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Published on 17/03/2021 11:30:42 AM | Source: HDFC Securities Ltd

Update On Mangalam Cement Ltd By HDFC Securities

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Mangalam Cement (MGC) has guided that the demand scenario in its region, i.e., North and Central, continues to be strong with demand from both trade and non-trade segments showing strong growth. Price hikes have been taken in 2021 so far to ease off pressure on input and transportation costs. MGC’s premium cement – Mangalam ProMaxX has been received well by the market and the company sees it clocking 15K MT/month. 0.3 mnMT clinker expansion is delayed by a quarter to 2QFY22. MGC is on course to reduce ~INR 1.5bn of debt in FY21. We do not have a rating on the company.  Demand and price trends: Non-trade segment is showing strong growth with demand from the infra sector, specifically from road projects and highway projects, picking up. And from the trade segment also, the company is seeing strong demand from the urban side particularly. The north-central region has seen a price hike of INR 5-7/bag in 2021 so far, commensurate with the rise in fuel prices.

* Mangalam ProMaxX: MGC recently launched its premium PPC based cement brand Mangalam ProMaxX (in Oct’20). The company has seen extremely good demand from ProMaxX and is currently doing 15,000MT/month and commands a premium of ~INR 30/bag.

* Cost trend: WHRS for the company is running at optimum capacity and annual benefit from the same is to the tune of INR 300mn. Petcoke prices have risen to very high levels and impact of this would be seen 4QFY21 onwards as the company has exhausted its low-cost inventory it had purchased earlier.

* Ramp-ups, expansion and debt: Aligarh unit is struggling to ramp up because of low fly ash availability. But this problem should be solved with MGC winning an auction for supply of fly ash from a new power plant coming up near the Aligarh plant for a period of 10 years. MGC is also undergoing a clinker expansion of 0.3mn MT, which should be completed by 2QFY22 (delayed by one quarter due to COVID-19). The company is on course to reduce ~INR 1.5bn of debt in FY21.

* Amalgamation of Mangalam Timber: The scheme of amalgamation has been approved from both parties and only NCLT approval is due. The business is mainly struggling due to non-availability of funds. The amalgamation should solve this issue. MGC is confident of turning the timber business profitable because of its strong brand and demand. Capacity is at 100TPD and the company is looking to do INR 1-1.25bn revenue per annum, going forward, at 15-18% EBITDAM.

 

 

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