Buy Orient Cement; target of Rs 238: Arihant Capital

Arihant Capital is bullish on Orient Cement has recommended buy rating on the stock with a target price of Rs 238 in its research report dated December 13, 2021.

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Arihant Capital’s research report on Orient Cement

Orient Cement Limited (OCL) is a mid-sized (8.0 MT) cost-efficient player in cement space. Its cement plants are in Devapur, Telangana (3 MT integrated), Chittapur, Karnataka (3 MT integrated), Jalgaon, Maharashtra (2 MT grinding unit). The company derives revenues largely from Maharashtra (50%), Telangana, Karnataka and MP markets It also has 95 MW power plant (95 MW CPP) that makes it self-sufficient in terms of power requirements We initiate coverage on Orient Cement Limited (OCL) with a BUY recommendation with a Target Price (TP) of Rs 238/share, implying an upside of 43.7% from the current levels .We believe OCL is well-placed to take advantage of a revival in the cement demand in its operating regions by leveraging its planned capacity expansion, better monitoring of cost drivers, and improving financials.

Outlook

We believe OCL is well-placed to take advantage of a revival in the cement demand in its operating regions by leveraging its planned capacity expansion, better monitoring of cost drivers, and improving financials. At a CMP of INR 166 stock is trading at a EV/EBIDTA multiple of 3.8(x) and 2.8(x) to its FY23E and FY24E .We value the stock at a EV/EBIDTA of 4(x) to its FY24E and initiate coverage on Orient Cement Limited (OCL) with a BUY recommendation with a Target Price (TP) of Rs 238/share, implying an upside of 43.7%

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