Buy Sagar Cements, target price Rs 220: HDFC Securities

HDFC Securities has buy call on Sagar Cements with a target price of Rs 220. The current market price of Sagar Cements Ltd. is Rs 193.65. Sagar Cements Ltd., incorporated in the year 1981, is a Small Cap company (having a market cap of Rs 2538.34 Crore) operating in Cement sector.

Sagar Cements Ltd. key Products/Revenue Segments include Cement, Power, Scrap, Coal and Other Operating Revenue for the year ending 31-Mar-2022.


Financials
For the quarter ended 30-09-2022, the company reported a Consolidated Total Income of Rs 489.48 Crore, down -14.15 % from last quarter Total Income of Rs 570.16 Crore and up 31.76 % from last year same quarter Total Income of Rs 371.50 Crore. Company reported net profit after tax of Rs -49.19 Crore in latest quarter.

Investment Rationale
Management believes its energy cost will decline by ~INR 250 per MT QoQ in Q3. It expects blended cement share to increase to 70% in the next few years (Q2FY23 - 51%). It believes healthy demand in the south and the ramp-up of Jeerabad/Jajpur plants will boost volume growth by 30% YoY (to ~4.7mn MT) in FY23 and increase the share of blended cement from FY23 onwards. Sagar expects to complete the acquisition of Andhra Cements by Q3FY23 end (2.6mn MT cement and 1.65mn MT clinker). It has not yet factored the same into operational estimates. Factoring in weak Q2 numbers, it trims EBITDA estimates for FY23/24/25E by 5/6/2% respectively.

Promoter/FII Holdings
Promoters held 45.2 per cent stake in the company as of 30-Jun-2022, while FIIs owned 4.47 per cent, DIIs 18.21 per cent.