Add Deccan Cements, target price Rs 515: HDFC Securities

HDFC Securities has add call on Deccan Cements with a target price of Rs 515. The current market price of Deccan Cements Ltd. is Rs 448.3. Time period given by analyst is one year when Deccan Cements Ltd. price can reach defined target.

Deccan Cements Ltd., incorporated in the year 1979, is a Small Cap company (having a market cap of Rs 624.73 Crore) operating in Cement sector.

Deccan Cements Ltd. key Products/Revenue Segments include Cement, Power Generation, Other Operating Revenue and Scrap for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Standalone Total Income of Rs 189.77 Crore, down -1.74 % from last quarter Total Income of Rs 193.13 Crore and down -12.57 % from last year same quarter Total Income of Rs 217.06 Crore. Company reported net profit after tax of Rs .20 Crore in latest quarter.

Investment Rationale
DCL is awaiting environment clearance for its 1.4mn MT brownfield clinker expansion. It expects it to come through by Jun- 22. It is also awaiting environment clearance for its 0.8mn MT greenfield SGU. The land acquisition for its 1.2mn MT greenfield Nellore SGU is also underway. DCL spent INR 1bn towards these projects (of the total project cost of ~INR 8bn). The brokerage expects these projects to be operational by FY25E. The company would fund the expansion through internal accruals and debt, leading to net debt/EBITDA of ~2x in FY24E. It cuts FY23/24E EBITDA estimates by 11/14%, factoring in lower volume and fuel cost pressure. It lowers valuation multiple to 6x from 6.5x earlier, factoring in lower profitability.

Promoter/FII Holdings
Promoters held 56.24 per cent stake in the company as of 31-Mar-2022, while FIIs owned 7.72 per cent, DIIs 0.41 per cent.