SPA Research research report on Mangalam CementMCL reported improved set of numbers largely in-line with our estimates. While weak pricing environment continued to exert pressure on revenues, EBIDTA/tonne improved by 1.8x to INR 467/tonne driven by 17.8% decline in expenditure/ tonne. 0.5 mt Aligarh grinding capacity expansion remains on track and MCL is all set to commence operations from Q2FY17 onwards. We incorporate FY18 numbers and continue to retain our BUY recommendation on the stock with a revised target of INR 453 (earlier INR 399). Cement demand after languishing in low single digits for last 3 years, is expected to recoup back to +1.5x GDP over the next few years, as infrastructure projects and initiatives announced by the Government come on stream. Commissioning of new capacities along with self sufficiency in power coupled with presence in structurally sound northern region provides strong prospects for MCL. Expected commissioning from new 0.5 mt Aligarh unit will enable it to dispatch more to VAT exempted Rajasthan market. Improving profitability owing to better efficiency of new unit and efforts to reduce lead distance and rationalize P&F costs will aid growth. Currently the stock is trading at FY18E 9.4x PE, 5.3x EV/EBIDTA and EV/tonne of INR 2252 its FY18E capacity. We incorporate FY18 numbers and continue to retain our BUY recommendation on the stock with a revised target of INR 453 (earlier INR 399) based on FY17 EV/tonne of INR 3600. 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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