Reliance Securities

Mangalam Cement (Buy)

CMP: ₹285.3

Target: ₹400

Mangalam Cement is a cement manufacturing company. The company is engaged in producing cement in 43 grades, 53 grades and Portland Pozzolana Cement (PPC) using the dry process. PPC is special blended cement that has hydraulic binding properties. PPC is produced by inter-grinding higher strength cement clinker with processed fly ash. 43 Grade Cement is an ordinary portland cement, which is used in all constructions, including plain and reinforced cement concrete, brick and stone masonry, floors and plastering.

Mangalam Cement is likely to witness healthy traction ahead mainly on account of steady realisation in Northern region and cost synergies.

Notably, commissioning of 11MW WHRS in the last month and recent US petcoke contract at $70 ($77/tonne average cost in second quarter) along with likely improvement in utilisation will lead to meaningful decline in operating expenses in the subsequent quarters.

Further, improved fly-ash availability, new coal mining and improved biomass contribution are expected to aid its operating performance.

We forecast EBITDA/tonne at ₹707 and ₹696 for FY20E and FY21E, respectively.

We maintain our fundamental ‘buy’ recommendation on the stock with a target price of ₹400.

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