Sagar Cements - Steered Towards Robust Growth: Systematix Initiates Coverage With A Buy

Systematix Research Report

The buoyant industry landscape is fueled by strong demand, supported by the government’s continued emphasis on housing and infrastructure. Sagar Cements Ltd. plans to scale up the capacity of its recently acquired Andhra Cements Ltd. plant from 2.3 million tonnes per annum to 3 mtpa and rampup its existing Jeerabad (0.5 mtpa) and Gudipadu (0.25 mtpa) facilities by FY26E, to make the most of the demand momentum in the industry.

Further, Sagar Cements plans to monetize-

1. 107 acres of its Vizag plant land (ongoing rate ~Rs 40 million/acre), and

2. trim its holding in Andhra Cements to 75% from 95% currently to boost valuations.

At enterprise value/tonne of $48.8, the company trades at a substantial discount to the peer group, owing to net losses in the last few quarters.

We expect the stock to re-rate significantly, on anticipation that its financials will turnaround from the ensuing quarter.

We value Sagar Cements at Rs 333/share, giving equal (50%) weights to EV/tonne ($70 on current 10 mtpa capacity, still at 25-30% discount to the recent acquisition) and EV/Ebitda (10 times on FY26E). Initiating a 'Buy'.

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