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Saurashtra Cement Ltd

Hathi Cement........Cheapest cement stock in Mid Cap space

            CMP Rs 71 (FV10)                             Analyst : Janak Shah (M.B.A. Finance)

            Market Cap Rs 328 crs                     Date: 4th Dec 2015

            Target : Rs 90                                    Time frame : 1 year target

About the Company:

Recommended in July 2015 at Rs 65, it has advanced to Rs 71. The company is promoted by the Jay Mehta group.  The company has been into the field of manufacturing cement since the last few decades. It has seen a troubled past and after the restructuring done in 2013, there has been vast improvements in the performance of the company. The company’s product are being marketed under the “Hathi” name.


Hathi cement has a vast set of clients in Gujarat and Mumbai. The company has a 1.5 M TPA plant in Saurashtra to make quality cement. It had tried to increase the capacity earlier but due to cash cruch it could not manage to do so. This old plant was revamped in the year 2001 and the company is valued at just US $ 35 per ton as compared to other peers like Sanghi which is at $68, Mangalam at $46, Birla cement at $53, Orient at $96 and Shree and Ultratech at $240 and $215. Saurashtra cement is a very cheap buy due to quality product and extremely attractive valuations.


The company has  a  book value  of over Rs 45 for year ending March 2015. The company reported EPS of 8 this year (2015) and the forward PE stands at just 7 given the price of Rs 71 a share. Even if the company plans expansion, it has enough limestones mining lease till 2041. The cash flow expected this year is 600 to 700 mn. The company has captive power plant too to take care of the electricity consumption. The company is going to be debt free very soon. We expect by Q1 2016, the company will be 0 debt company. 

Equity Holding:

Promoters hold about 64.5% and  Dii’s hold 2%  the public holding is about 33.5%. Almost 99% of promoters holding are pledged.

Comparisions to Peers:

The company can be compared to Mangalam, Heidelberg Cement, Orient Cement, Sanghi cement etc.

 Investments Rationale:

The government has a lot of focus on building roads where lots of cement will be used. The monsoon is a period when the demand is less and Q1 is generally weak for all companies but the remaining quarters have good demand given the growth in infra which will take place over the next 5 years. The promoters pledged holdings is going to fall down and as mentioned earlier the company will achieve debt free status. Cheapest cement stock. ROE of 40% and company is cash rich. Margins of 17% are higher than peers. Even if the company doubles capacity, it will cost 250 crs as grinding capacity of 3m TPA and other infrastructure is in place.  

Price Targets:

At current price of Rs 64 per share the company is available at a low valuation despite the current upmove from the recent low of Rs 40 and the price can move to Rs 85-90 per share in the next 1 year. The company is poised to take the advantage of the opening of the economy and focus on roads and infrastructure laid down by the government.

( Disclosure: The analyst has no holdings in the shares on date of publication of the issue)

Sebi  Registration No: INH000001717

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