Sagar cements reported healthy set of numbers with EBITDA growing 5x vs last year during Q3FY21, though it was down marginally by 0.3% on QoQ basis. Sales volume recorded double digit growth of 12.6% YoY to 0.86MT. Realisations also remained firm at Rs. 4229/t (up 23.2% YoY) in AP and Telangana region. However, it corrected by 6.3% QoQ. The plants during the quarter operated at 58% vs 52% last year and 50% in the last quarter. EBITDA margin for the quarter came in at 28.7% vs 7.6% LY. However, it declined by 344bps QoQ. Sharp jump being witnessed in the raw material cost (up 24% QoQ to Rs. 812/tonne). However, it was down by 11.8% on YoY basis. Freight cost increased by 3.7% on per tonne basis due to rise in the diesel prices. Optimal thermal efficiency and usage of alternative fuel helped in keeping power cost lower for the quarter. Overall, company managed to reduce total production cost by 4.9% YoY to Rs. 3015/t (down 1.5% QoQ). As a result, EBITDA/t increased by 367% YoY to Rs. 1,214/t (vs. I-direct est of Rs. 1,206/t). Higher operating profits and low interest led to company reporting net profits of Rs. 49.6 crore for the quarter vs (I-direct est: Rs. 45.5 crore). Gross debt stood at Rs. 635 crore with D/E of 0.44x for the quarter. The company has declared second interim dividend of Rs. 2/share (ie. 20% of face value).
Valuation & Outlook
With capacity expansions into newer geographies like East & Central, we expect revenue CAGR of 20.5% during FY20-22E, though full potential of new capacities would start reflecting from FY23E onwards. Despite sharp run-up in the past 4 months, the stock is still available at FY22E EV/t of $41/t, and FY22E P/E of 8.2x implying a considerable margin of safety. With strong management, cost efficiency and healthy BS, we maintain BUY rating with revised TP of Rs. 900/share (ie at 7x FY22E EV/EBITDA, $50/t on 8.25MT).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SagarCement_Q3FY21.pdf
Shares of SAGAR CEMENTS LTD. was last trading in BSE at Rs.701.25 as compared to the previous close of Rs. 735.9. The total number of shares traded during the day was 20584 in over 1577 trades.
The stock hit an intraday high of Rs. 769.5 and intraday low of 701.25. The net turnover during the day was Rs. 15181921.