IGI Logo

New capacity operating cost impacted margins

Result Synopsis

Sagar Cements (SGC) reported strong sequential volume growth of +52% (+10% y/y) that translate in revenue/EBITDA growth of +50/32% in Q4FY22. While reported weak EBITDA/te of Rs542 (YSEC est. Rs628) as total cost/te rise by +1% q/q (+28% y/y) over marginal weak NSR by -1% q/q (+9% y/y) in Q4FY22. SGC reported net loss of Rs115mn on account of higher finance cost due to increased debt in Q4FY22 for acquisition. For FY22, SGC posted a record volume of 3.6MT (+14% y/y; YSEC est. 3.4MT) along with healthy NSR (+2% y/y) translate in +16% revenue growth to Rs15.9bn (All time high) but EBITDA/PAT decline to Rs2.76/0.69bn (-31/63% y/y) as operating cost increased by +36% y/y in FY22. SGC completed its ongoing capacity addition, took the total cement capacity to 8.25MTPA (+43%) in FY22. Therefore, with the strong demand outlook and the production ramp-up, we expect strong volume growth of +39/7% y/y in FY23/24E. However, inflated energy cost posing challenges to the industry and likely to remain elevated till H1FY23 thereafter moderation is expected. Therefore, we trimmed our EBITDA/PAT est. by 22/31% for FY23E with the belief that EBITDA/te to improve by +17% y/y to Rs893 in FY23E and Rs1166 in FY24E. We need to monitor the overall impact on operational efficiency, due to newly added capacities in east & central. Thus, we retain our BUY recommendation with a TP of Rs290, valuing the stock at 7x EV/EBITDA on the FY24 estimates.

Result Highlights

* SGC reported in-line revenue growth of +50% q/q and +20% y/y to Rs5bn led by strong volume growth of +52% q/q and +10% y/y to 1.13MT in Q4FY22. While EBITDA grew by +32% q/q to Rs0.61bn (YSEC est. Rs0.71bn) in Q4FY22 but remain lower as compared to Rs1.04bn in Q4FY21.

* Despite the sequential power & other cost/te decline by 16% & 4% (+75% y/y & +24% y/y), the Total cost/te increased by +1% q/q (+28% y/y) led by surge in RM cost/te by +89% q/q (+4% y/y) impacted the EBITDA/te to Rs623 decline by 13% q/q and 47% y/y in 4QFY22.

* In FY22, Volume grew by +14% y/y with the NSR increase of +2% y/y translated in reported revenue jump by +16 % y/y to Rs15.9bn (v/s YSEC est. of Rs16bn).

* EBITDA/PAT decline by 31/63% y/y to Rs2.7/0.69bn led by jump in total cost by +31% y/y, whereas EBITDA/te decline by 40% y/y to Rs765 v/s YSEC est. of Rs791 in FY22.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer