Sagar Cement Best Play On South Growth Strong, Ventura Securities Says

Sagar Cement Ltd. is the best play on the cement growth story in South India, according to homegrown brokerage Ventura Securities, which has given the Hyderabad-based company its most bullish price target.

The stock gained 33.3 percent to Rs 842 apiece last year, beating analysts' consensus target price of Rs 795, Bloomberg data showed. It has returned over 93 percent in the last two years.

Ventura Securities expects the cement maker's sales volume to grow at a healthy compounded annual growth rate of 18.7 percent. “We expect net revenues to grow to Rs 1,775 crore,” it said in a research note.

Here's what makes Venture so bullish on the cement maker:

• Low-cost initiatives: A waste heat recovery system, high capacity solar power plants and usage of slag cement by the company would be beneficial.
• Geographical presence: Apart from Andhra Pradesh and Telengana where it sells 54 percent of its volumes, Sagar Cements is also placed in Tamil Nadu, Maharashtra, Karnataka, Orissa and other states.
• Recent monsoons to revive growth in Tamil Nadu and Karnataka which remained muted in the past.
• Ventura does not agree with the management's view that low cost housing and irrigation projects will bear fruits in the next half of the current financial year, and expects these to contribute meaningfully from the next year onwards.