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SPA Research
Sagar Cements (Buy)
CMP: ₹417.10
Target: ₹590
Sagar Cements (SCL) is a south-based cement company having production capacity of 2.75 million tonnes (mt) in Nalgonda District, Telengana. It has acquired BMM Cements, which has capacity of 0.95 mt and captive power plant of 25 MW. The company manufactures and markets cement under the brand name ‘Sagar’. SCL being located in close vicinity of Amravati and having presence across all the key recovering markets in southern India, remains best placed to tap increasing cement demand. Proximity to raw material sources, in addition to significant savings from BMM acquisition and commencement of railway siding unit, will aid cost savings and improve margins.
Revenue is expected to register a compound annual growth rate of 31.3 per cent over FY15-FY17E led by 18.6 per cent and 10.8 per cent CAGR in volumes and realisations, respectively.
SCL is currently trading at an attractive valuation.
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