Buy Orient Cement, target price Rs 155: HDFC Securities

HDFC Securities has buy call on Orient Cement with a target price of Rs 155. The current market price of Orient Cement is Rs 119.45.

Orient Cement, incorporated in the year 2011, is a Small Cap company (having a market cap of Rs 2471.74 Crore) operating in Cement sector.

Orient Cement key Products/Revenue Segments include Cement, Scrap and Power for the year ending 31-Mar-2022.

Financials
For the quarter ended 31-12-2022, the company has reported a Standalone Total Income of Rs 733.42 Crore, up 18.27 % from last quarter Total Income of Rs 620.11 Crore and up 18.29 % from last year same quarter Total Income of Rs 620.01 Crore. Company has reported net profit after tax of Rs 27.52 Crore in latest quarter.

The company’s top management includes Mr.Chandrakant Birla, Mr.Desh Deepak Khetrapal, Mr.Rabindranath Jhunjhunwala, Mrs.Amita Birla, Mr.Rajeev Jhawar, Mr.Janat Shah, Mr.Swapan Dasgupta, Mr.I Y R Krishna Rao, Mrs.Varsha Vasant Purandare. Company has S R Batliboi & Co. LLP as its auditors. As on 31-12-2022, the company has a total of 20 Crore shares outstanding.

Investment Rationale
HDFC Securities upgrades its rating on Orient Cement to BUY (from ADD earlier), owing toa correction in stock price with an unchanged TP of Rs 155/share (7.5xMar-25E consolidated EBITDA). Orient reported strong 17/16% YoY/QoQ volume growth in Q3FY23. Unit EBITDA also recovered ~INR 370 per MT QoQ on better realisation, cool-off in input cost and op-lev gains at Rs 632 per MT. Its expansions (Devapur and Tiroda) are expected to be delayed beyond FY25E.However, Orient’s volume growth will not suffer as it has a surplus capacity. The 10MW WHRS will be commissioned in Q1FY24 and will boost its margin from FY24 onwards.

Promoter/FII Holdings
Promoters held 37.9 per cent stake in the company as of 31-Dec-2022, while FIIs owned 6.02 per cent, DIIs 10.92 per cent.