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Stock Outlook & Returns
The Current Market Price (CMP) of Orient Cements on NSE is Rs 115.50 apiece. The stocks are 0.17% down from their previous close at the time of writing. The stock is trading at Rs 19.90 above the 52 week low and Rs 70.05 below the 52 week high of the stock, respectively.
Its 52-week low is Rs 95.60 apiece recorded on 20th June 2022, and the 52-week high is Rs 185.55 apiece recorded on 08 November 2021. The market capitalization of the stock is 2,365 crore. The ROE is 17.25%. TTM PE ratio is 11.20. PB Ratio is 1.56. TTM EPS is Rs 10.31. The Dividend yield is 2.17% and the face value is Rs 1.
Last week, the shares have fallen nearly 2.78% and roughly 0.52% in the past 1 month, respectively. Over the past 1 year, it has fallen around 25.26% and in the past 5 years, the shares have fallen 24.58%, respectively. In the past 3 years, share value witnessed a jump of 25.85%.
Elevated fuel costs & contracted demand hurt volumes
- Orient Cements reported subdued performance for 1QFY23 as revenue remained flat YoY while EBITDA/PAT recorded de-growth amidst muted volumes & inflated fuel costs. The company’s revenue at ₹7.1bn (+3.4% YoY/ -11.2%) was impacted by weak demand & intensifying competition. EBITDA declined by 45.1% YoY/33.4% QoQ to ₹1.0bn on the back of incremental cost pressures while PAT lowered to ₹374mn, down by 58.2% YoY/48.9% QoQ due to lower other income. The key highlight for the quarter came in terms of mining lease approval in Rajasthan mines
- EBITDA/tn slipped to ₹740.5 in 1QFY23, down 45.9% YoY/21.8% QoQ, on the back of cost inflation (P&F cost up 73.1% YoY/4.7% QoQ). However, the improved realizations partially offset the effect of cost inflation as they improved by 1.8% YoY/4.3% QoQ to ₹5,174. The management anticipates the energy cost inflation to have peaked out in the recent quarter thus improved the financial performance in coming quarters.
- Although the fuel prices seemed to have softened out the last few weeks, it is expected to take considerable amount of time to restore to original levels. Meanwhile, to negate the impact of high fuel prices, the company resorted to alternative fuel, and savings accrued from commissioning of solar power source for Jalgaon unit also benefitted the company
- North, Central & Western markets were faired well during the challenging quarter witnessing better tailwinds in terms of demand, significant growth in volumes and pricing. The Southern markets on the other hand, had a lean quarter owing to heavy monsoon, soft volumes and absence of demand triggers. The company’s opportunity to pass on the heavy costs of fuel were constrained due to contracted demand. Orient refrained itself from additional volumes from B2B segment as the pricing was suboptimal.
- The company won the mining lease rights in Rajasthan, transferred from Orient Paper to OCL, in the terms expected by the company. OCL will construct 2MT greenfield plant, with an estimated capex outlay of Rs 15-16bn. With this additional capacity, the company plans to diversify its market base. On the contrary, delays in approvals for Tiroda grinding expansion has slowed down the capex pace of the company. Some delays in Devapur expansion project can be expected, thus, the company aims to maintain debt/equity of 1.5x & debt/EBITDA of 3.0x.
Chola Wealth Direct Suggests Buy For A Target Price Of Rs 170 apiece
According to the brokerage firm, Orient Cements has grown its franchise in a tough southern market in the wake of cost efficiency, higher EBITDA/tn & better realizations. The company has opted for expansion mode for growth in recent phase and aims to increase its production capacity considerably.
The brokerage said, “The recent approval of mining rights will be a big boost for diversification of business. The delay in capacity expansion might be a hindrance in medium term. But the higher blended cement volumes, improving demand scenario and cost efficiency will act as key triggers for the company going ahead. We value the company at 6.5x FY24 EV/EBITDA to arrive at a target price of ₹170 (earlier target Rs 192), thus, retaining our BUY rating on the stock.”
According to the brokerage firm, the key risk would be delay in capex programs, Slowdown of demand, cost escalations, low realizations & intensifying competition.
About – Orient Cements Limited
Established in 1979, Orient Cement was formerly, a part of Orient Paper & Industries. It was demerged in the year 2012 and since then, it has emerged as one of the fastest growing and leading cement manufacturers in India.
Orient Cement began cement production in the year 1982 at Devapur in Adilabad District, Telangana. In 1997, a split-grinding unit was added at Nashirabad in Jalgaon, Maharashtra. In 2015, Orient Cement started commercial production at its integrated cement plant located at Chittapur, Gulbarga, Karnataka. With a total capacity of 8 MTPA, they serve Maharashtra, Telangana, Andhra Pradesh, Karnataka and parts of Madhya Pradesh, Tamil Nadu, Kerala, Gujarat and Chhattisgarh.
The product mix includes Pozzolana Portland Cement (PPC) & Ordinary Portland Cement (OPC) marketed under the brand name of Birla.A1 – Birla.A1 Premium Cement and Birla.A1 StrongCrete.
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