Mangalam Cement Reports Strong June Quarter: Reiterate ‘Buy’ Call
DSIJ Intelligence / 07 Aug 2012
Mangalam Cement, a north-based cement manufacturing firm, announced its results for the June quarter 2012 wherein it has reported strong numbers.
Mangalam Cement, a north-based cement manufacturing firm, announced its results for the June quarter 2012 wherein it has reported strong numbers. The net sales of the company have gone up by 48.71 per cent on a YoY basis to Rs 189.4 crore. The company has reported a good improvement in net profit, up by 135 per cent YoY to Rs 26.27 crore as against Rs 11.17 crore in the same period last year. This is mainly on account of the decline in inventory (down by 106 per cent YoY), improvement in the realisation and a jump in the sales volume during the quarter. The sales volume of the company has increased by 36 per cent on a YoY basis to 0.464 million tonnes and the blended realisation has gone up by 9.6 per cent YoY to Rs 4,081 per tonne.
| Dispatches/Realisation June 2012 Quarter | |||||
|---|---|---|---|---|---|
| Particulars | Jun-12 | Jun-11 | YoY | Mar-12 | QoQ |
| Sales (Rs Crore) | 189.4 | 127.43 | 49 | 200.92 | -5.7 |
| Sales Volume (Million Tonnes) | 0.464 | 0.342 | 36 | 0.511 | -9.2 |
| Blended Realisation (Rs Per Tonne | 4,081.9 | 3,726.0 | 9.6 | 3,931.9 | 3.8 |
The company has done well on the margin front too. The EBITDA margin of the company improved by 278 bps YoY and 645 bps QoQ to 22 per cent. The improvement in the EBITDA margin is mainly on account of higher realisation and lower power & fuel cost. The raw material cost for most of the cement companies jumped by 100 per cent on a yearly basis. However, due to a change in the quality of coal consumption from lower grade to higher grade and some fall in the prices from the previous quarter, the power & fuel cost was down by 8 per cent QoQ to Rs 48.47 crore.
| Financial Performance June 2012 Quarter | |||||
|---|---|---|---|---|---|
| Particulars | Jun-12 | Jun-11 | YoY | Mar-12 | QoQ |
| Sales | 189.4 | 127.4 | 48.7 | 206.5 | -8.3 |
| Raw Material | 27.8 | 13.8 | 100.9 | 14.3 | 93.8 |
| Power & Fuel | 48.5 | 25.3 | 91.9 | 52.8 | -8.1 |
| Operating Profit | 41.1 | 24.1 | 70.6 | 31.5 | 30.5 |
| Net Profit / Loss | 26.3 | 11.2 | 135.2 | 18.0 | 45.6 |
| OPM (%) | 21.7 | 18.9 | 2.8 | 15.3 | 6.5 |
| NPM (%) | 13.7 | 8.7 | 5.0 | 8.6 | 5.0 |
| EPS (Rs) | 9.8 | 4.2 | 134.8 | 6.8 | 45.6 |
Cement is cyclical business and generally the June quarter starts witnessing slowdown with the onset of monsoon. However, due to the delayed rainfall this year the June quarter posted decent returns for the cement companies.
About The Company
Mangalam Cement is an integrated cement manufacturing company and primarily caters to the markets of Rajasthan, Madhya Pradesh, Haryana and western Uttar Pradesh. The company has a cement plant of 2 MTPA capacity and a coal-based power plant of 35 MW for captive consumption. It has a consistent dividend paying history of 50-60 per cent at a face value of Rs 10, thus offering decent returns to the investors.
Good Growth Prospects
In our earlier conversation, the company’s president, R C Gupta, had stated that the demand growth in the coming years will mainly be derived from the government’s focus on infrastructure and elections scheduled for 2014. Anticipating higher demand in the coming years, the company is in the process of commissioning a 1.2 MTPA cement plant by the second half of 2012 to take its total cement capacity to 3.2 MTPA. The company is also increasing its clinker capacity by 0.5 MTPA, taking the total clinker capacity to 2.2 MTPA. This will start contributing to the company’s revenues from H2CY13 onwards.
Valuations
At its CMP of Rs 147, the scrip is trading at a PE of 5.51x with its annualised EPS of Rs 26.64. Despite the run up in the scrip at the current valuation, it offers decent upside potential. Also, if we look at the company on the basis of its EV per tonne, it is available at Rs 1,795 which looks attractive as compared to the other players.
In conclusion, given the kind of growth that we expect in earnings from the new capacity addition coupled with improving demand due to higher infrastructure spending from the government and the higher cement prices, we recommend our investors to buy this scrip with an upside potential of 15-20 per cent in the next one year.
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