Accumulate Heidelberg Cement India; target of Rs 220: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Heidelberg Cement India

Heidelberg cement (HEIM) reported strong earnings with 6%/12% beat on ours/consensus PAT estimates. Beat was primarily driven by lower than expected costs and better than expected volume growth. Unitary EBITDA rose 31% YoY to Rs1,200 (PLe:Rs1,133). Exhaustion of capacity remains Achilles heel for HEIM. To address the same, it is expanding capacity by 0.5mnt through debottlenecking which would support 4-5% YoY growth in volumes for next couple of years. In addition, it is also exploring inorganic route to expand volumes.

Outlook

Despite exhausted capacity, HIEM maintained its strong earnings growth trajectory on the back of steep increase in margins. Led by better outlook on Central region, quality operations and attractive valuations, we maintain Accumulate with TP of Rs220, EV/EBITDA of 9x FY21e.

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