111% rally from March lows, analysts say this smallcap is cementing a long-term growth story
Nirmal Bang Securities has recommended buying Sagar Cements from a long-term perspective. Once the new facilities stabilise, faster cash flow generation will result in relatively lower leverage leading to re-rating of multiples, it said.
Analysts believe the expansion in new states will rationalise freight costs. The company may also see a sturdy profit thanks to the combined benefits of better prices, reduced costs and regional diversification.
Brokerages on Dalal Street have turned bullish on Telangana-based Sagar Cements following a slew of tailwinds, including projections of demand improvement in core markets, relatively better realisations in recent times, efficient operations and capacity addition in new regions.
The stock has already advanced 111 per cent to Rs 520 as of October 1 from its 52-week low Rs 246 hit on March 25 this year. That compares with a 73 per cent gain logged by BSE Smallcap index in the same period.
Earlier, the stock rose 66 per cent in last five years till December 31 2019, when BSE Sensex gained 22 per cent.
Nirmal Bang Securities has recommended buying Sagar Cements from a long-term perspective. Once the new facilities stabilise, faster cash flow generation will result in relatively lower leverage leading to re-rating of multiples, it said.
“Sagar Cements is one of our preferred picks in the smallcap cement space, and we believe it is one of the best smallcap ideas with potential of exponential gains over next three to four years,” Nirmal Bang said.
Last year, the company acquired majority stake in Madhya Pradesh-based Satguru Cement and entire stake in Odisha-based Jajpur Cements. Through these acquisitions, it is setting up a 1 million tonnes greenfield integrated cement plant in MP and a 1.5 million tonne grinding unit in Odisha.
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Aiming at 10 million tonnes per annum capacity by 2025, the company’s ongoing 2.5 million tonne expansions in MP and Odisha will take it to 8.25 million tonnes per annum by Q2FY22.
The company produces a variety of cements such as ordinary Portland, Portland Pozzalona and sulphate resistant cement. It has improved operating performance with cost optimisation measures like thermal plant efficiency, reduced lead distance, softening of input prices, commissioning of the captive power plant and favourable fuel mix.
Analysts believe the expansion in new states will rationalise freight costs. The company may also see a sturdy profit thanks to the combined benefits of better prices, reduced costs and regional diversification.
Nirmal Bang expects a substantial improvement in cash profits for the company over FY20-FY22 and projects Ebitda and net profit growth of 29 per cent and 75 per cent, respectively, over this period.
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The company reported 30 per cent growth in standalone net profit at Rs 34.73 crore for the year ended March 31. However, gross sales declined 6 per cent YoY to Rs 847.58 crore. Topline stood at Rs 26.62 crore for FY19 against Rs 49.39 crore in FY18.
“The current strong pricing environment and greater operating efficiencies are expected to result in robust operations. With a re-rating on the cards on capacity addition over the next one year, we retain our ‘buy’ rating on Sagar Cements with a price target of Rs 733,” said Anand Rathi Shares and Stock Brokers.
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12 stocks that analysts say can offer solid returns in 2-3 weeks
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The stock markets extended Thursday's gain and witnessed a gap-up start to the trade. Analysts believe any dip can be used as a buying opportunity but investors must protect profit at higher levels. "Amid the global uncertainty and aided by weakness in the US Dollar, some moves on the upside cannot be ruled out. Even if we see some uncertain volatile moves initially, we recommend staying away from creating major shorts. Dips may be used to make fresh purchases. But investors must remain vigilant and guard profits at higher levels as the risk-on setup may have some steam left as long as the Nifty defends the crucial 10,932-11,075 zone in the near term," said Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst and founder of Gemstone Equity Research & Advisory Services.
Here are 12 stocks that analysts say can offer solid returns in 2-3 weeks:
The stock markets extended Thursday's gain and witnessed a gap-up start to the trade. Analysts believe any dip can be used as a buying opportunity but investors must protect profit at higher levels. ..
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After a quick pullback rally from Rs 1,325 to Rs 1,450, currently, the stock is consolidating in the range of Rs 1,400-1,450. From the last few weeks, the stock was trading within a narrow range but recent strong pullback rally indicates uptrend momentum is likely to continue in the medium term. On daily charts, the stock has formed range breakout kind of formation along with modest volume activity which suggests a strong possibility of fresh uptrend from current levels. For the positional traders, Rs 1,390 should be the sacrosanct level; trading above the same, the analyst expects uptrend continuation wave up to Rs 1,550. Stop loss suggested at Rs Rs 1,390.
After a quick pullback rally from Rs 1,325 to Rs 1,450, currently, the stock is consolidating in the range of Rs 1,400-1,450. From the last few weeks, the stock was trading within a narrow range but ..
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After a strong uptrend rally from Rs 600 to 960, currently, the stock is witnessing price correction. From its 52-week high of Rs 967.50, the stock has corrected nearly 15 per cent. However, the medium-term structure of the stock is still on the positive side. Currently, the stock is trading near an important retracement level along with strong bullish candle formation. Weekly charts clearly indicate a strong possibility of fresh uptrend wave from current levels. For the bulls, Rs 800 should be the key level to watch out for; trading above the same, the stock can rally up to Rs 885, the analyst said. Stop loss suggested at Rs 800.
After a strong uptrend rally from Rs 600 to 960, currently, the stock is witnessing price correction. From its 52-week high of Rs 967.50, the stock has corrected nearly 15 per cent. However, the medi..
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ICICI Bank has formed expanding Triangle formation post sharp price correction. Currently, the stock is hovering in the range of Rs 350-365. Strong bullish reversal candle on the weekly chart suggests the bears have started losing interest. Hence, if the stock consistently manages to trade above Rs 355, it can witness a quick pullback rally from current levels. In addition, the stock is also trading near 50-day SMA along with positive SAR series which suggest a strong uptrend rally is not ruled out from current levels. Unless it starts trading below Rs 355, positional traders can retain an optimistic stance and look for a target Rs 400. Fresh buying can be considered now and on dips, if any, between Rs 368-362 levels with a stop loss below Rs 355.
ICICI Bank has formed expanding Triangle formation post sharp price correction. Currently, the stock is hovering in the range of Rs 350-365. Strong bullish reversal candle on the weekly chart suggest..
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This counter appears to have registered a consolidation breakout as it posted strong gains in Thursday’s session on the back of relatively higher volumes. This kind of breakout especially after 7 sessions of sideways move shall pave the way for a sustainable rally going forward. Hence, as long as the stock sustains above Rs 105 levels, it can initially head to retest corrective swing high of Rs 122 levels from where recent correction unfolded before posting a bottom around Rs 98. Therefore, positional traders are advised to buy into this counter for a target of Rs 122 with a stop below Rs 104 on a closing basis, the analyst said.
This counter appears to have registered a consolidation breakout as it posted strong gains in Thursday’s session on the back of relatively higher volumes. This kind of breakout especially after 7 ses..
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This counter appears to be in a consolidation mode for the last four trading sessions and can be on the verge of a breakout as it is moving in extremely narrow range of Rs 329-339 levels. On such a breakout, it can swiftly head towards its 200-day moving average which is curtailing its pullback attempts. As risk-reward ratios from current levels are looking extremely positive, positional traders are advised to buy into this counter for a target of Rs 370 levels, the analyst said. Stop suggested for the trade is a close below Rs 329 levels.
This counter appears to be in a consolidation mode for the last four trading sessions and can be on the verge of a breakout as it is moving in extremely narrow range of Rs 329-339 levels. On such a b..
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This counter appears to be moving in a well-defined ascending channel for the last 78 trading sessions with multiple touch points. As this counter once again strongly recoiled after testing the demand line of the said channel, a decent bounce can be expected going forward. Therefore, positional traders can buy into this counter and look for a target of Rs 540 levels with a stop below Rs 494 levels on closing basis.
This counter appears to be moving in a well-defined ascending channel for the last 78 trading sessions with multiple touch points. As this counter once again strongly recoiled after testing the deman..
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The stock recently bottomed out near Rs 90 levels and picked up momentum to improve the bias with almost moving past 200-DMA to indicate strength and potential to rise further in coming days. With the RSI indicator also on the rise, the analyst suggests buying and accumulating the stock for an upside positional target of Rs 115-120, keeping the stop loss near Rs 88.
The stock recently bottomed out near Rs 90 levels and picked up momentum to improve the bias with almost moving past 200-DMA to indicate strength and potential to rise further in coming days. With th..
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The stock has corrected well and almost reached the trendline support near Rs 280 levels. The analyst expects the stock to bottom out and stage a reversal as it had in the past. It is well placed with the RSI correcting and is in consolidation form to gather strength. One can look to buy and accumulate this stock for an upside target of Rs 330-340, keeping the stop loss at Rs 275, the analyst recommended.
The stock has corrected well and almost reached the trendline support near Rs 280 levels. The analyst expects the stock to bottom out and stage a reversal as it had in the past. It is well placed wit..
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On the daily chart, the stock prices after defending the demand zone of previous swing low at Rs 140 levels have bounced back sharply to end above the previous swing high. This price movement has resulted in a ‘Double Bottom’ pattern which is a bullish formation. The said breakout is supported with good increase in volume and bullish candlestick pattern. The RSI is also giving a fresh buy signal and is trading well above 50 levels, supporting the buy call. In addition, prices are well above all key moving averages, indicating bullishness in the counter. Looking at all the above evidence, the analyst says the prices have resumed their primary uptrend after recent consolidation. Going ahead, the stock is likely to see strong outperformance. Hence, he recommends a buy at current levels for a target Rs 182 over the next 14 sessions. The stop loss should be fixed below Rs 156.
Analyst: Sameet Chavan, Chief Analyst, Technical and Derivatives, Angel Broking
On the daily chart, the stock prices after defending the demand zone of previous swing low at Rs 140 levels have bounced back sharply to end above the previous swing high. This price movement has res..
Institutional investors, too, seem to like the company. Latest shareholding data showed promoters held 50.16 per cent stake as of June 30, while public shareholders including mutual funds had 11.17 per cent, foreign portfolio investors (FPI) 2.88 per cent and insurance companies 1.51 per cent. The stock commands a market-cap of Rs 1,145 crore.
In terms of leverage and other key risks, the company’s gross debt stood at Rs 480 crore as of June 30. This consists of Rs 350 crore in long-term loans and Rs 130 crore in working capital.
There are expectations that the long-term debt will peak at Rs 800 crore by FY22 due to ongoing capex plans. Current debt-to-equity ratio stands at 0.33 times and the debt-to-Ebitda ration at 2.5 times, which seem to be on the higher side.
Nirmal Bang says these figures should be manageable considering the capacity addition in the central and eastern regions. On the other hand,
Anand Rathi said annual debt repayments would be in the Rs 130-150 crore range, which will not be difficult for the company to pay despite volatility in earnings.
