Buy Heidelberg Cement India Ltd. target Rs 150: Reliance Securities
Reliance Securities has a buy call on Heidelberg Cement India Ltd. at a price target of Rs 150.
By ETMarkets.com | Updated:
Reliance Securities has Buy call on Heidelberg Cement India Ltd. with a target price of Rs 150 .The current market price of Heidelberg Cement India Ltd. is Rs 132.1
Sales Volume Improves Strongly
Post subdued sales volume performance in 3QFY17 due to demonetization and planned shutdown of Damoh unit, HCIL’s sales volume grew by 9 per cent YoY and 15 per cent QoQ to 1.21mnT aided by improved rural demand following remonetisation and better agricultural output. Notably, trade segment sales accounted for 80 per cent of its total dispatches.
Satisfactory Operating Performance
Reported EBITDA rose by 9 per cent YoY and 79 per cent QoQ to Rs701mn vs. our estimate of Rs703mn. EBITDA/tonne stood at Rs580 compared toRs579 and Rs373 in 4QFY16 and 3QFY17, respectively. Notably, HCIL’s EBITDA/tonne continues to improve since 2011, when it was hovering in the range of Rs200-250/tonne. A consistent endeavour in improving operating efficiencies with supportive price environment led to improvement in operating performance.
Outlook & Valuation
With no meaningful capacity addition coming in central region in next 2-3 years, we believe HCIL would hit a sweet spot to improve its financials in ensuing years on the back of healthy demand outlook (owing to possible resolution of sand issues in UP and up-tick in government spending in MP) and supportive pricing environment. Further, visible de-leveraging of balancesheet and healthy operating efficiencies are expected to result in improvement in return ratios. We reiterate our BUY recommendation on the stock with an upwardly revised Target Price of Rs 150 (8x FY19E EBITDA).
Sales Volume Improves Strongly
Post subdued sales volume performance in 3QFY17 due to demonetization and planned shutdown of Damoh unit, HCIL’s sales volume grew by 9 per cent YoY and 15 per cent QoQ to 1.21mnT aided by improved rural demand following remonetisation and better agricultural output. Notably, trade segment sales accounted for 80 per cent of its total dispatches.
Satisfactory Operating Performance
Reported EBITDA rose by 9 per cent YoY and 79 per cent QoQ to Rs701mn vs. our estimate of Rs703mn. EBITDA/tonne stood at Rs580 compared toRs579 and Rs373 in 4QFY16 and 3QFY17, respectively. Notably, HCIL’s EBITDA/tonne continues to improve since 2011, when it was hovering in the range of Rs200-250/tonne. A consistent endeavour in improving operating efficiencies with supportive price environment led to improvement in operating performance.
Outlook & Valuation
With no meaningful capacity addition coming in central region in next 2-3 years, we believe HCIL would hit a sweet spot to improve its financials in ensuing years on the back of healthy demand outlook (owing to possible resolution of sand issues in UP and up-tick in government spending in MP) and supportive pricing environment. Further, visible de-leveraging of balancesheet and healthy operating efficiencies are expected to result in improvement in return ratios. We reiterate our BUY recommendation on the stock with an upwardly revised Target Price of Rs 150 (8x FY19E EBITDA).
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
