January 30, 2017 / 16:58 IST
The company has indicated the overall south market is expected to increase 8.0% YoY in FY18E. A major driver of cement demand in the south market is expected to be the AP and Telangana market. These markets are expected to increase 14.0% YoY mainly led by increased government spending by both AP and Telangana markets on low cost housing, irrigation and other infra projects.
OutlookWe expect cost rationalisation led by better fuel mix, installation of power plant in AP and improving efficiency of plants to drive margins. In addition, with improving cash flow we expect debt to reduce over the next two years. Hence, we maintain our BUY rating on the stock with a target price of Rs 175 (i.e. EV/EBITDA of 9.0x, EV/Tonne of US$85/t).
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