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Anand Rathi
HeidelbergCement (Buy)
CMP: ₹175.35
Target: ₹207
The higher realisation (up 6 per cent y-o-y) and cost saving from raw material/ P&F/ logistic cost/tonne dipping 7.5 per cent/15 per cent/7 per cent helped to a robust EBITDA/tonne of ₹1,164 in Q4. EBITDA grew 9.2 per cent y-o-y to ₹130 crore despite a 10 per cent volume loss, though revenue dipped only 4.7 per cent y-o-y. We expect volumes to shrink 11 per cent in FY21 and grow 9 per cent in FY22 with EBITDA/tonne of ₹916 and ₹1,034 respectively, aided by firm realisation.
The company completed debottlenecking of Imlai (MP) and Jhansi (UP) by respectively 0.5 million tonne and 0.55 million tonne in Q4 FY20, leading to 6.26 million tonne capacity.
Valuation: Management said prices would be firm on low volumes (a ₹10 price hike, post-lockdown). The company continues to operate at negative working capital. Besides NCDs of ₹125 crore repaid in FY20, management spoke of repaying ₹125 crore in FY21 and ₹120 crore in FY22 from internal accruals.
We expect a net D/E of -0.2x in FY21 (vs. -0x in FY20). We retain our Buy rating, at a higher target of ₹207 (9.2x FY22e EV/EBITDA).
Risks: Higher petcoke and diesel prices, extension of the lockdown.
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