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Hidden Gem - Sagar Cements

ICICIdirect Research 25 Jul 2025 DISCLAIMER

Company’s profitability is expected to see substantial increase in the coming years, led by considerable revival in utilization of its existing units in Andhra Pradesh & Telangana. Overall capacity utilization, which stood at ~52% in FY25, is expected to improve led by considerable pick-up in demand across southern-region markets
Moreover, company is also in process of expanding its total cement capacity to 11.75 mtpa by FY27E (from 10.5 mtpa at present)
Volume growth expected to pick-up significantly over the next few years (double-digit growth over FY25-27E as compared to ~7% CAGR over the last 2 years)
Company’s operational performance is estimated to improve meaningfully over FY26E-27E (as compared to FY25), factoring in improvement in realisations, production ramp-up of its subsidiary Andhra Cements & other units, continuous focus on improving operational efficiencies and positive operating leverage
The company targets Rs 250-300/ton of cost savings in the next 2-3 years. We estimate an improvement in EBITDA/ton to Rs 764/ton in FY27E (from Rs 256/ton in FY25)
Company is also in process of monetize a 107-acre land parcel at Vizag, which would fetch Rs 350 crore to the company in the coming period, which would help in debt-reduction. Net Debt/EBITDA is also expected to come down significantly to below 3x in the next 2 years (from ~9x at present)
With the strong EBITDA CAGR of ~95% over FY25-27E, valuation at $47/ton looks attractive considering the recent M&A transactions in the same region

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