Mangalam Cement has a price potential of Rs 429:Arihant cap

Per capita consumption of cement in India is only 191 kg compared to world average of 513 kg which offers huge untapped market.

Increasing demand coupled with slowing capacity additions will drive up utilisation rates.

MCL has recently added 1.25 mn tons of capacity which will drive growth in volumes.

New capacity added will consume less power. Also there were few modifications done to existing kiln. This will lead to savings of ~ Rs 150/ton on overall capacity which will help MCL to improve its ROE.

Strong realisations, lower power cost will drive margins.

MCL conducted trial run of new capacity in FY14 due to which its EBITDA per ton has come down to Rs 310 per ton from Rs 681 per ton in FY13. We expect MCL to post EBITDA/ ton of Rs 614 in FY16E.

Valuation"At CMP of Rs 314 the stock is trading at EV/ton of $ 46, which is at a huge discount to its midcap peers. We believe MCL has a price potential of Rs 429 based on EV/ton of $75", says Arihant capital markets research report.

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