Recommendation: Buy
CMP = Rs 3,202
Price target: Rs 4,800
Key points:
- Madras Cements has completed the process of buy back. As a result of the buy back the earnings per share (EPS) of the company will increase by 1.5%. Firm cement prices in south
- The company had a capacity of 6 million tonne at the end of FY2007, which increased to 7 million tonne at the end of FY2008 and is expected to further increase to 10 million tonne by the end of FY2009. Capacity additions will drive the volumes growth of the company.
- At the current market price of Rs 3,202, the share trades at 8.7X and 6.7X its FY2008 and FY2009 earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisaion (EBIDTA) of 5.5X and 5X for FY2008 and FY2009 respectively.
- I maintain a strong Buy recommendation on the stock with a price target of Rs 4,800.
