Why HeidelbergCement Share Price is Rising

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Today, we'll talk about Gautam Adani's big bang move to acquire yet another cement firm.

That's right.

In early trade today, it was announced that the Gautam Adani led Adani group is in talks to purchase Germany's Heidelberg Materials' Indian cement operations.

This in turn, resulted a steep rise in the Indian unit - HeidelbergCement.

The stock price climbed more than 12% to touch a fresh 52-week high of Rs 258 on the Bombay Stock Exchange (BSE).

Let's look at what cause the stock price to register such a steep rise and what lies ahead...

Why HeidelbergCement Share is Rising

Adani to Acquire Controlling Stake in the Company

As mentioned above, the share price of HeidelbergCement saw a steep rise in early trade today after the Adani Group informed about its plans to purchase the German company Heidelberg Materials' Indian cement operations.

According to reports, the estimated value of the deal is said to be somewhere around US$1.2 billion.

Heidelberg currently operates four plants and sells cement under two brands, Mycem and Zuari.

This acquisition is part of Adani Group's ongoing expansion in the cement sector. The company entered the industry in 2022 by acquiring Holcim's stake in Ambuja Cement.

To strengthen its place in the already intense cement industry, where top cement producer UltraTech Cement recently announced a big acquisition and a massive capex, the Adani Group has also made it clear that it's leaving no stones unturned. Adani has made a series of acquisitions in the cement sector, including Ambuja Cements, Sanghi Industries, and Hyderabad-based Penna Cement Industries.

Recently, there were also some reports that indicated Adani was in talks to acquire Gujarat's Saurashtra Cement, Jaiprakash Associates' cement business, and Vadraj Cement, owned by ABG Shipyard.

What Next for HeidelbergCement?

To be honest, this acquisition news could not have come at a better time.

In the first quarter of FY25, Heidelberg Cement's profit fell for the first time in as many as five quarters owing to lower sales volume and price cuts.

The company faced challenges such as labor shortages, global slowdown, and intensifying competition in the cement market.

However, the management is expecting a turnaround in the coming quarters.

The company is undertaking a de-bottlenecking exercise, which is expected to increase its cement output by 200,000 tons per annum.

Meanwhile, it has also launched a new value-added product called Power Shield. This premium brand is priced around Rs 50 to Rs 60 higher per bag compared to regular products.

If Adani's acquisition does go through, it is expected to significantly boost Ambuja Cement's production capacity.

Heidelberg Materials, parent company of HeidelbergCement India, provides solutions for the construction industry and is a pioneer in the field of decarbonisation.

HeidelbergCement also pays consistent dividends to shareholders.

The company's return ratios also seem to be improving, while it has reduced debt to almost nil in the past 5 years.

Financial Snapshot

Rs m, standalone	FY20	FY21	FY22	FY23	FY24
Net Sales	21,696	21,167	22,970	22,381	23,660
Growth (%)	2%	-2%	9%	-3%	6%
Operating Profit	5,805	5,531	4,836	2,941	3,170
OPM (%)	27%	26%	21%	13%	13%
Net Profit	2,681	3,150	2,523	992	1,680
Net Margin (%)	12%	15%	11%	4%	7%
ROE (%)	21.6	22.4	16.5	6.6	11.4
ROCE (%)	27.7	25.2	21	10.7	17.2
Dividend (Rs)	7.5	8	9	7	8
Debt to Equity (x)	0.31	0.2	0.12	0.12	0.09

Data Source: Ace Equity

How HeidelbergCement Share Price has Performed Recently

In the past 1 month, HeidelbergCement share price has gained 7%.

In 2024 so far, the stock has delivered muted returns of 4%.

HeidelbergCement has a 52-week high of Rs 258 touched on 7 October 2024 and a 52-week low of Rs 183 touched on 26 October 2023.

In the past one year, the stock price has gained 28%.

Following Adani's buyout news worth more than Rs 10,000 crore, Heidelberg Cement share price rose to its highest level in as many as 3 years.

Here's a table comparing HeidelbergCement with its peers -

Comparative Analysis

Company	Heidelberg	HIL	Orient Cement	Sagar Cements	Star Cement
ROE (%)	11.4	8.9	10.5	1.8	14.1
ROCE (%)	17.2	10.5	16.3	5.4	21.5
Latest EPS (Rs)	6.9	91.2	8.5	3.1	3.8
TTM PE (x)	31.9	32.3	35.5	73.7	54.9
TTM Price to book (x)	3.3	1.8	3.5	1.8	5.1
Dividend yield (%)	3.7	1.3	0.7	0.3	0.0
Industry PE	46.9
Industry PB	4.1

Data Source: Ace Equity, Equitymaster

About HeidelbergCement

HeidelbergCement India is the Indian subsidiary of HeidelbergCement Group, Germany.

The company has its operations in Central India at Damoh (Madhya Pradesh), Jhansi (Uttar Pradesh), and in Southern India at Ammasandra (Karnataka).

To know more, check out its financial factsheet.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.