Sagar Cements Ltd. share price target

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...

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 Ltd (SGC) reported poor operating performance with EBITDA at INR30 Cr against our estimate of INR34 Cr on account of higher operating cost and lower-than-anticipated realization.

ICICI Securities Ltd | Retail Equity Research Sagar Cements' results were a mixed bag. Though robust demand from infra fuelled the volume growth by 35.3% YoY to 0.92 MT, prices remained weak (down by 5.4% YoY to | 3470/t). As a result, revenues increased 28% YoY to | 319 crore (vs. I-direct estimate: | 320.4 crore) Margins were under pressure with EBITDA margin falling 322 bps YoY to 9.4% (vs. I-direct estimate: 12.3%) mainly led by higher raw materials expenses up 73% YoY to | 70 crore and 28% YoY on a per tonne basis...

ICICI Securities Ltd | Retail Equity Research Sagar Cements' results were a mixed bag with revenues beating our estimates while earnings remained below our estimates. Revenues increased 9.6% YoY to | 257.7 crore (vs. I-direct estimate of | 245.4 crore) in Q2FY19 mainly led by 25.3% YoY growth in volumes to 0.72 MT (vs. I-direct estimate of 0.70 MT). However, realisation declined 12.4% YoY to | 3,584/t (vs. I-direct estimate of | 3,679/t) EBITDA margin declined 817 bps YoY to 8.2% (vs. I-direct estimate of...