Deccan Cements Ltd. share price target

We initiate coverage on Deccan Cements with a BUY for a price target of Rs. 600 (6X EV/EBITDA FY23) representing potential appreciation of 60% over the next 24 months from the CMP of Rs. 380

Good operating show; WHRS to aid savings; retaining a Buy Amid the tough business environment, Deccan Cements reported an enhanced operating performance, beating our estimates, aided by price hikes and cost savings, though the volume decline was in line with the industry. On the commencement of the 6MW WHRS, savings in fuel costs are expected to aid its operating performance. The GU expansion is currently on hold. We believe it strong net cash balance sheet and current short term profitability augurs well. We retain our Buy...

Despite near term weakness, we continue to like DCL for its strong focus on remunerative pricing and cost reduction measures. We expect demand revival in FY21E to further aid earnings recovery. Thus, we value the co at 5.7x Sep'21E EBITDA (in-line its 5-yr mean multiple). Maintain BUY with TP Rs 500/share (implies EV of USD 47/MT). DCL currently trades at an extremely low val of 2.7/3.3x FY21/22E EBITDA and EV of USD 25/MT. We maintain BUY with TP Rs 500 (5.7x its Sep21E EBITDA). In 3QFY20, DCL posted weak results (in-line EBITDA), hit by sharp demand contraction in AP/T markets (short term pain in our view).

Currently, the demand scenario in Andhra Pradesh is sluggish due to cancellation of several projects by the newly elected government. This, combined with sand availability and monsoon seasonality, led to a slump in construction activities in the state. Lower cement offtake in the first half of FY20 is attributable to these reasons. Demand recovery in the region is expected from late FY20 or FY21 once the cancelled projects are reallocated. With Deccan Cements having major exposure to the state, the current scenario would act as headwind for growth in the near term....

Despite a weak 2Q results, we like DCL for its strong margin focus and increasing cost reduction measures. We expect demand recovery in 2H to boost profitability and internal accruals for growth capex. We maintain BUY with TP Rs 610/share (6x Sep'21E EBITDA and 50% value to its FY22E CWIP). Our TP implies EV of USD 56/MT. The stock currently trades at 4.0/4.7x FY21/22E EBITDA and EV of USD 41/MT. We maintain BUY with TP Rs 610 (6x Sep21E EBITDA and 50% val to FY22E CWIP). Our TP implies EV of USD 56/MT.

We like DCL for its strong margin focus, increasing cost reduction measures and as regional pricing outlook has improved. Healthy cash generation has increased net cash on books, adding to balance sheet comfort for the capacity expansion. Maintain BUY with TP Rs 670/share (at 6x FY21E EBITDA, implying EV of USD 61/MT). The stock currently trades at 3.8x FY21E EBITDA and EV of USD 39/MT. Key risks: Continuation of weak demand beyond 1H, sharp reversal in fuel/diesel prices as against the falling trends currently. We maintain BUY with TP Rs 670/share (6x FY21 EBITDA). Our TP implies EV of USD 61/MT.

We like DCL for its strong margin focus, increasing cost reduction measures and as regional pricing outlook has improved. We expect DCL to announce brown-field expansion (potentially 1-1.5mn MT) this year as DCL's utilization will inch up to 88% by FY21 (vs 77% in FY19). Healthy cash generation has increased net cash on books, adding to balance sheet comfort for the upcoming expansions. Maintain BUY with TP Rs 680/share. We maintain BUY with TP Rs 680/share (6x FY21 EBITDA). Our TP implies EV/MT of USD 62. During 4QFY19, while DCL disappointed with vol decline, unitary EBITDA rose to Rs 701/MT (+40% YoY) boosting EBITDA/PAT growth.

Deccan Cements (DCL) registered 23% YoY volume growth in Q1FY19, buoyed by strong demand across all south markets. Still, aggressive competition is preventing price recovery while fuel and freight costs are on rise, leading to 7% EBITDA decline YoY. We continue to like DCL owing to (1) its strong balance sheet and (2) as we expect pricing to recover in south which should help the industry pass on the energy cost inflation. DCL is trading at extremely cheap valuations (14% AOCF/EV yield, 4.6x...

We retain our Buy rating on Deccan Cements (DCL) with a revised TP of Rs670. DCL reported weak earnings growth in Q2Y18 (EBITDA/PAT down 23%/30% YoY) led by high cost inflation and flattish volume offtake. We continue to like DCL owing to 1) the improving demand outlook in the south, 2) DCL's higher than peers profitability metrics, due to its...

ICICI Securities Ltd | Retail Equity Research The Deccan Cement stock has been sub-divided from one existing equity share of | 10 each face value fully paid-up into two equity shares of | 5 each face value. The record date for the same is September 12, 2017 while the exdate for the same is today i.e. September 11, 2017. Consequently, Deccan Cement's share price has dropped to ~| 583/share from ~| 1,166/share....

Deccan Cements (DECM) delivered EBITDA/t of Rs 706/t (vs estimated: 683/t, -17.7% YoY, -11.8% QoQ), driven by flattish volumes (0.36 mT, 1.6% YoY). A sequential decline in realisations (Rs 4,163/t, 4.4% YoY, -6.9% QoQ) was offset largely by a decline in selling cost (Rs 1,466/t, 11.1% YoY, -19.6% QoQ) and flattish NSRs (Rs 2,702/t, 1.1% YoY, 1.9% QoQ).

Over the last 5 years, Deccan Cements (DECM) has followed a prudent course by delivering stable operating results (bottom EBITDA margins of 13% in FY13 and FY14) in a volatile market and paying off its debt ahead of schedule (Net D/E now 0.2x vs 1.8x in FY09). Further, its capital base is one of the lowest in the industry, and will help deliver strong return ratios (RoE/RoIC: 20/27% in FY19E).

We recently met the management of Deccan Cements (DCL) to understand their outlook on Andhra Pradesh (AP) and Telangana's cement demand and get an insight into the company's future plans. DCL is a 30 year old cement brand in the south with an installed capacity of 2.3 million tonnes (MT). The company has a plant in Nalgonda (Telangana) and sells cement in Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra and Odisha. DCL has been able to register healthy margin trends mainly led by cost rationalisation through efficient use of captive...

Deccan Cement limited (DCL) incorporated in 1979 is engaged in manufacturing and marketing of cement and generation of power. However, about 99% of revenue comes from cement...