Wednesday, December 24, 2014

Brokerages raise UltraTech’s target price post Jaypee deal.

 The move by UltraTech Cement  BSE 4.31 % to buys Jaiprakash Associate's cement plants in Madhya Pradesh for about Rs 5,400 crore is seen as a positive by brokerages. A couple of them have even raised the target price of UltraTech Cememt.

UltraTech Cement has signed a memorandum of understanding (MoU) to buy two cement plants of Jaiprakash Associates BSE 4.69 %, a deal that will help consolidate its position as India's biggest cement-maker.

The company will acquire 5.2mnt clinker and 4.9mnt grinding capacity along with 180MW captive power capacity located at Bela (2.1mnt clinker and 2.6mnt grinding) and Sidhi (3.1mnt clinker and 2.3mnt grinding).

While the deal is on higher side of valuation based on existing capacity at US$180 per ton (based on grinding capacity), however, adjusting for expansion potential (and additional capex for the same), it is valued at around US$140 per ton, on our calculation," said Morgan Stanley report.

"Given the company has been able to reduce execution time for a new project and gains market share with the deal, we see this as medium term positive," the report added.

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