There are very few sectors which are relatively unaffected buy any global headwind like intercountry tensions, wars (be it physical or economic) and are mostly affected by domestic factors only. Cement sector is one such sector which is have heavily influenced by the the domestic Government and private sector actions and is therefore unaffected by any external factors. The present pandemic has caused a global economic damage of epic proportions and has seriously increased the chances of a global recession and therefore during these times it is important to have investments in sectors which would thrive despite this crisis. History has told us whenever there is a major recession the governments have had to to spend its way out of it. The favourite sector of most of the governments to spend on is infrastructure – as it is a big sector and any investment in this sector percolates to various other sectors giving a positive flip overall and especially to jobs. The biggest beneficiaries of any infrastructure push is cement as it is one of the common themes in almost all the industry be it real estate, construction, roads, ports etc. One other advantage of cement sector is that it grows if the economy is doing well, thanks to private sector push and it grows if the economy is not doing well, thanks to public sector and government funded projects. And this is the reason why the cement industry in India has thrived over the last few decades.
The company: Shree Digvijay cement is one of the oldest cement companies in India and it’s more than 75 years old and in fact has a unique distinction of being inaugurated by one of the tallest leaders of of India that is Sardar Vallabhbhai Patel. Over the past many years the company has been struggling to make any money due to various reasons and finally last year, it was taken over bye one of the India’s most well known private private equity call true north. And since they bought they have engineered a major operational turnaround in the company reflecting in the Stellar results. True north is known for its value creation in various companies like syngene Biocon TTK Healthcare Mahindra holidays Cloudnine hospitals etc. In case of Shri Digvijaya cement the company has partnered with the cement industry veteran who is truly experienced in in the sector. Shree Digvijay cement has 13 million tons of of limestone reserves and operates a cement plant of 1.2 million tons capacity near Jamnagar City on the Saurashtra coast of Gujarat. Company sells its cement under the brand of “Kamal cement.”
Valuations: it is a debt free company and has a cash balance of more than 75 crore. It is trading at a multiple of around 14 and recently gave its Maiden dividend. In the cement sector this is one of the most reasonably priced stock and with perhaps one of the best balance sheet. Promoter holding is at healthy 56%.
Technicals: Technically the stock is very strong and had broken out after multi decade consolidation. After breakout the stock came back to test it Breakout range and started it apart journey again. This is one of the most reliable technical setup.
They way the new promoters have engineered the turnaround it proves that the company is capable of making very good profits if the control is in right hands. Even the cash generation was stellar, again proving this thesis. Hopefully, the turnaround will gather steam moving forward.
God Bless !!!
Disclaimer: No personal investments.