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Saturday, December 19, 2009

Burnpur Cement Ltd:Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis,views and outlook

Scripscan:Burnpur Cement Ltd
BSE code:532931

Story:Company has up an integrated clinkerisation and cement grinding plant of 800 TPD expandable to 1600 TPD in Hazaribagh, Jharkhand. BCL’s has focused on under developed areas of Eastern India. BCL has the locational advantage & government subsidies. Company has entered into a MOU with the government of Jharkhand, whereby the government will extend the assistance for promotion and establishment of the proposed project of the company. The company has a wide distribution network in Eastern India.Concerns are: Limestone for clinker shall be obtained from JSMDC for which mining agreement is yet to be entered. Low capacity utilization. Non-availability of clinker and bottlenecks in the production process. Low installed capacity does not have any economies of scale. High debt and huge equity base is EPS dilutive.The stock is currently available at a P/E of 50x its expected forward earnings which is expensive vis-à-vis its peers. On EV/EBIDTA, it is valued at over 30x which too is very expensive when compare to its peers, which are trading in single digit range.BCL have lowest profitability among its peers mainly due to the high purchase cost of clinker Moreover, this being very small company in terms of revenue as well as market-cap, liquidity and institution participation will be a major disadvantage. Hence,I recomend a switch to other better bets.

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