Buy Mangalam Cement; target of Rs 277: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com`s research report on Mangalam Cement “Mangalam Cement’s Q1FY15 numbers came in ahead of our estimates mainly due to a sharp growth in volume along with improved realisations. Revenues were up 35.5% YoY to Rs 228.1 crore led by 28.9% YoY growth in volumes (0.58 MT) while realisations increased 6.4% YoY to Rs 3954/tonne. Improved volumes helped in improving margins, which came in at 15.5% with EBITDA/tonne increasing to Rs 614/tonne, up 12.5% YoY. However, net profit declined 31.2% YoY to Rs 13.0 crore due to higher tax (I-direct estimate: Rs 13.9 crore).” “Mangalam Cement has always remained a laggard in terms of capacity expansion. However, a presence in the strong northern region has always helped it to keep utilisation at healthy levels. At present, the company sells ~95% of its cement production in the north while the remaining volume is sold in the central region. Both northern and central regions have high demand compared to other regions. For FY11-14, cement consumption grew at 5.4% CAGR in Northern India and at 7.2% CAGR in central region compared to 5.1% CAGR consumption growth for all-India. Going ahead also, demand environment is expected to remain robust in these regions resulting in favourable environment for Mangalam Cement. The new cement mill with a capacity of 1.25 MTPA has commenced commercial production from the end of May this quarter. With this, total cement capacity of the company has reached 3.25 MTPA from current capacity of 2.0 MTPA. Clinker capacity is also expected to increase to 2.21 MTPA from current 1.71 MTPA. The company expects to utilise the new capacity at more than 90% within six months of commissioning, which will drive the growth of the company in coming years. Existing capacities of the company are also being utilised at more than 90% level.” “At the CMP of Rs 241, the stock is trading at 5.2x its FY15E and 4.1x its FY16E EV/EBITDA respectively. On an EV/tonne basis, the stock is trading at $45 on capacity of 3.25 MT, which is at ~35% discount to its midcap peers. This leaves much scope for appreciation over the longer term despite the sharp rally in stock prices over the last month. Given the improving demand scenario coupled with the capacity expansion of 1.25 MT from Q1FY15E onwards, we expect growth in profitability to remain healthy over the next two years. Hence, we continue to maintain our BUY rating on the stock with revised price target of Rs 277/share (i.e. at 4.5x FY15E EV/EBITDA, $50/tonne on capacity of 3.25MT),” says ICICIdirect.com research report. 

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