Retain BUY on Sagar Cements - Strong show - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

Sagar Cements' (SGC) 4QFY21 consolidated net sales grew 15/38% QoQ/YoY to INR 4.2bn, as volume grew 21/22% QoQ/YoY to 1.02mn MT. NSR cooled off 3% QoQ (still up 13% YoY). Unitary EBITDA remained strong at INR 1,019/MT (+91% YoY) on robust pricing and healthy cost controls. This led to a QoQ flattish EBITDA/APAT of INR 1.04/0.5bn (+1.3x/41.2x YoY). We like Sagar for its continued regional capacity/sales expansion, multiple opex reduction exercises, and healthy balance sheet. We retain BUY rating with an unchanged target price of INR 1,082/share (7x Mar'23E consolidated EBITDA).

4QFY21 performance: Sales volume grew 19/22% QoQ/YoY to 1.02mn MT on robust demand. NSR fell 3% QoQ on price cool off (still up 13% YoY). On QoQ basis, higher employee and other expenses drove up opex by 2% (down 1% YoY). Despite 16% QoQ moderation, unitary EBITDA remained solid at INR 1,091/MT. While EBITDA came in flat QoQ, it rose 134% YoY.

FY21 performance: Sales volume grew 1% YoY to 3.2mn MT despite COVID impact in 1H. Utilisation stood at 55% vs 54% YoY. NSR grew 16% YoY on firm prices in 1HFY21. Strong cost controls further led to 3% opex decline YoY and an all-time high unitary EBITDA of INR 1,267/MT (+114% YoY). This coupled with ~24% fall in interest cost led to 6x APAT growth.

Other updates and outlook: SGC's central & east expansions should commence as per schedule by Sep-21. It expects to operate these units to~50/70% utilisation in 2HFY22/23E. Cash Conversion Cycle stood at (-1) day in FY21 vs 9 days, led by significant decrease in debtor days. Robust OCF generation supported ongoing Capex. Thus, net debt grew a modest 15% YoY to INR 5.5bn. Net debt/EBITDA cooled off to five-year low of 1.4x in FY21. SGC declared a total dividend of INR 6.5/share for FY21.

Shares of SAGAR CEMENTS LTD. was last trading in BSE at Rs.783.75 as compared to the previous close of Rs. 804.4. The total number of shares traded during the day was 10131 in over 967 trades.

The stock hit an intraday high of Rs. 829.7 and intraday low of 770. The net turnover during the day was Rs. 8077333.

Source : Equity Bulls

Keywords