Maintain BUY on Heidelberg Cement - Robust margin despite disappointing volumes - HDFC Securities

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

In 4QFY21, Heidelberg Cement's (HEIM) revenue/EBITDA/APAT grew 1/27//120% QoQ (18/19/111% YoY) to INR 6.0/1.5/1.4bn respectively. While it reported a strong unitary EBITDA of INR 1,215/MT (led by GST benefits and superior opex controls), its volume fell 1% QoQ (+15% YoY on low base), thus muting the gains. We continue to like HEIM for its retail presence in the lucrative central market, increased volume growth visibility, and a net cash balance sheet. We maintain BUY with an unchanged target price of INR 276/share (8.5x Mar'23E EBITDA).

Q4FY21 highlights: Sales volume fell 1% QoQ to 1.25mn MT (+15% YoY on low base). NSR increased 2% QoQ (+3% YoY), mainly led by INR 120/MT gain from GST benefits received for FY21 booked in 4Q. Input costs which had spiked up in 3Q restored to normal levels in 4Q. Strong fixed cost controls further drove 5% lower unitary opex, thereby bolstering margin expansion. Thus, unitary EBITDA grew 28/4% QoQ/YoY to INR 1,215/MT.

FY21 highlights and outlook: Sales volume fell 5% YoY to 4.49mn MT as 1H was hit by COVID-led lockdowns. NSR increased 2% YoY cushioning the impact of lower sales. Unitary EBITDA rose 1% YoY to INR 1,129/MT as NSR rise offset 3% the opex inflation impact. In FY21, OCF fell 4% to INR 4.4bn due to lower profitability. Cash conversion cycle largely remained flattish YoY at negative 15days. Capex remained low and flattish YoY at INR 0.45bn. Positive FCF of INR 3.9bn (down 6% YoY) helped reduce gross debt by 27% to INR 3.5bn. HEIM has lent INR 1.5bn to its sister concern Zuari Cement at 7.65% p.a. HEIM has guided for Capex spends of INR 0.95bn in FY22E. We broadly keep our EBITDA estimates unchanged for FY22/23E.

Shares of HEIDELBERGCEMENT INDIA LTD. was last trading in BSE at Rs.254 as compared to the previous close of Rs. 251.4. The total number of shares traded during the day was 54012 in over 1174 trades.

The stock hit an intraday high of Rs. 257.6 and intraday low of 253.1. The net turnover during the day was Rs. 13775434.

Source : Equity Bulls

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