Buy Deccan Cements; target of Rs 1468: HDFC Securities

HDFC Securities' research report on Deccan Cements

Deccan Cements (DECM) delivered EBITDA/t of Rs 706/t (vs estimated: 683/t, -17.7% YoY, -11.8% QoQ), driven by flattish volumes (0.36 mT, 1.6% YoY). A sequential decline in realisations (Rs 4,163/t, 4.4% YoY, -6.9% QoQ) was offset largely by a decline in selling cost (Rs 1,466/t, 11.1% YoY, -19.6% QoQ) and flattish NSRs (Rs 2,702/t, 1.1% YoY, 1.9% QoQ).

Outlook

The deleveraging (large part of which has already played out) helps DECM navigate its volatile market with more comfort, as compared to peers. We believe that the company can plan its next expansion once cash levels become comfortable (say 30% equity contribution for a 1 mTPA kiln order). We maintain our BUY rating (TP: Rs 1,468, 6.5x EV/EBITDA, implied USD 60/t).