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 The Equity Desk Forum :Investment Ideas - Creating winning portfolios! :Stock Synopsis
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Monkey
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Quote Monkey Replybullet Topic: Mangalam Cement
    Posted: 07/Dec/2009 at 11:22pm
  1. This stock is available at market cap of Rs. 353 cr at price of Rs. 126.50/-.
  2. Debt / Equity ratio is 0.2.
  3. ROE and ROCE are above 35% since last three financial year.
  4. Net cash is Rs. 30 cr after deducting debt from cash on balance sheet.
  5. P/E is 2.83 based on TTM earnings.
  6. Last year's dividend is Rs. 5.50/- per share giving dividend yield of 4.3% at current price.
  7. P/B is 1.22.
  8. Gross block is Rs. 501 Cr and net block is Rs. 276 cr indicatting well depreciated assets.
Yes, this is cyclical industry and profit margins could be unusually high and might not be sustainable. Also, such stocks are best bought at bottom of business cycle and not at top.
 
Still, I think that P/E of less than 3 compensates for all above negatives. Also, with well depreciated assets, I guess current market cap is well below replacement cost.
 
Any views from forum members?


Edited by Monkey - 07/Dec/2009 at 11:23pm
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basant
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Quote basant Replybullet Posted: 07/Dec/2009 at 6:12am
What is the capacity at present and after expansion (if at all there is one)? 
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shadows
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Quote shadows Replybullet Posted: 07/Dec/2009 at 7:22am
Mangalam Cement capacity:  at 2 MT looks cheap to it's peers on PE basis.
55% div on FV:10 ->increasing dividend rate

B.K.Birla group and ISO certified.

'Birla uttam cement'  ::Brand

24MW power capacity

CARE A+ rating.
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nitin_jagtap
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Quote nitin_jagtap Replybullet Posted: 07/Dec/2009 at 9:48am

IMO...Replacement cost may not be the best way to go about judging the price once can pay atleast for some of the older cyclicals like mangalam,kesoram,century etc.

In this case I would like to focus on plant effeciency , cap utilization, input costs to see how effecient the company is in financial management
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Monkey
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Quote Monkey Replybullet Posted: 08/Dec/2009 at 8:27pm
Originally posted by basant

What is the capacity at present and after expansion (if at all there is one)? 
 
Following are based on latest annual report and subsequent announcement made by company:
 
  1. Current capacity is 2 MTPA for cement.
  2. Company generates 17.5 MW thermal power and 6.15 MW wind power for captive use.
  3. Company has captive limestone mines.

Company has announced following expansion plans on 30th July '09:

  1. New cement plan with capacity of 1.5 MTPA.
  2. New thermal power plant for generating 17.5 MW thermal power for captive use.
  3. Total cost of expansion is estimated to be Rs. 750 cr and to be completed within 18 months.
  4. Company envisages meeting the project cost by Rs. 450 cr of borrowing and Rs. 300 cr of internal cash generation. (operating cash flow for last year was 136 cr)

Given the financing plan, balance sheet wil become quite leveraged one. Besides, I do not know where cement cycle stands today. If it is at peak and turning down now then company's cash flow generation can be affected. Also, if much awaited market correction indeed comes in then also company would be available cheaper.

So, if forum members can help me in following queries:
  1. Are we due for down turn in cement cycle?
  2. Am I getting good margin of safety by buying at P/E of less than 3?
  3. Whether to wait for general stock market correction to buy this stock? 
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master
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Quote master Replybullet Posted: 08/Dec/2009 at 9:43pm

1. On current indicators, Mangalam "looks" cheap for sometime now. But, north India which is its main market, is likely to see large cement capacity getting commissioned & unloaded in next few quarters.

2. FY11 revenues may actually dip below Rs 600 cr estimated for FY10.
 
3. Out of Rs 750 cr capex planned, debt of Rs 450 cr will push DER > 1.5 in a ready-to-rise interest rate regime. PAT estimates can vary but expectation for FY11 is more like Rs 50 cr.
 
4. EPS for FY11E in Rs 20-21 range would mean 6 to 6.5 times FY 11 for a BK Birla group company. In its cement peers, this is not exactly cheap. Limited upside.
 
5. On the positive side, better dividend yield > 4%, high ROCE > 45%, upcoming commonweatlh games, and markets looking for value bargains in current leg of the rally.
 
 
 
 


Edited by master - 08/Dec/2009 at 9:45pm
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wiseowl
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Quote wiseowl Replybullet Posted: 08/Dec/2009 at 11:09am
B. K. Birla's granddaughter (Vidula Jalan) gets Mangalam Cement. So, it cannot be counted at par with Ultratech or Grasim which are B.K. / K.M. Birla companies.

Also, if I remember right, Mangalam Cement got out of BIFR some time back. Hope the expansion plan does not put it back under BIFR.
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BGKGURU
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Quote BGKGURU Replybullet Posted: 16/Dec/2009 at 10:39pm
If people see negative they can see only negative.
I m very positive in mangalam cement.
25$/tonne.
I think it is cheapest stock.
After 2 years d/e ration should 1:1. that is not bad in growing economy with growing cement demand. If you will see future road project with other ongoing project like commonwealth,verious rural schemes,airport modernisation,nrega etc. i see demand will be much higher than supply so my target for mangalam is Rs.350-400 in 3 years.
 
One more positive promoter(bk birla group) sold shares and birla sunlife insurance  bt 5% stake.
so may be management will be done by vidula jalan but control may be with cement baron mr. kumar mangalam birla.
 
One more point, if they will make same margin after 2 years also then they will make good profit in expanded capacity and so they can repay debt easily or d\e ratio will be in favour of equity(they may not be ableto pat long term loan as per agreement). So if someone bullish in cement.
mangalam is very good stock.
 
I m bullish in cement so i m buyer in mangalam.
 
 
 
Respect the Markets and do MAKE mistakes, but see to it that you can afford to stay in the markets even after the mistake-RJ
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