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After a long time ,tune of RBI officials signalling a
possible rate cut in another few months.On this expectation shares of many
companies from Infrastructure,Real Estate and Housing sectors showingbetter attention from investor fraternity.Any
improvement in the business prospects of any of these sectors willultimately ends in an increase in thedemand for cement consumption.This week I am
selecting one wonderful company from Cementspace - Mangalam Cement which is showing excellent growth even during
tough times.This company belongs to BK Birla Group based in Kolkata and having
a manufacturing capacity of 2 Million tonne per annum located in Rajasthan.Other major companies from the same business
group includes Century Textiles,Jayshree Tea,Pilani Investment..etc. This is an
integrated cement manufacturermainly
supplyingtoRajasthan, Madhya Pradesh, Haryana Delhi and
western Uttar Pradesh under the brand ‘Birla Uttam Cement’
I know many of you may ask what is special
with this company among many other mid sized listed cement players.Reasons are
1 ) First of all , compared with other regions ,there is not much capacity addition is
happening in the area (except for Mangalam) where this company is selling its
2) Secondly ,as we all are aware, shortage of power and
availability of Limestone are the key issues of Cement Companies for the
past many years.About 35 % of the production cost is going for power and fuel
in Cement industry . Mangalam having enough captive power generation capacity
which include 35 MW coal based (coal linkage upto 65 % requirements) and 13 MW
wind based -where its total requirement for currentcement production capacityis only 25 MW .This means .company is already
backed by captive power for ongoing capacity expansion too.
3) In case of lime
stone reserve ,Mangalam possessing enough limestone reserves for its existing and proposed
expanded capacity for another 60 years near to its factory itself.
4 ) Another importantfactor is the lowest debt level of this company .As
on 31 March 2012 ,this company is totally debt free ! .This is very rare in
case of capital intensive cement industry.For adding capacity(1.25 million ton
per annum) ,this year company will raise
funds through a mix of debt and internal accruals.Even after this fund raising
company’s debt equity ratio will be at a comfortable leveland remain as one of the lowest in the industry.
5) This company following a very liberal
dividend policy which distributed a dividend of 50 % in 2008 ,55 % in 2009 and
60% each in 2010 to 2012uninterruptedly.
6) In the financial front ,company reported
robust performance in recent times .In the latest quarter ,Mangalam
reporteda profit of Rs.28 Cr v/s just
Rs.68 lakhs in the same period last year.Its half year EPS already crossed last
years full year EPSwhich is Rs.20.
Company is expected to report even better numbers in second half . Based on
firm cement prices and expanded capacity which will be completed by September 2013 ,Mangalam is expected to report an EPS
above Rs.60 in FY 2014.
7) Company having a cash and bank balance of of Rs.43 Cr already in its
books and a book value of of over Rs.160/-.
8) Not a single share pledged by the promoters.
Currently this stock is trading at a dirt cheap valuation by any parameters and
deserves a place in your portfolio by all means.I strongly recommending
Mangalam Cement and expecting minimum 50% appreciation in one year time frame. Stock is listed both in NSE and BSE and trading around Rs.176 /-