Cholamandalam securities' research report on Heidelberg Cements India
HCIL’s revenue for 1QFY21 fell by 30.2% YoY to reach ₹ 4.1bn as against ₹ 5.8bn in 1QFY20, due to fall in volume (~32%); this was in part due to the shutdown in April. PAT dropped by 38.1% YoY to ₹ 489mn. During the quarter healthy demand recovery seen in the central region on the back of pre-monsoon work and rural housing demand going up. On a per tonne basis, gross realization increased by 2.4% whereas total operating cost (incl. freight) increased by 1.8% resulting in EBITDA of ₹ 1,264 per tonne as compared to ₹ 1,253 per tonne in 1QFY20. Concerted efforts to optimize costs supported HCIL; however, decrease in volume negatively impacted the operating leverage. On a per tonne basis, increased fixed cost is partially offset by lower raw materials and power & fuel costs.
Despite near term headwinds we remain optimistic on the growth prospects of HCIM, the company is done with its planned capacity augmentation and there is no major capex outlay for near-term. At CMP, the stock trades at EV/EBITDA of 5.4X FY22E. We maintain our BUY rating with a revised target price of ₹ 200 assuming an EV/EBITDA multiple of 7.2X FY22E.
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