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Reliance Securities
Sagar Cements (Buy)
CMP: ₹583.05
Target: ₹800
Sagar Cements is engaged in the manufacture of cement. The company is engaged in the business of cement and cement-related products. The company manufactures various varieties of cement, such as ordinary Portland cement (OPC) of 53 grade, 43 grade, Portland Pozzalona Cement (PPC) and Sulfate Resistant Cement (SRC) to suit various need of customers.
Shares of Sagar Cements has been rising on the expectation of likely price recovery in its key Andhra Pradesh and Telangana markets.
A sharper-than-expected improvement in average realisation along with steady growth in sales volume had aided Sagar Cements to report a strong 116 per cent y-o-y growth in EBITDA to ₹78.6 crore in 1QFY20. Consolidated EBITDA/tonne improved to ₹959 versus ₹492 in 1QFY19 and ₹654 in 4QFY19.
We believe a firm pricing environment, production ramp up from new plants, commissioning of 18-MW CPP and further ramp-up in WHRS capacity and hydel power are likely to aid its performance in subsequent quarters.
Further, geographical diversification in Central region and higher blended cement bode well for Sagar Cements in the long-run.
We maintain our fundamental BUY rating on the stock with a target price of ₹800.
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