The 14 reports from 5 analysts offering long term price targets
for Sagar Cements Ltd. have an average target of 943.80. The consensus estimate
represents an upside of 22.14%
from the last price of 772.75.
We also initiate on Sagar Cements (BUY, TP: INR 1,082) enthused by its prudent growth, diversification beyond south market and healthy Opex controls. Post the sharp run-ups in stock prices, we downgrade Shree Cement and Ramco Cements to REDUCE (from ADD rating earlier). Top picks: Ambuja, Dalmia in large-caps; Birla Corp, JK Lakshmi and Sagar Cements in mid-caps. In this report, we highlight long-term trends that are likely to drive the cement industry over the next few years - (1) brighter demand outlook, (2) continued consolidation - as bigger players accelerate capacity additions, (3) industrys continued efforts towards reducing its clinker factor and increasing productivity of WHRS, (4) business agility in the form of exploring multiple fuel sources to optimize cost and the industrys ability to manage its fixed costs. In our view, these will support the industry to maintain its multi-year high margins, and support its valuation re-rating. We expect robust 4QFY21E performance by the industry (aggregate EBITDA to rise 12/35% QoQ/YoY).
For the 3rd consecutive quarter, Sagar Cements Ltd (SGC) has reported an EBITDA/mt of Rs1,000+, which was primarily driven by declining operating costs and better realizations compared to last year. For 3QFY21, net sales increased by 38.8% YoY to Rs. 3.6bn. This was primarily driven by a 12.7% YoY increase in cement volumes to 0.86 mn mt, and 23.2% YoY growth in realization/mt. Despite having lower utilizations and higher OPC mix (59%), SGC still remains one of the lowestcost producers of cement. Total operating costs/mt declined by 5% YoY to Rs.3,013 and it was the 4th consecutive quarter of decline in costs reported by the company. All operating costs except for freight cost reported a decline on YoY basis. Freight costs increased by 3.7% YoY primarily due to higher diesel prices partially offset by lower lead distance (303kms). With tight control over the...
The company is targeting to reach to 10MT capacity by FY25E. In the first phase, the company is adding 2.5MT capacity (1MT in MP and 1.5MT in Odisha) for capex of |800 crore. These capacities will likely get commissioned by end of Q2/Q3FY22E. Post these expansions the total capacity will increase to 8.25MT. Having already spent |450 crore, we expect debt levels to peak around | 750 crore and D/E to peak at 0.5x by FY22E. Low cost producer in the AP/Telangana region In the past three years, company has initiated various cost efficiency...
Going forward we expect revenues to grow at a CAGR of 23.6% to Rs.2,220 cr aided by the volume CAGR of 23.4% to 5.9 MT by FY23 (contributions from the new facilities at Indore FY22 0.1 MT, FY23 0.4 MT and Jajpur FY22 0.2 MT, FY23 0.9 MT) amidst pressure on realizations.
We hosted Sagar Cements (SGC) management for a call to understand the company's future prospects and industry dynamics in the near to medium term. We retain our positive stance on the company as we believe that stable pricing and gradually improving demand will keep margins higher despite rising operating costs. We like SGC's low cost business operations and lower than industry investments for capex. We maintain our BUY recommendation on the stock with a target price (TP) of Rs1,040. Please find the key takeaways of our call below. Gradual recovery post COVID: For SGC, April'20 was a complete washout and the company lit up first kiln on 3rd May 2020 even though the government had given orders to open up a week earlier....
Exciting times ahead as company set to enter new territory Sagar cement (SGC) is one of our preferred picks in small cap cement space and we believe that it is one of the best small cap ideas with a potential of exponential gains over the next 3 to 4 years. We believe that multiple factors like improvement in demand scenario in SGC's core markets (on the back of weak base of past year), relatively better realizations (after hitting inflation adjusted decadal low in 3QFY20) in recent times, efficient operations and new capacities coming up in new better regions augurs well for the company. We expect substantial improvement in cash profits for the company over...
Sagar Cements reported a robust performance with EBITDA, PAT growth of 10%, 22%, respectively, in a challenging Q1FY21. The results were ahead of our estimates mainly on account of a sharp increase in cement prices in AP,...
NBIE Values your patronage- Vote for The Team in the Asia Money poll 2020. Click Here Highest EBITDA/mt driven by better realization Sagar Cements Ltd (SGC) has reported the highest ever quarterly EBITDA/mt of Rs1,567, which was primarily driven by higher cement realization and controlled operating costs despite weak utilisations. Key surprise and driver of earnings was realization, which at Rs4,756/mt increased by 31.5% QoQ and 13.4% YoY. The management during the previous conference calls had mentioned that pricing in its markets is at decadal low and unsustainable and we believe that the industry has...
Volume degrowth of SGC at 32% y/y was inline with industrydemanddegrowth.Consolidatedvolumesforthe quarterwas0.56MT.AccordinglynetsalesofRs2,641mn witnessed a decline of 23.3% y/y. Green shoots were particularly visible in rural segment demand and Government orders in Andhra during Q1 both are expectedtosustaingoingaheadaswell. EBITDA/te for Q1FY21 stood at Rs 1,568 (+64%...
by 11.6% y/y owing to softening of fuel prices and cost rationalizationmeasures,EBITDA/tedeclinedby18.8%y/y atRs533duetoweakpricingscenarioascomparedto last year (NSR was down ~7% y/y). Management has...
Sagar Cements Ltd (SGC) has reported good set of numbers for 4QFY20. Revenue at Rs3.04bn declined by 17% YoY due to 11% YoY decline in volume. Realization was better with 5.4% QoQ uptick, but it was down by 6.6% YoY. Operating cost/mt declined by 4% YoY as raw material cost and power & fuel cost were lower. As a result, EBITDA/mt came in at Rs534, which was almost double compared to 3QFY20 but down 18% YoY. SGC will continue to add capacity in Madhya Pradesh and Odisha which will take its total capacity from current 5.75mn mt to 8.25mn mt by June 2021. The current gross debt of the company stands at Rs4.9bn, which is expected to reach Rs8bn post completion of capex. Given the expected slowdown in...
Led by a demand slump in Andhra Pradesh from H2FY20, Sagar Cements faced challenges in FY20. While signs of a recovery were seen from January 2020, the virus outbreak led to weakness in demand and a nationwide lockdown. While operations have resumed gradually, the management said that its business is 50% below previous year's volumes and also cannot be confident whether this demand will sustain in coming months. Thus, the management expects FY21 to be a challenging year with volumes seeing a double digit decline, owing to utilisation levels remaining sub-par. We model...
Sagar Cements saw its operating performance decline during the quarter amid weakness in Andhra Pradesh & Telangana markets. Revenues dropped 18% YoY to | 262 crore (vs. I-direct estimate of | 268 crore) on the back of a fall in volumes to the tune of 17% YoY to 0.76 MT. Pricing pressure caused realisations to drop 1% YoY to | 3,431/t (vs. I-direct estimate of | 3,510/t). EBITDA margins contracted ~185 bps YoY to 7.6% YoY (vs. I-direct estimate of 11.7%). Total cost/tonne was up 1% YoY owing to inventory adjustment in the base quarter as well as higher other expenses, which was cushioned...
Better Operating Performance amid Muted Volume; Maintain BUY Sagar Cements (SGC) reported better-than-estimated operating performance despite steeper -than-expected decline in average realisation. Reported consolidated EBITDA stood at Rs424mn (+101% YoY and -46% QoQ), which was higher than expectations of Rs403mn, while EBITDA/ tonne stood at Rs596 vs. Rs294 in last year and Rs959 in 1QFY20. We note that better-thanexpected improvement in opex/tonne at Rs3,138 (-4.9% YoY and -3.1% QoQ) led to performance beat, despite average realisation declining by a steep 11% QoQ. A significant reduction in input cost/tonne (-2.7% YoY and -5.9% QoQ) mainly owing to reduction in power & fuel cost led to improved opex. Sales volume broadly remained muted at 0.71mnT (-0.9% YoY and -13.4% QoQ)....
Incremental business to come from eastern markets During FY19, Sagar Cements commissioned additional capacities, out of which 1.2 MT added in Vizag will serve the strong eastern markets. The company has sufficient headroom for growth. In the current scenario in AP & Telangana, demand is expected to remain flattish for the full year (the management mentioned 50% demand decline in September 2019 in the AP & Telangana markets). Hence, we expect additional volumes from the eastern markets to contribute to the company's growth. We slightly lower...
Increasing business from eastern markets to lead growth During FY19, Sagar Cements commissioned additional capacity of 1.5 MT enhancing its capacity to 5.75 MT. Out of new capacity, 1.2 MT was added in Vizag, which will serve the growing eastern markets. With volumes of 3.3 MT being clocked in FY19, the company has sufficient headroom for growth. Diversified presence supported volume growth during the quarter despite soft demand. We lower our estimates for volume and revenue growth to 7.4% and 11.5% CAGR, respectively, in FY19-21E factoring in the impact of...
Over four years i.e. FY16-19, Sagar Cements registered volume growth of 21% CAGR led by strong demand in its major markets and capacity addition. This was led by AP, Telangana region witnessing 40% growth in the recent times, which, however, is expected to slow down given the high base. Hence, considering the ramping up of the Vizag unit, the company via sales in the eastern region, we model in volume CAGR of 8.5% in FY19-21E to 3.9 MT. The capacity expansion in Madhya Pradesh and Odisha of 2.5 MT, which the company has undertaken would add to volumes only from FY22E...
Sagar Cements (SGC) reported a healthy performance in 4QFY19 (in line with our expectation) following contribution from realisation gains and volume jump. Strong jump in cement prices in SGC's key markets (Andhra Pradesh & Telangana) led to realisation jump of ~5% YoYat Rs3,874/tn. Volume jumped by a strong ~18% YoY to 0.94mt, indicating SGC balancing despatches (in eastern region) and realisation gains in key home markets. Effectively, revenues grew 24% YoY to Rs3.65bn (our estimate Rs3.65bn). Costs/tn stayed flat YoY at Rs3,221/tn, leading to ~60% jump in EBITDA to Rs6108mn (Rs387mn in 4QFY18). EBITDA margin gained 380bpsat 16.9%, while EBITDA/tn increased to Rs654 from Rs485 in 4QFY18. Higher interest costs and depreciation because of commissioning of additional capacity at Bayyavaram (1.5mt from 0.3mt) dragged...
