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Reliance Securities
HeidelbergCement (Buy)
CMP: ₹194.15
Target: ₹260
HeidelbergCement India is engaged in manufacturing of Portland cement. The company's product portfolio includes Portland Pozzolana Cement (PPC) and Portland Slag cement (PSC). The company's manufacturing facilities are located in Ammasandra, Karnataka; Damoh, Madhya Pradesh, and Jhansi, Uttar Pradesh.
HeidelbergCement has been reporting consistent superior performance for the last couple of quarters on the back of favourable realisations, steady demand and cost-saving measures taken by the company, which we expect to persist in ensuing quarter. However, weak demand in 1HFY20 will result in soft volume in ongoing quarter. f
Looking ahead, we expect visible de-leveraging of balancesheet (net debt at mere ₹80 crore currently) and healthy operating efficiencies to result in the best return ratios vis-à-vis its comparable peers.
We further expect that capacity constraints to be addressed by the company in due course, which will aid in re-rating of the stock.
Current valuations at 6.5x FY21 EBITDA appear to be attractive and hence we maintain our fundamental BUY recommendation on the stock with a Target Price of ₹260.
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