Market Price : Rs. 48.5
BSE Code: 526521
NSE Code: SANHIIND
Equity Capital: Rs. 220 crore
FV: Rs. 10/-
Market Cap: Rs. 1070 crore
Book Value/sahres: Rs. 40.5
Web: www.sanghicement.com
Even though Cement is the largest consuming product in the world on per capita basis, Cement Industry's fortune is largely depends on GDP growth. On an average rule, Cement Industry is growing 1.2 to 1.5 times of the GDP growth of the country.
Mostly, India is a country with over supply of cement production. In the Indian scenario, a typical cement company needs 65% capacity utilization to be break even, 75% capacity utilization is comfort and of or above 85% capacity utilization is excellent.
In India, about 65% of the cement had is consumed by Housing Sector, 15% in Infrastructure sector and the rest is consumed my Commercial & Industrial construction and a small portion goes to exports.
Fuel is accounts a major portion of the cement production cost whether it is Coal, Furnace oil, electricity and transportation cost of raw materials or end product. If a company can save in this area, its bottom line will be appealing.
According to analysts estimate, Indian GDP is expected to grow over 6.5% in the next year and after that it will grow by 7.5%. Unexpected fall in the crude Oil prices is fortunates the Govt as it need not to spend large sum of Fuel Subsidy. In the November, 27th meeting of OPEC decided to not to cut Oil production is favour for India as the crude oil price expected to be at low level at least for the next few months. We feels that the savings from the subsidy, Govt will utilize in to their ambitious infrastructure projects. Interest rate in India seems to going to fall as the inflation reduced. It will also boost the Housing projects and other investments across the Economy, also boost the cement demand.
In such a scenario, Sanghi Industries Ltd, a well managed mid sized cement company with attractive valuation feels a good investment opportunity for medium term perspective. I am not going for a one-to one financial analysis, just giving a view about this company.
Sanghi Industries Ltd (Sanghi), better known as "Sanghi Cement" is Gujarat based mid-sized cement company promoted by Sanghi brothers. Having an installed capacity of over 3 MTPA capacity, Sanghi is the only Five star rating cement company in India. Now the company is utilizing almost 85% of its capacity. The ongoing brown field expansion which is expected to complete by next year, the company's capacity will be at 4.1MTPA. For the better and cost effective transportation, the company have Jetty in Gujarat and Mumbai also it propose to sets up new jetties on long distance places at Kochi and Goa, where higher demand and margins. It also propose to add Six vessels to support the cost effective transportation by the Sea.
Earlier, the promoters of the Sanghi brothers had some dispute over the company management, now it seems almost settled. Any way the promoters of the company acquiring shares through open market purchases. During the last two years they have acquired 10% stake through creeping acquisition route, which shows the confidence of the management in their company.
The company's September quarter financials was poor, thanks to a 38 days shut-down on its clinker plant. Sanghi has reported a turn over of Rs. 181 crore in the second quarter ended September 14 as against 210 crore reported in the same quarter of the previous year. However, Net profit reported at Rs. 1.8 crore from a loss of Rs. 18.5 crore reported in the previous year. The notable point is , as a result of the restructure and pay-off of some of its debts, company's interest out go declined sharply by 40% to Rs. 3.6 crore in the September quarter. We feels Sanghi's margins will improve in the future on every aspects. At the current market price of Rs. 48.5, it seems a good medium term bet.
Please note that I have no vested interest in this company.
