Emkay Global Financial has given Buy recommendation for Sagar Cement with a target price of Rs. 220 in its research report issued on Oct 20, 2022

Emkay Global Financial’ research report on Sagar Cement

Sagar Cement’s Q2FY23 EBITDA sharply declined by 91% YoY and QoQ to Rs57mn vs. our estimate of Rs156mn (Consensus: Rs234mn) owing to higher-than-expected increase in cost/ton. Accordingly, EBITDA/ton declined to just Rs55 (Emkay est.: Rs150). Volume growth remains superior at 21% YoY to 1.03mt, in line with our estimates. The company has recently increased its capacity by 43% to 8.3mt. Sagar is expected to register an industry-leading volume CAGR of 19% over FY22-25E, aided by a low base effect and capacity expansion. The company is also expanding its footprint to the East and Central regions, which would lead to reduced earnings volatility. In May-22, the company issued 13.2mn equity shares (10% stake) to Premji Invest at Rs265/share, totaling Rs3.5bn, to fund growth capex. Factoring in Q2FY23 miss and higher opex/ton, we reduce our FY23 EBITDA estimates by 29% and 4-6% for FY24E and FY25E, respectively.


We maintain our Buy rating on the stock with a revised Sep-23 TP to Rs220 (earlier Rs225) post the quarterly rollover. Our DCF-based TP implies a one-year forward EV/EBITDA of 8x.

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