Mangalam Cement :: Angel Broking Diwali Top Picks (Diwali Muharat)

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 Mangalam Cement (MCL), a BK Birla group company having its plant in Rajasthan,
has expanded its cement capacity by 1.25 MTPA (increase of 63%) to 3.25 MTPA
(as of end-FY2014). We expect MCL to report a healthy 21.8% volume CAGR over
FY2014-16E, on the back of improved outlook for cement demand.
 With MCL's grinding capacity now having increased to 1.4x of clinker capacity post
expansion (vs 1.2x earlier), it expects to increase the fly ash component in cement
production from the current 16% to 30-32% during FY2015E, closer to industry
levels, which is expected to aid OPM expansion. Also, the new 1.25 MTPA capacity,
which is expected to contribute significantly to overall production volume, is also
expected to be more energy efficient. Thus there would be a further reduction in
the cost of cement production for the company. The realizations are also expected
to improve due to strong demand recovery in the cement sector. Overall, we expect
EBITDA/tonne to improve from `310/tonne in FY2014 to `680/tonne in FY2016.
 At the current market price of `244, the stock is trading at trailing EV/tonne of $49
(on its 3.25 MTPA installed capacity), which is at a large discount to its midcap peers.
WWWe value MCL at EV/tonne of $60 and imply 6.5x FY2016 EV/EBITDA to arrive at A to arrive at
target price of target price of ```337, thus providing an upside of 39% from the current levels. 337, thus providing an upside of 39% from the current levels.