Sagar Cements Q2FY21 - EBITDA at lifetime high; maintain TP of Rs 745 - YES Securities

Sagar posted lifetime high quarterly EBITDA which was led by (1) modest volume growth, (2) strong realizations and (3) operating efficiencies. Against the backdrop of sluggish demand scenario in South, Sagar managed to grow its volumes by 2% y/y primarily due to low base of company. Volumes stood at 0.72 MT with capacity utilization lingering around 48%. EBITDA/te at Rs 1,451 witnessed a phenomenal improvement of 143% y/y - which was driven by (1) strong prices, (2) softer input costs and (3) efficiency improvement through rising share of power from CPP and WHRS. Consequently, EBITDA was at lifetime high - Rs 1.05 bn, translating into a sharp growth of 147% y/y. At CMP of Rs 689, Sagar is trading at EV/EBITDA of 5.9x and EV/te of ~$35 on FY23E. We assign an EV/EBITDA multiple of 7x on Sep-22E and arrive at TP of Rs 745/share with potential upside of 8%. Accordingly, post the recent rally, we downgrade the stock from BUY to ADD. Further upgrades in earnings estimates and stock price would depend upon sustainability of strong pricing in South.

Shares of SAGAR CEMENTS LTD. was last trading in BSE at Rs.688.05 as compared to the previous close of Rs. 672.15. The total number of shares traded during the day was 10035 in over 913 trades.

The stock hit an intraday high of Rs. 695 and intraday low of 655.85. The net turnover during the day was Rs. 6795796.

Source : Equity Bulls

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