HDFC Securities is bullish on the shares of Heidelberg Cement India Limited, which is a subsidiary of the German multi-national Heidelberg Cement Group. The company which has a total capacity of 5.4 million tonnes, manufactures and sells cement in India under its brand “mycem cement”. “HCIL is one of the leading cement industry players in central India with large built up capacities. With no expectations of capacity additions in the central region, the already established players are expected to maintain a pricing discipline in the region and the price realizations are expected to stay at current elevated levels,” noted HDFC Securities.
The research firm has a target price of Rs 192 over a time period of six quarters. Heidelberg Cement India shares closed at Rs 153.45 on NSE this afternoon. HDFC Securities’ target price implies an upside of more than 25% from the current market prices. “We think investors could buy the shares at the CMP of Rs.149.25 (~11.1x FY19E EV/EBITDA; $108.2/tonne) and add on dips to Rs.135-138 band (~10.3x FY19E EV/EBITDA; $100/tonne) for sequential targets of Rs.169 (~12.4x FY19E EV/EBITDA; $121/tonne) and Rs.192 (~14.0x FY19E EV/EBITDA; $136/tonne) over the next 4-6 quarters,” said the report.
The research firm is primarily betting on the government push to the infra sector and affordable housing, which will lead to a rise in demand for cements, thus benefitting the company. “With the government impetus to the infrastructural development like road building and other infra projects and also government’s efforts towards Housing for all through affordable housing projects, the demand for cement is expected to grow/maintain at current levels. This will help HCIL derive good growth in its revenues through higher volumes and attractive realizations,” said HDFC Securities in its report.