Sagar Cements - Q2FY21 First Cut - ICICI Securities

(CMP: Rs. 689; Market cap: Rs. 1620 crore)

Sagar cements reported robust performance with EBITDA and PAT growth of 2.5x and 10x respectively during Q2FY21. The results were ahead of our estimates mainly on account of sharp increase in the cement prices in AP/Telangana, recovery in sales volumes aided with the benefit of lower fuel prices during the quarter.

Q2FY21 Earnings Summary

- Revenues grew by 22.8% YoY to Rs. 325.9 crore (above our estimated revenue of ~Rs. 319 crore. Sales volume recovered sharply with growth of 1.7% YoY to 0.72MT (above pre-covid levels). Realisations also improved by 20.8% YoY to Rs. 4512/t (down 5.5% QoQ) in AP and Telangana region. The plants during the quarter operated at 50% vs 49% last year and 37% in the last quarter

- The company outperformed our expectations on the margins and profitability front, reporting EBITDA margins of 32.1% (doubled from LY) for the quarter, which though declined marginally by 80bps QoQ. As the company uses 100% petcoke, usage of low cost petcoke inventory (prices down 27% YoY) helped the company to reduce power and fuel cost by 28% YoY to Rs. 844/t. Freight costs, however were up by 10% YoY to Rs. 769/t due to increase in lead distance from 288km to 319km along with increase in the diesel prices during the quarter

- Overall, company managed to reduce total production cost per tonne by 2.4% YoY to Rs. 3062/t. As a result, EBITDA/t increased sharply by 143% YoY to Rs. 1,451/t (vs. I-direct estimate of Rs. 1,365/t). On an absolute basis, EBITDA stood at Rs. 104.8 crore, up 147.3%% YoY, 20.4% QoQ (vs. I-direct estimate of Rs. 98.4 crore)

- Higher operating profits and low interest costs led to company reporting 919% YoY growth in net profits to Rs. 50.2 crore for the quarter vs (I-direct est: Rs. 43.5 crore). Gross debt stood at Rs. 527 crore with D/E of 0.35 for the quarter. The company has declared interim dividend of Rs. 2 per share (ie. 20% of face value)

Ongoing greenfield projects of Satguru Cement Private Limited, Madhya Pradesh and Jajpur Cements Private Limited, Odisha progressing as per schedule. Post this expansion, the total capacity will increase to 8.25MT. We would be coming out with a detailed report post the conference call.

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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