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Reduce Madras Cements, target of Rs 90: Angel Broking

Posted on: June 1st, 2009 and is filed under Brokerage Recommendations.

Angel Broking has maintained its reduce rating on Madras Cements with a target price of Rs 90 in its May 29, 2009 research report.

“We expect the domestic cement industry to witness substantial bunching up of capacities over the next couple of years. As per the company‚Äôs announced capacity addition plans, around 85mn tonnes of cement capacity is expected to come on-stream over the next 18-24 months. We are introducing our FY2011 numbers with an EPS estimate of Rs16. At the CMP of Rs106, Madras Cements is trading at an EV/EBIDTA of 5.2x and 4.8x FY2010E and FY2011E EBIDTA and EV/tonne of US USD 83/tonne and USD 77/tonne on FY2010E and FY2011E capacities. We believe that in view of the imminent downturn in the cement cycle, Madras Cements should trade at a 45-50% discount to the prevailing replacement costs, as suggested by its historical valuations in a down cycle. Hence, we maintain a ‘Reduce’ on the stock with a target price of Rs 90,” says Angel’s research report.

source: Moneycontrol

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