Buy Mangalam Cement - A C Choksi

Greenfield expansion plan on track, to impel volume led growth.

Mangalam Cement have plans to enhance its clinker capacity by 0.50 mtpa at its existing units by April, 2013. It is setting up a new 1.25 mtpa clinker grinding unit in Morak (Rajasthan) by CY13 end. Post expansion the capacity of the companywould increase to 3.25 mtpa.

Presence in better performing markets to bodewell.

Mangalam Cement is present in Haryana, Madhya Pradesh, Rajasthan, Uttar Pradesh and Delhi. Its majority sales come from Rajasthan and Uttar Pradesh both accounting for 65%-70% of its Revenue. It's majority exposure to better performing markets to bodewell for the company.

Self sufficiency in power&savings in opex to improve margins.

We expect EBITDA/tonne to improve from 634/tonne in FY12 to 806/tonne in FY14, growing at an impressive CAGR of 12.7% over the next two years. Consumption in limestone has gone down by moving to pet coke from coal.We seeEBITDAmargins to improve over the next couple of years.

MCL is trading at attractive valuations.

We initiate coverage on Mangalam Cement with aBUYRating with a target price of 179 , valuing it using EV/Tonne Method. At the recommendation price of 162, the stock is trading at 6.9x and 6.3x its FY13E and FY14E earnings, respectively. The stock is trading at an EV/EBITDA of 4.7x and 4.2x FY13E and FY14EEBITDA, respectively.

Source : Equity Bulls

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