Sagar Cements at new high, surges 26% in one week

The stock of a South India-based cement company has outperformed its peers by rising 26% in past one week compared to 1% rise in benchmark Sensex.

Sagar Cements has rallied 12% to Rs 278, also its 52-week high on the Bombay Stock Exchange. The stock opened at Rs 259 and has seen a combined 13,181 shares changing hands so far.

The stock of the South India-based cement company outperformed its peers by rising 26% in past one week compared to 1% rise in benchmark Sensex.

The company’s prime market is Andhra Pradesh, accounting for 50% of its sales, which faced an oversupply situation in the past due to incremental capacity and a sharp fall in demand because of political turmoil.

However, over the past one year, cement demand has bottomed out and analyst believes demand growth will register an uptrend led by infrastructure capex in the run-up to state assembly elections and general elections in FY14.

 

“The company’s capacity utilisation level to improve from 59% in FY12 to 69% in next three years led by demand revival in Andhra Pradesh, which is expected to drive net profit CAGR of 21% over the years,” according to analyst at Nirmal Bang institutional securities.

Analyst have assigned a Buy rating to Sagar Cements with target price of Rs 345, given the revival in cement demand, improvement in operational efficiency due to capex and attractive valuation.