Buy Heidelberg Cements; target of Rs 186: Chola Securities

Chola Securities's research report on Heidelberg Cements

HCIL’s revenue grew by 22% YoY to INR 5.4bn due to growth in sales volume coupled with superior realizations. The company posted a 15% YoY growth in sales volume to 1.26mn ton aided by pick-up in construction activities, better sand availability in most parts of the central India especially in Uttar Pradesh. Realization per ton increased by 7% YoY (2.5% QoQ) to INR 4,287/tn. Trade and Non-trade mix of the company is currently at ~83:17.

Outlook

Heidelberg's capacity utilisation stood at 92% and it is expected to improve further from current high levels due to higher demand led by increase in infrastructure spending and affordable housing under Pradhan Mantri Awas Yojna. At CMP, the stock trades at EV/EBITDA of 9.1X and 7.7X of FY19 & 20E respectively. We rate the stock a BUY with a price target of INR 186 assigning a EV/EBITDA multiple of 9X FY20E.