Buy Mangalam Cement; target of Rs 257:Emkay

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26 Aug, 2025 12:21

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Emkay's reserach report on Mangalam Cement Mangalam Cement’s Q2 performance was slightly better than our estimate with adj. EBITDA at Rs50.mn (adj. for Rs45mn against DMF provision for prior period) vs. est. Loss of Rs40mn. EBITDA/tn was at Rs89/t against Rs337/t in Q2FY15 and expected loss of Rs72/t Sales volume declined by 11.8% yoy to 0.56MT, slightly higher than our estimate of 0.55MT. Also, realization declined by 4.7% yoy to Rs3,557/tn, however, it was 2.6% higher than our estimate of Rs3,468/t Cement prices have again come under pressure in the North region post recovery seen in Aug-Sep '15. Factoring in pressure in pricing scenario in the key markets of the company (North and Central regions), we have cut our EBITDA estimates by 50.9%/21.8%/6.4% for FY16e/FY17e/FY18e The stock has corrected by ~30% in past 5 months, and we believe that the pressure will continue in the near-term due to volatile pricing environment, however, on account of attractive valuations, we retain Buy on the stock with revised price target is Rs257 (earlier PT Rs330)Cement prices have again come under pressure in the North region post recovery seen in Aug-Sep '15. We believe FY16e will be a challenging year for the company and improvement in earnings will be a function of pricing improvement. Earnings volatility is expected to continue for small cement companies in the North region as low demand has led to increased price volatility. Thus, we have revised our EBITDA estimates downwards sharply by 50.9% / 21.8% / 6.4% for FY16e / FY17e / FY18e. However, we expect EBITDA to grow at a CAGR of 45.1% over FY15-FY18e with EBITDA margin of 15.3% in FY18e with improvement in capacity utilization leading to benefits of operating efficiency. Though we expect stock to remain under pressure in the near term, we Maintain Buy on the stock as the valuations are very attractive. Our revised price target is Rs257 (earlier PT Rs330) based on 5.5x mid-FY18e EV/EBITDA.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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