers for the Q2FY13 on the back of sharp surge in volumes and significant improvement in operational parameters. While the topline growth was a bit higher than our estimates at INR 1617 mn (up 30.8% YoY) largely due to better realisations, net profit surpassed our estimates by growing 8.0% sequentially (+41.7x YoY) to INR 284 mn on account of lower than expected costs. EBIDTA/tn improved by 4.1x YoY (+7.7% QoQ) to INR 823/tn mainly on account of higher realisations and lower operating cost. Upcoming clinker and cement capacity of 0.50 mt & 1.25 mt by Apr 13 & Oct 13 respectively will drive the next leg of growth. We change our rating to HOLD on the stock with a target of INR 193.”

“MCL reported a healthy revenue growth of 30.8% YoY to INR 1617 mn, led by volume growth of 17.1% to 0.43 mt coupled with 11.7% improvement in cement realisations to INR 3763/tn. MCL like all other cement players managed to witness sharp improvement in realisations largely due to delayed monsoons, resulting in shorter period of seasonal decline in prices (which resulted in 4.1% sequential improvement in realisations). Demand is expected to improve going forward with the commencement of construction activities post monsoon season, which will result in recovery in cement prices. EBIDTA/tn expanded significantly to INR 823/tn in Q2FY13 from INR 202/tn in Q2FY12 and INR 765/tn in Q1FY13 led by higher cement prices and better operating parameters. The adjusted raw material cost has declined significantly to INR 137/tn as MCL successfully reduced its high grade limestone consumption on the back of using petcoke as a fuel. Freight cost increased by 16.3% to INR 1090/tn due to the recent 5-7% increase and levy of service tax on rail freight. Power & Fuel declined by 3.9% YoY to INR 1139/tn mainly on account of higher pet coke usage. The EBITDA margin has improved by 1588 bps YoY and 81 bps QoQ to 22.5%.”

“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. At the CMP of INR 180, the stock trades at attractive valuations of FY14E P/BV of 0.8x & PE of 5.0x and EV/tonne of US$46 its FY14E capacity. We change our rating to HOLD on the stock with a target of INR 193,” says SPA Research report.  

FIIs holding more than 30% in Indian cos

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