Buy Sagar Cement - Anand Rathi

Sagar Cement (Price: Rs.275, Target: Rs.320, Rating: Buy)

We expect Sagar Cement to post a 15% yoy revenue drop, driven by 3% realisation decline and 12% volume decline. Price declines in the South, particularly AP, led to realisation declines while volumes declined due to demand sluggishness (no major spending on infrastructure, housing).

With state elections due in Karnataka (May'13) and AP (May'14), we expect some pick-up during the next 6-12 months. We expect the company to post EBITDA per ton of Rs.430 (compared to Rs.440 in the previous quarter and Rs.790 in the year-ago quarter), leading to EBITDA decline of more than 50% yoy and 10% qoq.

This, coupled with lower other income (Rs.25m, vs Rs.107m yoy) is expected to flow through to a much weaker net profit at Rs.19m compared to Rs.48m in the previous quarter and Rs.177m in the year-ago quarter.

Source : Equity Bulls

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