Mutual Fund Advisor
NCL Industries
Buy
NCLI (Nagarjuna Cement Ltd Industries) has recently completed its capex in both its leading verticals of cement (0.7 MTPA) and particle boards (30,000 TPA). Post this the cement capacity stands elevated to 2.7 mtpa while the particle board capacity has expanded by 50% to 90,000 TPA. Further, the company plans to commission a MDF board plant with capacity of 1000 boards per day by Sept FY19.
This plant is expected to breakeven by FY20 and will marginally dent overall EBITDA margins. On the back of the above we expect overall revenues to grow at a CAGR of 27.7% to Rs 1595.9 crores by FY20. EBITDA is expected to grow to Rs 250.9 crores (CAGR of 30.0%) over the same period. While margins of the cement business are expected to remain resilient, particle board margins are expected to taper given the impending competition. Despite this overall margins will improve by 79 bps to 15.7% by FY20.
The repayment of debt to the extent of Rs 150 crores (from the recently concluded QIP) will not only lead to de-leveraging the balance sheet but enable faster growth in PAT to Rs 151.8 crores (CAGR of 40.5%). We expect ROE to dip slightly to 14.1% over the period FY18-19 before clawing back to 20%plus levels by FY20. Over the same period ROCE is
expected to improve by 249bps to 19.7%.
Mutual Fund Advisor
MR.K.P.PRABHAGHARAN,
KKP CAPITAL, 9894333189
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