Sagar Cements Q4 Results Review - Lower Profitability Remains A Concern: Dolat Capital

Dolat Capital Report

Sagar Cements Ltd.’s Q4 FY24 volume/revenue/adjusted profit after tax came in-line, however realisation, Ebitda and Ebitda/tonne were below estimates. Revenue grew by 14.0% YoY to Rs 7.1 billion (+5.9% QoQ) led by volume growth of 18.9% YoY to 1.6 million tonne (+14.7% QoQ), partially offset by -4.1% YoY in realisation/tonne to Rs 4,392 (- 7.7% QoQ).

Ebitda grew +75.3% YoY/-21.7% QoQ to Rs 681 million. Adjusted net loss stood at Rs 123 million versus Rs 775 million YoY. The company targets volume of 6.5 mt (versus earlier guidance of 7 mt) for FY25E.

We expect revenue/Ebitda compound annual growth rate 13.9%/34.7% over FY24-26E led by 16.4%/15.2% volume growth and -5%/+1% blended realization growth in FY25E/FY26E.

However, we expect improvement in net loss at ~Rs 117 million in FY26E versus Rs 837 million net loss in FY24.

We are positive on Sagar Cements' strong fundamentals driven by-

1. its positioning as a low-cost cement producer, achieved through various cost rationalising measures and

2. its constant efforts to expand capacity and diversify revenue streams.

However, we decrease our FY25E/FY26E Ebitda estimates by 38.6%/25.9% post factoring lower volume coupled with lower realisation and also expect Ebitda/tonne of Rs 508/Rs 604 for the same period.

Accordingly, we downgrade to ‘Sell’ rating from Accumulate with revised target price of Rs 186 based on 7.5 times consolidated FY26E enterprise value/Ebitda plus Vizag land monetization at Rs 49/share (Rs 6.4 billion).

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