Anand Rathi 's research report on Heidelberg Cement
On its Q1 FY21 sales volumes dropping 32% y/y, Heidelberg’s revenue/ EBITDA/PAT fell 30%/29%/38% y/y. EBITDA/ton rose 4% y/y to `1,247, however, on firm realisations and cost optimisation. The net debt-free balance sheet continues, and negative working capital. Management’s focus remains on greater cost efficiencies and it talked about continuing to look at greenfield expansions. We retain our Buy recommendation, with a higher target of `231 (earlier `207).
On 30th Jun’20, it had a net cash balance of `1.6bn. Management said it would look at greenfield expansions. Regulatory hiccups (maximum promoter shareholding and mine transfer) have postponed the Zuari merger. With no major capex announced, we expect net D/E of -0.3x in FY22 (vs. 0x in FY20). We retain our Buy rating, at a higher target of `231 (9x FY22e EV/EBITDA).