Hold Orient Cement; target of Rs 150: Centrum


Centrum’s research report on Orient Cement

Orient Cement (ORCMNT) posted flattish EBITDA YoY in Q4FY18, as increased competition drove volume decline YoY, and aggressive pricing led to weak NSR QoQ. Lower opex QoQ moderated YoY cost inflation. The JPAs assets acquisition is getting delayed owing to pending approvals. We remain wary of this inorganic acquisition which will keep leverage high, and return ratios subdued. We maintain HOLD with TP of Rs150.


Outlook

We maintain HOLD on the company with a TP of Rs150/share (no change), valuing it at 8.5x FY20E consolidated EBITDA. Out TP implies replacement value of USD87/MT. We remain wary of the impact of the inorganic acquisition on balance sheet (net D:E to remain at 1.2-1.4x during FY18-20) and return ratios (RoCE net of taxes to only marginally improve to 6%/8% during FY19/20).

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