ICICI Securities Sees 21% Potential Gains To This Small Cap Cement Stock, Suggests Buy

Heidelberg Cement India Limited gets a 'buy' call for a target price of Rs 220 per share by the ICICI Securities in its report published on July 20, 2022. The brokerage recommends buying the stock of the company, it sees a potential gain of 21% considering the Current market Price and the estimated target price. Heidelberg Cement is a major cement company in India with a market capitalisation of Rs 4,118.69 crore.

Stock Outlook

Heidelberg Cement's current share price of Rs 181.35/share, opened today at Rs 183.50/share. The previous close was 181.70/share. Its 52 week low is recorded at Rs 164/share and the 52 week high recorded at Rs 277.95/share. It is currently trading at Rs 17.35/share above the 52-week low that it hit last month on the 20th.

Heidelberg Cement share, in last 1 week moved up by 3.98%, and in last 1 months, it gained 9.37%, respectively. The shares have not performed well in the long term as they fall 31.44% in the last 1 year and 9.95% in the last 3 years, respectively. However, in the last 5 years, its share gained 33.7%.

Q1FY23 Results

Heidelberg Cement reported relatively better results for Q1FY23 that saw the least margin erosion despite elevated cost pressure. Net revenue grew 6.1% YoY to Rs 589.9 crore led by 13% YoY jump in realisations while volume remained soft, declining 6.1% YoY to 1.11 MT. EBITDA margins were down 300 bps QoQ to 16.1% (747 bps YoY). Reported EBITDA/tonne of Rs 855/t was down 22.8% YoY, 11% QoQ. Migrated to concessional corporate tax rate of 25.2%. This also helped to arrest the fall in profitability. Net profit declined 24.9% YoY to Rs 51.6 crore.

Brokerage suggests buying for a target price of 220 per share

According to the brokerage, "Heidelberg Cements' share price has grown only 44% over the past five years (from ~Rs 125 in July 2017 to Rs180 in July 2022). Now with strong balance sheet, the company is in a better position to withstand near-term cost challenges and grow its business. We value Heidelberg Cement at Rs 220 i.e. 9.0x FY24E EV/EBITDA.

Key triggers for future price performance

• Heidelberg Cement has a strong brand presence and high share in retail trade (83% of total sales) of which 23% is in the premium segment.
• Better realisations and controlled costs to keep margins trajectory better vs peers. RoCE is also among the best in industry, clocking in excess of 20%.
• However, growth to remain a concern for the company as no major expansions are planned in the medium term. The work on proposed greenfield Gujarat expansion is set to begin from 2024.
• It has good divided yield of close to ~5%. (FY22 divided was Rs 9/share).

About - Heidelberg Cement India Limited

Heidelberg Cement India Limited is a mid-sized (6.3 MT) player operating mainly in the central region. Its cement plants are located at Damoh in MP, Jhansi in UP and Ammasandra in Karnataka. The company sells cement under mycem and mycem power brand. The company has also executed a mining lease in Gujarat and is seeking environmental clearances from the government.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.