🟢 At a Glance
Sagar Cements, once a promising mid-cap in India’s cement universe, has delivered a spectacular destruction of shareholder value. With ROE at -10%, ROCE at -2%, promoter pledging at 80.8%, and FY25 net loss at ₹217 Cr, is there any value left to salvage here?
🏭 About the Company
Sagar Cements Ltd is in the business of making cement — a product that’s heavy, commoditized, margin-thin, and cyclical as hell.
📦 Product Portfolio Includes:
- Ordinary Portland Cement (OPC)
- Portland Pozzolana Cement (PPC)
- Composite Cement
- Ground Granulated Blast-furnace Slag (GGBS)
- Sulphate-Resistant Cement
Basically, if it can be crushed, powdered, packed in bags, and dumped at construction sites — Sagar sells it.
👤 Key Managerial Personnel (KMP)
- Mr. Sreekanth Reddy – Vice Chairman & Managing Director
Cement veteran and face of the company’s expansion spree. Knows the industry, but FY25 tested even his mettle. - Mr. S. Sreekanth – Joint MD
Oversees plant ops, logistics, and day-to-day execution. Legacy family promoter team in place. - Mr. R. S. Raju – CFO
Keeping the company afloat while managing ₹1,448 Cr in debt and dealing with negative returns.
📊 Financials: 5-Year Snapshot
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 1,371 | 1,597 | 2,230 | 2,505 | 2,258 |
| EBITDA (₹ Cr) | 400 | 276 | 153 | 247 | 141 |
| Net Profit (₹ Cr) | 186 | 59 | 10 | -52 | -217 |
| EPS (₹) | 15.88 | 5.89 | 2.31 | -3.32 | -16.05 |
| ROCE % | 18% | 8% | 6% | 1% | -2% |
| ROE % | 17% | 7% | 2% | -3% | -10% |
| Net Debt (₹ Cr) | 809 | 1,510 | 1,478 | 1,444 | 1,448 |
📉 From profit-making in FY21 to deep red in FY25, this isn’t a bad year — it’s a slow-motion multi-year wreck.
🧱 Operations Overview
👇 Cement Demand Weakness + Cost Pressures
- Volumes grew modestly, but realisations took a hit.
- OPM fell from 17% (FY22) → 10% (FY24) → 6% (FY25)
- Power, logistics, and raw material inflation squeezed margins
🏗️ Heavy Capex, Minimal Payback (So Far)
| Asset Growth | FY21 | FY25 |
|---|---|---|
| Gross Block | ₹1,301 Cr | ₹3,109 Cr |
| CWIP | ₹517 Cr | ₹123 Cr |
They expanded capacity, but demand didn’t show up. Welcome to the Cement Sector.
🚩 Red Flags Galore
| 🔻 Risk Area | Value |
|---|---|
| Promoter Pledging | 80.8% of holding pledged |
| Interest Burden | ₹188 Cr in FY25 |
| Contingent Liabilities | ₹1,152 Cr |
| ROE 3-Year Avg | -4.85% |
| Working Capital Stress | Inventory days: 232, Debtor days: 33 |
📦 Translation: You’re basically lending this company money at this point.
📉 FY25 Results Summary
- 🧨 Net Loss: ₹217 Cr
- 🔻 EBITDA down 43%
- 📦 Sales: ₹2,258 Cr (Down YoY)
- 🏦 Net D/E still >1x
- 🔴 OPM shrunk to 6%
- ⚰️ Net profit margin: -9.6%
Yet, somehow, the stock rallied from ₹155 to ₹225. Because stock market ≠ Excel sheet.
📦 Fair Value Estimate 🔍
Let’s assume they return to FY23 profitability in FY26: ₹10–₹15 Cr PAT
Apply industry bottom-feeder PE: 12x
🎯 Market Cap Range: ₹120 Cr – ₹180 Cr
🧮 Shares Outstanding ≈ 11.6 Cr
🧮 Fair Value Range = ₹104 – ₹155
🎯 CMP = ₹225 = Overvalued by 45%–115%
Unless cement prices spike or a strategic investor shows up with cash and guts — this is… generous pricing.
📌 EduInvesting Take
Sagar Cements is the classic overleveraged cyclical stock that retail investors fall for after a small bounce.
You know the type:
- ₹5 stock goes to ₹15
- Everyone says “multibagger”
- Ends up at ₹3 post next rate hike
Except here, it’s ₹225 — and still showing negative ROCE.
🛑 High debt
🛑 ROE deep in negative
🛑 80.8% promoter pledging
🛑 ₹200 Cr+ interest annually
🛑 Negative FCF despite ₹2,000+ Cr revenue
🚫 This isn’t a value buy. It’s a valuation trap waiting to snap shut.
🧠 Final Word
Sagar Cements proves that capacity ≠ profitability.
Despite running a decently scaled operation, the company’s interest costs, weak margins, and pledged promoter shares have wrecked its balance sheet.
Turnaround might happen — cement cycles do change — but the current price assumes a miracle. Investors might want to wait for actual profit, not just dust.
Because in cement, volume is vanity, EBITDA is sanity… and net profit is the only reality.
✍️ Written by Prashant | 📅 June 16, 2025
Tags: sagar cements, cement stocks india, pledged shares, cyclical stocks, turnaround trap, fy25 losses, negative roe, high debt companies, eduinvesting recap
