Buy Heidelberg Cement; target of Rs 145: ICICI Direct

ICICI Direct's research report on Heidelberg Cement

The central region is expected to witness healthy growth in volumes and realisation led by strong growth in demand and absence of new capacity addition. Further, higher government spending and revival in rural economy is expected to further drive cement demand. Consequently, we expect Heidelberg’s revenues to increase at a CAGR of 11.9% in FY17- 19E.

Outlook

Further, steady cash flow is expected to help reduce debt in FY17-19E. Considering this, we upgrade the stock from Hold to BUY and revise our target price upwards to Rs 145 (i.e. valuing at 11x FY18E EV/EBITDA, $121/tonne on capacity of 5.4 MT).