Orient Cement deleveraging continues at an impressive pace given strong margins and limited capex

Chirag Batavia • 13 September 2021

Orient Cement (ORIENTCEM)

  • Deleveraging continues at an impressive pace given strong margins and limited capex. The company has pre-paid all its debt maturities due till FY22.

  • We estimate net debt/EBITDA to reduce to 0.5x in FY22E from 3.1x/1.2x in FY20/21.

  • With a stronger balance sheet, ORCMNT is now working on growth projects. The company will spend Rs1500-2000 crs on these projects over FY22-25E.

  • In Q1FY21, EBITDA/ton increased to Rs1,368/ton (+14% yoy, +25% qoq; KIE: Rs1,167/ton)

  • Management expects costs to peak in H1FY22 and expects some moderation in H2FY22.

  • Recent amendments to the mining act should allow the company to transfer a limestone mining lease in Rajasthan to its name without additional royalty payment.

  • Our Fair Value is based on 6x September 2023E EV/EBITDA.

Note: The above is a brief note on the company, based on the inputs of KIE research report dated 3 rd August 2021, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental .

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