Prabhudas Lilladher has given Reduce recommendation for Heidelberg Cement India with a target price of Rs. 225 in its research report issued on May 31, 2021

Prabhudas Lilladher’s research report on Heidelberg Cement India

HEIM’s EBITDA/EPS grew at a CAGR of 18%/49% over FY16-FY21, predominantly led by revival in prices post consolidation in the central region. EBITDA/t grew at CAGR of 17.8% while volumes grew mere 0.2% due to capacity constraints and focus on nearby markets. Strong prices in the region has attracted meaningful surge in volumes from other regions. Increased supplies due to inflow from other regions and upcoming new capacities would keep prices under check. HEIM expanded capacity by 20% to 6.3mnt through debottlenecking. However, we believe that contraction in margins would considerably neutralize the volume growth.


Hence, we expect EBITDA to grow at a CAGR of 4% over FY20-FY23e. Given the tepid outlook on earnings growth and unattractive valuations, we downgrade the rating on stock to Reduce with TP of Rs225 (earlier Rs218), EV/EBITDA of 7.5x FY23e.