Why this Rakesh Jhunjhunwala-owned cement stock has got 'Buy' from brokerages
The brokerage has a Buy recommendation on the cement stock with a revised target price of ₹187 per share
Brokerage and research firm HDFC Securities has maintained its 'Buy' rating on the cement company Orient Cement that is part of the Indian ace investor Rakesh Jhunjhunwala's portfolio. As per the company's BSE shareholding pattern, Jhunjhunwala holds 1.22% stake in the company as of June 2021 quarter. Shares of Orient Cement have surged over 140% in a year and more than 80% this year (year-to-date).
In line with the performances of its peers in the south, Orient reported strong margin expansion during Q1FY22, the brokerage said in a note. It has a Buy stance on the stock with a revised target price of ₹187 per share. Explaining the rationale, HDFC Securities said that it continues to like Orient Cement due to a healthy demand outlook, its comfortable balance sheet, and its 3mn MT expansion plan.
In its key markets, the share of its premium cement sales has increased to 15-18% of its trade sales (from ~8% in FY20). Orient has also stocked up domestic coal inventory ahead of the price increase, thereby moderating fuel inflation impact Q2 onwards. Amid no major ongoing Capex currently, Orient reduced debt by 15% in H1FY22, it added.
Another brokerage Anand Rathi is also bullish on the stock. It has retained its Buy rating, with a higher target of ₹220 (earlier ₹171). ''On the low base, Orient’s performance was robust, its highest EBITDA/ton despite high input costs. It is targeting 14.5m-ton cement capacity by FY26, the expansion in two phases.. On the favourable base and demand revival, volume growth would be good; higher costs, however, may trim profitability in the short term,'' it said in a note.
Orient Cement is also among the top picks for the month of August 2021 by Axis Securities. The brokerage has a target price of ₹180 for the cement stock.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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