MANGALAM CEMENT --- EXCELLENT OPPORTUNITY

After a long time ,tune of RBI officials signalling a possible rate cut in another few months.On this expectation shares of many companies from Infrastructure,Real Estate and Housing sectors showing  better attention from investor fraternity.Any improvement in the business prospects of any of these sectors will  ultimately ends in an increase in the  demand for cement consumption.This week I am selecting one wonderful company from Cement  space - Mangalam Cement which is showing excellent growth even during tough times.This company belongs to BK Birla Group based in Kolkata and having a manufacturing capacity of 2 Million tonne per annum  located in Rajasthan.  Other major companies from the same business group includes Century Textiles,Jayshree Tea,Pilani Investment..etc. This is an integrated cement manufacturer  mainly supplying  to  Rajasthan, Madhya Pradesh, Haryana Delhi and western Uttar Pradesh under the brand ‘Birla Uttam Cement’

I know many of you may ask what is special with this company among many other mid sized listed cement players.Reasons are many .

1 ) First of all , compared with other regions ,there is not much capacity addition is happening in the area (except for Mangalam) where this company is selling its product .

2) Secondly  ,as we all are aware, shortage of power and availability of Limestone are the key issues of Cement Companies for the past many years.About 35 % of the production cost is going for power and fuel in Cement industry . Mangalam having enough captive power generation capacity which include 35 MW coal based (coal linkage upto 65 % requirements) and 13 MW wind based -where its total requirement for current  cement production capacity  is only 25 MW .This means .company is already backed by captive power for ongoing capacity expansion too.

3) In case of lime stone reserve ,Mangalam possessing enough limestone reserves for its existing and proposed expanded capacity for another 60 years  near to its factory itself.

4 ) Another important  factor  is the lowest debt level of this company .As on 31 March 2012 ,this company is totally debt free ! .This is very rare in case of capital intensive cement industry.For adding capacity(1.25 million ton per annum) ,this year company  will raise funds through a mix of debt and internal accruals.Even after this fund raising company’s debt equity ratio will be at a comfortable level  and remain as one of the  lowest in the industry.

5) This company following a very liberal dividend policy which distributed a dividend of 50 % in 2008 ,55 % in 2009 and 60% each in 2010 to 2012  uninterruptedly.

6) In the financial front ,company reported robust performance in recent times .In the latest quarter ,Mangalam reported  a profit of Rs.28 Cr v/s just Rs.68 lakhs in the same period last year.Its half year EPS already crossed last years full year EPS  which is Rs.20. Company is expected to report even better numbers in second half . Based on firm cement prices and expanded capacity which will be completed by September 2013 ,Mangalam is expected to report an EPS above  Rs.60 in FY 2014.

7) Company having a cash  and bank balance of of Rs.43 Cr already in its books and a book value of of over Rs.160/-.

8) Not a single share  pledged by the promoters.

Currently this stock is trading at a  dirt cheap valuation by any parameters and deserves a place in your portfolio by all means.I strongly recommending Mangalam Cement and  expecting minimum  50% appreciation in one year time frame. Stock is listed both in NSE and BSE and trading around Rs.176 /-

Link to company website HERE

Link for latest Annual Report HERE

Discl:I have vested interest in MCL