Positive on cement, including Sagar Cements: SP Tulsian

SP Tulsian of sptulsian.com told CNBC-TV18, "Sagar Cements posted excellent numbers, because you have to include the numbers of BMM Cements also, which is a wholly owned subsidiary. This company has a very strong presence in Andhra and Telangana. They derive more than 50 percent of their sales coming in from these two states. Apart from that, they have presence in Karnataka and Maharashtra predominantly. So, you just cannot say that they are in the Eastern region or they are in the one or two states. They have the presence in Tamil Nadu, maybe Karnataka is giving about 20 percent, Tamil Nadu is giving 15 percent while Maharashtra is giving 10 percent.""Andhra Pradesh and Telangana put together, more than 52-53 percent to be precise including the sales figure of BMM Cements is a wholly owned subsidiary. If you go by the month-on-month (M-o-M), for March, they have sold 2.4 lakh tonne of cements, against 1.7, practically both, M-o-M as well as year-on-year (Y-o-Y). So, they have posted a growth of 37 percent. In fact, the interesting part is that again one may say that this is just one off, March has shown good numbers. Maybe like index of industrial production (IIP) and all that, so this company may have also posted good numbers in the month of March. If you take Q4, they have sold 6.08 lakh tonne which is again a growth of 56 percent. In the similar quarter last year, they have sold cement of 3.9 lakh tonne. So, growth of 56 percent quarter-on-quarter (Q-o-Q) and 20 percent Y-o-Y," he said."Sagar Cement has a capacity of 3.7 million tonne. So, if you go by the enterprise value (EV) basis, it is ruling now at sub-USD 40. So, it is looking very cheap. Maybe on earnings per share basis (EPS) basis, you may say that it is ruling at a price to earnings ratio (P/E) of closer to about 16-17.""Atul Daga of UltraTech Cement has said of looking for double digit growth. If you have that kind of thing coming in, I have been holding my positive view on the cement stocks for the last 3-4 months, because actually the indications came in 3-4 months back, but sometimes, people just get so much engrossed in this weak bias of the market, all bearish patterns and all that," he added. "But cement is really looking very good and if I go by the UltraTech, who is controlling 24 capacity of the country, referring the group including UltraTech, Kesoram Industries, Century Cement and Mangalam Cement. Looking to Sagar Cement which has a capacity of 3.7 million tonne, I am very positive because of the operating leverage, because if you see, pan-India, there is 73-74 capacity utilisation, but many of these companies are operating at a capacity utilisation of maybe 55 percent. So, operating leverages will come into play and I am keeping a positive bias and one should not say that okay, even apart from the Andhra and Telangana, maybe with good monsoon, you may see the demand picking up across all the states. Already the demands are good in the Northern part."He further added, "Even Karnataka, Maharashtra and Tamil Nadu seems to be very good. So, positive view on Sagar Cements, specifically in terms of valuation. Sub-USD 40 per tonne and I have given a growth of 20 percent Q-o-Q and 37 percent M-o-M. So, that all gives a positive view on the cement stocks.""If you go by the pure definition of Force Majeure, it do not know whether that you can really confine your claim on the particular source, or maybe because if you really see the power plants, this coastal power, that was Tata Power which was purely on the imported coal because that was on the UMPP. We have seen UMPP, Krishnapatnam got shelved but that was also on the imported coal. Otherwise also in case of Adani Power also, they were all on the imported coal.""So, even if they have all been hunting around and they have gone around India also, because Adani had a trading company also and they have been sourcing the coal from all over. At that time, because of the Indonesia, you just cannot say that because Indonesian pocket only has seen the rise in the coal prices that has happened across the globe because that effect has seen spill-over. So, rightly, in my view if I interpret the Appellate Tribunal For Electricity (APTEL) order, I think the Central Electricity Regulatory Commission (CERC) will be directed to calculate under the Force Majeure, that also gets covered which they will be entitled to receive."