Reviews
In this edition, we have reviewed Shree Digvijay Cement Company Ltd. and CIE Automotive India Ltd.. We suggest our reader-investors to HOLD Shree Digvijay Cement Company Ltd. and CIE Automotive India Ltd.
We had recommended Shree Digvijay Cement Company Ltd. in Volume 39, Issue No. 12 dated May 06, 2024— May 19, 2024, under the ‘Low Price’ segment. The recommended price for the stock was ₹111.15. We had recommended the stock on the basis of strong operational performance, focus on cost reduction and efficiency-driven growth. The company, established in 1949, is a leading entity in the Cimpor Group, offering a variety of cement products including oil well cement, sulphate-resisting Portland cement, and railway sleeper manufacturing cement.
In Q2FY25, on a consolidated basis, its revenue decreased by 20.88 per cent YoY to ₹145.18 crore compared to ₹183.49 crore from the previous year’s same quarter. On a sequential basis, its revenue decreased by 17.9 per cent. The PBIDT excluding other income decreased by 54.82 per cent to ₹8.1 crore YoY as compared to ₹17.93 crore from the previous year’s same quarter, while sequentially decreasing by 62.44 per cent. The net profit stood at ₹0.39 crore compared to ₹7.4 crore, a YoY decrease of 94.67 per cent, while sequentially decreasing by 96.5 per cent from ₹11.27 crore. At TTM, the shares of Shree Digvijay Cement Company are trading at a PE of 16.9 times, which is lower than its industry PE of 40.2 times.
The company has a three-year average return on equity (ROE) of 20.4 per cent and a return on capital employed (ROCE) of 28.5 per cent. The demand for cement may further increase as infrastructure projects such as bridges, roads, ports, metro rails and low-budget housing segment gain momentum, creating prospects for expansion in this sector. The long-term prospect for cement is anticipated to be favourable. The company has done well by enhancing plant performance and managing the costs. It has posted higher operating profit with an EBITDA margin of 19.34 per cent.
With the consistent efforts undertaken by the company throughout the year, it has managed to achieve higher sales volume, and higher cement and clinker production.The company keeps focusing on lowering costs, increasing operational efficiency, blended and special products sales and building the brand. To lower the risk of energy costs getting out of control, the company also focuses on reducing grid dependency by using more alternate fuels, solar and wind energy sources. Hence, we recommend HOLD.
We had recommended CIE Automotive India Ltd. in Volume 39, Issue No. 13 dated May 20, 2024— June 02, 2024, under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹482.15. We had recommended the stock on the basis of the growing Indian market for its products, operational strength and demographic growth. CIE Automotive Group of Spain is a global supplier of automotive components and subassemblies. The company produces and sells automotive components to original equipment manufacturers and customers in India and overseas. Mahindra CIE offers a range of products, including forging products, castings, composites, and stamping products.
The company also supplies magnetic products, such as soft ferrite cores, which power everyday products and increase welding efficiency. Mahindra CIE also supplies composites, which are noncorrosive and offer benefits in automotive and medical applications. The company operates in various business segments, including cars, utility vehicles, medium and heavy commercial vehicles, agriculture, and two-wheelers. In Q2FY25, on a consolidated basis, its revenue decreased by 6.35 per cent YoY to ₹2,134.63 crore compared to ₹2,279.41 crore from the previous year’s same quarter.
On a sequential basis, its revenue decreased by -6.89 per cent. The PBIDT excluding other income decreased by 4.29 per cent to ₹330.57 crore YoY as compared to ₹345.38 crore from the previous year’s same quarter, while sequentially it decreased by 8.18 per cent. The net profit stood at ₹192.83 crore compared to ₹186.93 crore, a YoY increase of 3.15 per cent, while sequentially it decreased by 10.63 per cent from ₹215.77 crore. At TTM, the shares of CIE Automotive India are trading at a PE of 21.4 times, which is lower than its industry PE of 22.6 times. If we look at its PBV, it is currently at 2.84 times, which is higher than the industry PBV of 4.49 times.
The company has a three-year average return on equity (ROE) of 9.14 per cent and a return on capital employed (ROCE) of 14.6 per cent. It is poised for significant growth in the Indian market due to a strong tailwind from the country’s growing population. This growth aligns with the overall market growth, allowing the company to capitalise on expanding opportunities. Despite a weak European market, CIE Automotive India has demonstrated resilience through operational improvements and positive margin evolution, showcasing its ability to adapt and maintain profitability in challenging market conditions. Hence, we recommend HOLD.
(Closing price as of December 23, 2024)