India Cement (INDCEM) - icicidirect.com · ICICI Securities Ltd | Retail Equity Research Page 3 Company Analysis Largest manufacturer of cement in South India India Cement is the

February 13, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Higher prices lead to margin expansion… • India Cement’s Q3FY15 results came in line with our estimates with

revenues at | 1035.9 crore and net profit posting a loss of | 11.7 crore vs. our estimated revenue and loss of | 1034.8 crore and net loss of | 7.3 crore, respectively

• Sales volumes declined 8.0% YoY to 2.1 MT (in line with our estimate of 2.1 MT) while realisation for the quarter improved 8.3% YoY to | 4795/tonne. Cement EBITDA/tonne stood at | 755/tonne vs. | 592/tonne in Q3FY14 (up ~27.5% YoY). On a QoQ basis also, it improved 22.3% led by an increase in cement prices and a decline in power & fuel costs

• The pricing environment in the south continues to remain stable. On the cost front, road freight is expected to see a decline of ~5-7% on account of diesel price decline which should help the company to further improve margins going forward.

Fifth largest player in India with strong presence in south (AP, Karnataka)

India Cement is the fifth-largest cement player in India and the largest player in South India. Out of total cement sales, ~85-90% of sales come from the southern region for the company. Due to excess capacity in the southern region, particularly Andhra Pradesh (AP) where the company has over 49% of its total capacity, it reported muted revenue growth i.e. at a CAGR of 4.2% during FY10-14. Further, with power problems in AP and low capacity utilisation (~60-62%), its operating margins have come down sharply from 21.9% in FY10 to 12.1% in FY14. With the Telangana issue now resolved, we expect overall utilisation in the southern region to improve over the next two or three years. While the bottoming out of demand in South India is a key positive for India Cement, the utilisation level is unlikely to exceed ~67-68% till FY17-18E, which will limit the volume growth for the company.

Margins to remain flattish led by high power costs

Although the company commissioned the 50 MW power plant in AP, it went into maintenance due to some technical problem. This led to further delays in stabilisation of the power plant. As a result, its power cost per tonne remained higher at | 1273/tonne in FY14 (i.e. 20% higher than average industry cost). We expect it to continue to be higher till the plant stabilises. In addition, inefficiency of some older plants also remains a structural cost concern for the company. In this situation, we expect a margin expansion to happen gradually through price hikes in the next two years.

Investment in unrelated businesses keeps RoE at lower levels

India Cement has investments worth ~| 2300 crore in non-cement assets of which ~| 700 crore is invested in the shipping and IPL business. Apart from this, the company is invested in Coromandel Sugar & Travels and Jagati Publications Carmel Holdings. In the absence of healthy earnings from these businesses (EBITDA of | 46 crore in FY14, | 56 crore in FY13), its RoE has remained lower at 4% in FY13 and -0.9% in FY14.

High risks, low RoE factored in valuations; maintain BUY

At the CMP of | 104, the stock is available at $66/tonne on capacity of 15.5 MT, which is still 35% cheaper than the average valuations of midcap companies. Given the healthy pricing scenario coupled with an expected pick-up in demand, we remain positive on the company and maintain our BUY rating on the stock with a revised target price of | 127/share (i.e. valuing at $73/tonne on FY17E capacity and 6.5x FY17E EV/EBITDA).

India Cement (INDCEM) | 103

Rating matrix Rating : BuyTarget : | 127Target Period : 12-15 monthsPotential Upside : 22%

What’s changed? Target Changed from |141 to |127EPS FY15E UnchangedEPS FY16E Changed from |6.6 to |5.7EPS FY17E Changed from | 7.8 to |9.3Rating Unchanged

Quarterly performance

Q3FY15 Q3FY14 YoY (%) Q2FY15 QoQ (%)Revenue 1,035.9 1,036.5 -0.1 1,131.7 -8.5EBITDA 158.7 144.4 10.0 179.1 -11.4EBITDA (%) 15.3 13.9 140 bps 15.8 -51 bpsPAT (11.7) 0.4 PL 7.5 NA

Key financials | Crore FY14 FY15E FY16E FY17E

Net Sales 4,440.9 4,616.3 5,004.5 5,363.6

EBITDA 537.1 703.5 922.2 1,031.5Net Profit (35.9) 27.2 166.3 251.5

EPS (|) (1.2) 0.9 5.4 8.2 Valuation summary

FY14 FY15E FY16E FY17E

P/E 0.0 118.6 19.4 12.8

Target P/E NA 143.4 23.5 15.5

EV/EBITDA 11.2 9.0 6.7 5.9

EV/Tonne($) 71 68 67 66

P/BV 0.8 0.9 0.8 0.7RoNW (%) (0.9) 0.7 3.9 5.5

RoCE (%) 3.9 6.4 8.9 10.0 Stock data

Amount

Mcap | 3226 crore

Debt (FY15E) | 3080 crore

Cash & Invest (FY15E) | 31 crore

EV | 6274 crore

52 week H/L | 134 / 48

Equity cap | 307.2 crore

Face value | 10

Particular

Price performance

1M 3M 6M 12M

Heildelberg Cem. 8.2 0.4 40.9 126.3

India Cement 34.2 -3.1 5.6 99.4

JK Cement 11.9 26.1 84.6 293.2

JK Lakshmi Cem. 1.9 15.9 82.6 458.6 Research Analyst

Rashesh Shah [email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis Q3FY15 Q4FY14E Q3FY14 YoY (%) Q2FY15 QoQ (%) Comments

Total Operating Income 1035.9 1103.6 1036.5 -0.1 1,131.7 -8.5Cement volumes declined 3.7% YoY to 2.35 MT while realisation improved sharply by 13.1% YoY to | 4655/tonne

Other Income 4.7 3.5 1.9 143.0 4.2 12.5Raw Material Expenses 145.2 155.0 137.7 5.5 173.6 -16.4Employee Expenses 78.3 75.4 83.1 -5.7 76.8 2.0Stock Adjustment 15.1 0.0 1.3 NA -15.9 -195.1

Power & Fuel 262.0 285.8 296.1 -11.5 296.3 -11.6Low cement volumes coupled with a fall in international coal prices led to a decline in total power cost.On a per tonne basis, it remained flat at | 1261/tonne

Freight cost 224.7 255.4 231.8 -3.1 265.1 -15.3Others 151.9 136.9 142.3 6.7 156.6 -3.0EBITDA 158.7 195.1 144.4 10.0 179.1 -11.4

EBITDA Margin (%) 15.3 17.7 13.9 140 bps 15.8 -51 bpsLower operating cost led to 408 bps expansion in margins. However, the same remained lower than our estimates due to higher freight costs during the quarter

Interest 108.7 97.8 77.3 40.7 109.5 -0.7Depreciation 66.4 66.9 68.6 -3.2 66.3 0.1PBT -11.7 24.8 0.4 -2,881.0 7.5 -255.9Total Tax 0.0 -3.1 0.0 NA 0.0 NAPAT -11.7 24.8 0.4 PL 7.5 NA

Key MetricsVolume (MT) 2.35 2.36 2.44 -3.7 2.56 -8.1 Sales volume declined on account of poor demand in APRealisation (|) 4,655 4,394 4,116 13.1 4,244 9.7Cement EBITDA per Tonne (|) 618 538 408 51.3 448 37.9

Better realisation and lower power cost helped to improve EBITDA/tonne for the quarter on a QoQ basis

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change Old New % Change Comments

Revenue 4,895.3 4,644.6 -5.1 5,331.8 5,040.1 -5.5 NA 5,415.4 NA

We expect FY15 to be a challenging year in terms of volume growth amid excess capacity in the southern region. However, strong pricing environment would be a key driver for revenue growth

EBITDA 746.4 751.2 0.6 916.2 934.8 2.0 NA 1,083.3 NA

EBITDA Margin (%) 15.2 16.2 93 bps 17.2 18.5 136 bps NA 20.0 NA

Margins are expected to recover from FY16E led by improvement pricing environemnt and stabilisation of new power plant

PAT 47.4 74.9 58.0 184.4 174.7 -5.3 NA 286.7 NAEPS (|) 1.5 2.4 58.0 6.0 5.7 -5.3 NA 9.3 NA

FY15E FY16E FY17E

Source: Company, ICICIdirect.com Research Assumptions

CommentsFY13 FY14 FY15E FY16E FY17E FY15E FY16E FY17E

Volume (MT) 10.1 10.0 9.5 10.0 10.4 10.4 10.7 NAWe remain conservative on the volume growth front with visible recovery from FY16E onwards

Cement Realisation (|) 4,362 4,183 4,626 4,735 4,958 4,278 4,490.0 NAHowever, we expect pricing environment to remain strong due to improvement in demand

Cement EBITDA per Tonne (|) 783 289 556 670 773 323 518.0 NAExpect lower EBITDA/tonne than industry due to high exposure in AP

EarlierCurrent

Source: Company, ICICIdirect.com Research


Company Analysis Largest manufacturer of cement in South India

India Cement is the largest cement manufacturer in the southern region with an installed capacity of 13.1 MTPA in the southern region. While 1.1 MTPA of capacity is in Maharashtra, 1.5 MTPA of capacity is in Banswara, Rajasthan. Out of total revenue, ~85-90% of sales come from the southern region for the company. Due to excess capacity in the southern region, the company is vulnerable to the demand supply mismatch of the southern region. Going ahead, after the resolution of Telangana issue in the region, we expect demand to improve from here on. However, given the additional capacity, the utilisation level is unlikely to exceed ~67-68% till FY17-18E, which will limit the volume growth for the company.

Exhibit 1: Demand supply dynamics of South India Million tonnes FY09 FY10 FY11 FY12 FY13 FY14P FY15E

Effective Capacity 67.0 83.0 101.5 110.0 119.0 123 128.0

Production 59.7 63.0 66.0 67.2 68.3 69 73.0

Capacity Utilisation (%) 89.1 75.9 65.0 61.1 57.4 56 57.0

Consumption 59.7 62.9 66.0 67.2 68.3 69 71.5

Consumption Growth(%) 10.4 5.4 4.9 1.8 1.6 1 3.9

Surplus/Deficit 7.3 20.1 35.5 42.8 50.7 54 56.5 Source: ICICIdirect.com Research

Operationally inefficient; captive power plants to help, going forward

The company is one of the least efficient players in the industry. The EBITDA margin at the end of FY14 was at 7% only against industry average of 17%. The company currently has 50 MW of power capacity at Sankarnagar to cater to the energy needs of cement plants in Tamil Nadu. Another captive power plant of 50 MW at Vishnupuram in Andhra Pradesh has been installed and is in the process of stabilisation. The plant will cater to the requirement of cement plants in Andhra Pradesh.

Exhibit 2: EBITDA margin compared to industry

33 34

25 23

12

2118

7

31 29 2825

1822

1917

05

10152025303540

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

(%)

India Cement Industry


Exhibit 3: EBITDA/tonne compared to industry

111 156

93

754

412

887

783

289

895

889 942

901

689

956

848

727

0

200

400

600

800

1,000

1,200

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

(|)

India Cement Industry


Huge investments in unrelated non-cement business remain key concern

The company has invested a large sum of money in non-core businesses and other group companies/associates. As of FY14, the company has total loans and advances of | 2552 crore and other investments of | 943 crore, which contributes only ~9% in total EBITDA of the company for FY14. Loans and advances include advances to other body corporate like ICL Financial Services, ICL Securities, Trishul Concrete (RMC business), etc, which have led to low RoEs. The company has several times iterated its intentions of restructuring its non-core businesses. However, till that time, this remains an overhang for the company.

Capacity spread

Tamilnadu38%

Andhra Pradesh

45%

Maharastra7%

Rajasthan10%


Expect revenue CAGR of 6.5% during FY14-17E

The company’s revenue has grown at a CAGR of 4.2% during FY10-14 while in FY12-14, the growth was lower at 2.8% led by a slowdown in AP coupled with higher cement capacity. Going forward, with the resolution of the Telangana issue and a strong focus towards infrastructure development by the government, we expect revenue CAGR of 6.5% in FY14-17E. We expect volume growth at a CAGR of 1.1% during our forecast period of FY14-17E while realisations are expected to grow at 5.5% on account of an improvement in capacity utilisations.

Exhibit 4: Expect revenue CAGR of 6.5% during FY14-17E

3771 35014203

4597 4441 46165005

5364

0

1000

2000

3000

4000

5000

6000

FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Net Sales (| crore)


Exhibit 5: Capacity addition plans State Region MT

Sankarnagar, Tirunelveli Tamilnadu South 2.1

Sankari, Salem Tamilnadu South 0.9Dalavoi, Ariyalur Tamilnadu South 1.9

Vallur Village, Tiruvallur Tamilnadu South 1.1Chilamakur, Kadapa Andhra Pradesh South 1.5

Yerraguntla, Kadapa Andhra Pradesh South 0.7

Vishnupuram, Nalgonda Andhra Pradesh South 2.5

Malkapur, Ranga Reddy Andhra Pradesh South 2.4Parli Vaijnath, Beed Maharashtra West 1.1

banswara Rajasthan North 1.5Total 15.7


Exhibit 6: Volume to grow at CAGR of 1.1% during FY14-17E

10.969.97 9.53 10.05 10.02 10.45 11.01 11.51

0.00

3.00

6.00

9.00

12.00

15.00


Sales Volumes (In mn)


Exhibit 7: Realisation to grow at CAGR of 5.5% during FY14-17E

3266 33754215 4362 4183 4613 4723 4908

0

2000

4000

6000

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

FY17

E

(|/to

nne)

-10

0

10

20

30

(%)

Cement Realisation (|/tonne) -LS Growth (%) -RS


Exhibit 8: Volumes decline 8.0% YoY Q3FY15 due to lower demand…

2.31 2.43

2.19 2.

60

2.38 2.48

2.42 2.

78

2.65

2.44

2.29 2.

64

2.56

2.35

2.11

0.00

0.501.00

1.50

2.002.50

3.00

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

-15.0

-10.0-5.0

0.0

5.010.0

15.0

Sales volumes (In MT) -LHS Growth (%) -RHS


Exhibit 9: …but realisations up 8.3% YoY to | 4795/tonne

4148

4223

4241

4245 44

6644

1143

7342

2141

8941

16 4429

4027 42

44 4655 4795

2000250030003500400045005000

Q1FY

12Q2

FY12

Q3FY

12Q4

FY12

Q1FY

13Q2

FY13

Q3FY

13Q4

FY13

Q1FY

14Q2

FY14

Q3FY

14Q4

FY14

Q1FY

15Q2

FY15

Q3FY

15

|/to

nne

-1001020304050

(%)

Realisation-LHS Growth (%) -RHS

`



Margins to improve gradually, going forward

We expect margins to improve gradually during our forecast period of FY14-17E led by healthy realisations and reduction in power & freight cost/tonne.

Exhibit 10: Expect EBITDA/tonne of |723 in FY17E

754

412

887783

289

506658

723

0

200

400

600

800

1000


|

Cement EBITDA/Tonne


Exhibit 11: Margins to pick-up from FY17E

21.9

12.4

21.518.3

12.115.2

18.4 19.2

05

101520253035


(%)

EBITDA Margin (%)


Exhibit 12: Q3FY15 cement EBITDA improved due to higher cement prices

988887 862 819

1029

778 792

569 572408

592

388 448

618755

0

200

400

600

800

1000

1200

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15


Exhibit 13: Margin trend (%)

23.120.719.3

23.1

18.317.814.115.4

11.713.9

6.9

12.915.3

22.915.8

0

5

10

15

20

25

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

(%)

EBITDA Margin (%)


Expect net margins to improve during FY14-17E

After reporting a loss in FY14, we expect net margins to improve to 4.7% in FY17E from 3.6% in FY13. Overall, we expect the company to report a net profit of | 251.5 crore during FY17E from a loss of | 35.9 crore in FY14. Exhibit 14: Profitability trend

310.8

65.7

296.0

27.2

166.3

251.5

-35.9

176.39.4

4.7

0.6

3.33.6

7.0

1.9-0.8

-100

0

100

200

300

400


| cr

ore

-5

0

5

10

15

20

(%)

Net profit - LS Net profit margin -RS



Outlook and valuation With the Telangana issue now resolved, we expect the overall utilisation in the southern region to improve over the next two or three years. While the bottoming out of demand in South India is a key positive for India Cement, the utilisation level is unlikely to exceed the peak of FY13 till FY17-18E, which will limit the volume growth for the company. At the CMP of | 103, the stock is available at $66/tonne on capacity of 15.5 MT, which is still 35% cheaper than the average valuations of midcap companies. Given the healthy pricing scenario coupled with an expected pick-up in demand, we remain positive on the company and maintain our BUY rating on the stock with a revised target price of | 127/share (i.e. valuing at $73/tonne on FY17E capacity and 6.5x FY17E EV/EBITDA).

Exhibit 15: Key assumptions | per tonne (Blended) FY12 FY13 FY14 FY15E FY16E FY17E

Capacity Utilisation (%) 67.4 71.5 64.7 61.5 64.8 66.8

Realisation 4215 4362 4183 4613 4723 4908

Total Expenditure 3328 3579 3894 4106 4065 4185

Stock Adj 3 -19 -31 44 0 0

Raw material 568 575 604 685 735 755

Power & fuel 1149 1249 1273 1233 1260 1280

Employee 312 332 350 344 360 370

Freight 793 954 1007 1063 1070 1080

Others 503 489 691 738 640 700

EBITDA per Tonne 887 783 289 506 658 723

Source: ICICIdirect.com Research


Exhibit 16: One year forward EV/EBITDA

0

2000

4000

6000

8000

10000

12000

Feb-

07

Aug-

07

Feb-

08

Aug-

08

Feb-

09

Aug-

09

Feb-

10

Aug-

10

Feb-

11

Aug-

11

Feb-

12

Aug-

12

Feb-

13

Aug-

13

Feb-

14

Aug-

14

Feb-

15

(| C

rore

)EV 10.4x 9.4x 8.5x 7.5x 5.6x


Exhibit 17: One year forward EV/Tonne

0

1000

2000

3000

4000

Feb-

07

Aug-

07

Feb-

08

Aug-

08

Feb-

09

Aug-

09

Feb-

10

Aug-

10

Feb-

11

Aug-

11

Feb-

12

Aug-

12

Feb-

13

Aug-

13

Feb-

14

Aug-

14

Feb-

15

Milli

on $

EV $180 $160 $140 $120 $80


Exhibit 18: Valuations Sales Growth EPS Growth PE EV/EBITDA EV/Tonne RoNW RoCE

(Rs cr) (%) (Rs) (%) (x) (x) (x) (%) (%)FY14 4597.0 9.4 5.3 -44.2 19.7 7.2 71 4.0 8.1FY15E 4440.9 -3.4 -1.2 -121.9 0.0 11.2 68 -0.9 3.9FY16E 4616.3 4.0 0.9 -175.9 118.6 9.0 67 0.7 6.4FY17E 5004.5 8.4 5.4 511.2 19.4 6.7 66 3.9 8.9



Company snapshot

0

20

40

60

80

100

120

140

160

180

Jan-

09

Apr-0

9

Jul-0

9

Oct-0

9

Jan-

10

Apr-1

0

Jul-1

0

Oct-1

0

Jan-

11

Apr-1

1

Jul-1

1

Oct-1

1

Jan-

12

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Jan-

15

Apr-1

5

Jul-1

5

Oct-1

5

Jan-

16

Target price: |127

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventMar-08 The company revives their shipping business with the purchase of two ships (dry bulk carriers) with a total capacity of 79,843 DWT. Commences commercial

production of 1 MT grinding plant at Chennai. Also, the company successfully bids for the Chennai franchise of the DLF-IPL 20/20 Cricket Tournament - 'Chennai Super Kings'.

Feb-09 Completes and commences commercial production of 1 MT grinding plant at Parli (Maharashtra). The company's subsidiary, namely, Trishul Concrete Products Ltd gets completed and commences commercial production of 1 lakh cuic metre ready mix concrete plant at Hyderabad (Andhra Pradesh)

Apr-09 The company upgrades capacity of kiln I to 3000 TPD (1700 TPD) at Vishnupuram

Sep-09 Announces plans to set up two 50 MW power plant in Shankar Nagar, Tamil Nadu and Andhra Pradesh with total capex of | 500 crore

Jan-10 ICL Financial Services Ltd (ICLFSL), the company's wholly-owned subsidiary, acquires 60.89% (including shares acquired under open offer) equity share capital in Indo Zinc Ltd (IZL). Consequently, IZL became a subsidiary of ICLFSL and ultimate subsidiary of the company. The company set up PT. Coromandel Minerals Resources as subsidiary in Indonesia for acquiring coal concessions

Apr-10 The company obtains ISO 9001 certification for quality assurance for their Dalavoi Plant.

Jun-10 The company completes upgradation of capacity at Chilamakur to 4500 tonnes per day

Jun-12 CCI fines company with penalty of | 187.5 crore on alleged cartelisation

Aug-12 Reports Q1FY12 results with 39% fall in profit, misses forecast due to overcapacity in South

Sep-12 COMPAT serves notice to CCI in cement cartelisation case

May-13 COMPAT directs cement companies to pay 10% penalty

Oct-13 Supreme Court bars company promoter N Srinivasan from taking charge as BCCI President till investigation gets complete w.r.t. IPL probe

Feb-15 Company transfred IPL division into separate subsidiary company Chennai Super Kings Cricket (CSKC) limited

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 BNY Mellon Asset Management 31-Dec-14 9.80 30.1 0.12 EWS Finance & Investments Ltd. 31-Dec-14 9.00 27.6 0.03 Prince Holdings Madras Pvt. Ltd. 31-Dec-14 8.30 25.5 0.04 Subramanian (Vidya) 31-Dec-14 6.50 20.0 0.05 Life Insurance Corporation of India 31-Dec-14 6.06 18.6 0.06 Trishul Investments Pvt. Ltd. 31-Dec-14 5.71 17.5 0.07 The Boston Company Asset Management, LLC 1-Jul-14 5.24 16.1 -6.28 AfrAsia Capital Management Ltd 31-Dec-14 4.56 14.0 0.09 Anna Investments Pvt. Ltd. 31-Dec-14 4.24 13.0 0.010 HSBC Global Asset Management (Hong Kong) Limited 31-Dec-14 4.10 12.6 -0.4

(in %) Dec-13 Mar-14 Jun-14 Sep-14 Dec-14Promoter 28.23 28.23 28.23 28.23 28.23FII 35.10 35.96 36.12 35.96 33.07DII 12.74 11.97 12.15 11.97 12.50Others 23.93 23.84 23.50 23.84 26.20

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesDimensional Fund Advisors, L.P. 12.30m 9.07m The Boston Company Asset Management, LLC -10.50m -6.15m Napean Trading & Investment Company Pvt. Ltd. 4.92m 3.63m Artisan Partners Limited Partnership -2.52m -2.11m Barclays Capital Mauritius, Ltd. 4.51m 3.32m GMO LLC -2.14m -1.86m Norges Bank Investment Management (NBIM) 3.07m 2.82m Raiffeisen Kapitalanlage-Gesellschaft mbH -1.35m -1.67m Reliance Capital Asset Management Ltd. 2.75m 2.26m Robeco Institutional Asset Management B.V. -0.72m -1.03m

Buys Sells


Financial summary Profit and loss statement | Crore (Year-end March) FY14 FY15E FY16E FY17E

Total operating Income 4,440.9 4,628.9 5,017.1 5,415.4

Growth (%) -3.4 4.2 8.4 7.9

Raw material cost 574.4 695.3 738.1 781.5

Employee Expenses 351.3 327.5 361.5 383.0

Power, Oil & Fuel 1276.2 1174.6 1265.4 1325.0

Freight cost 1009.1 1012.7 1074.5 1118.0

Other Expenses 692.7 667.7 642.7 724.6

Total Operating Exp. 3,903.7 3,877.7 4,082.3 4,332.1

EBITDA 537.1 751.2 934.8 1,083.3

Growth (%) -36.3 39.8 24.4 15.9

Depreciation 276.4 268.4 279.9 288.7

Interest 353.7 423.6 417.2 396.0

Other Income 57.1 16.1 20.0 20.0

Exceptional items 0.0 0.0 0.0 0.0

PBT -35.9 75.2 257.7 418.5

Total Tax 0.0 0.0 85.1 133.9

PAT -35.9 75.2 172.7 284.6

Adjusted PAT -35.9 74.9 174.7 286.7

Growth (%) -120.3 -309.0 133.2 64.1

Adjusted EPS (|) -1.2 2.4 5.7 9.3


Cash flow statement | Crore (Year-end March) FY14 FY15E FY16E FY17E

Profit after Tax -35.9 74.9 174.7 286.7

Add: Depreciation 276.4 268.4 279.9 288.7

(Inc)/dec in Current Assets -166.7 -44.6 -495.5 -157.6

Inc/(dec) in CL and Provisions 270.2 4.3 109.5 -94.8

CF from operating activities 344.0 303.1 68.5 323.0

(Inc)/dec in Investments 12.3 -125.0 -100.0 -50.0

(Inc)/dec in Fixed Assets -57.6 -250.0 -220.0 -250.0

Others 0.0 0.0 0.0 0.0

CF from investing activities -45.3 -375.0 -320.0 -300.0

Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0

Inc/(dec) in loan funds -97.9 300.0 -100.0 -100.0

Dividend paid & dividend tax 0.0 -71.9 -71.9 -71.9

Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0

Others -202.5 -128.1 450.0 150.0

CF from financing activities -300.4 100.1 278.1 -21.9

Net Cash flow -1.6 28.2 26.6 1.1

Opening Cash 4.7 3.1 31.3 57.9

Closing Cash 3.1 31.3 57.9 59.0


Balance sheet | Crore (Year-end March) FY14 FY15E FY16E FY17E

Liabilities

Equity Capital 307.2 307.2 307.2 307.2

Reserve and Surplus 3,544.1 3,419.0 3,971.9 4,336.6

Total Shareholders funds 3,851.3 3,726.2 4,279.0 4,643.8

Total Debt 2,779.7 3,079.7 2,979.7 2,879.7

Deferred Tax Liability 329.7 329.7 329.7 329.7

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 6,960.7 7,135.6 7,588.4 7,853.2

Assets

Gross Block 6,863.5 7,263.5 7,468.5 7,728.5

Less: Acc Depreciation 2,901.0 3,169.5 3,449.4 3,738.1

Net Block 3,962.5 4,094.1 4,019.2 3,990.4

Capital WIP 300.0 150.0 165.0 155.0

Total Fixed Assets 4,262.5 4,244.1 4,184.2 4,145.4

Investments 943.5 1,068.5 1,168.5 1,218.5

Inventory 550.9 590.4 564.2 682.1

Debtors 422.5 440.4 522.3 563.8

Loans and Advances 2,552.3 2,539.5 2,979.3 2,977.6

Other Current Assets 2.1 2.1 2.1 2.1

Cash 3.1 31.3 57.9 59.0

Total Current Assets 3,530.9 3,603.6 4,125.8 4,284.5

Creditors 1,716.8 1,648.6 1,718.2 1,632.0

Provisions 59.4 131.9 171.8 163.2

Total Current Liabilities 1,776.2 1,780.5 1,890.0 1,795.2

Net Current Assets 1,754.7 1,823.1 2,235.8 2,489.3

Application of Funds 6,960.7 7,135.7 7,588.5 7,853.2


Key ratios (Year-end March) FY14 FY15E FY16E FY17E

Per share data (|)

Adjusted EPS -1.2 2.4 5.7 9.3

Cash EPS 7.8 11.2 14.8 18.7

BV 125.4 121.3 139.3 151.2

DPS 0.0 2.0 2.0 2.0

Cash Per Share 0.1 1.0 1.9 1.9

Operating Ratios (%)

EBITDA Margin 12.1 16.2 18.6 20.0

PAT Margin -0.8 1.6 3.5 5.3

Inventory days 43.0 45.0 42.0 42.0

Debtor days 34.7 34.7 38.0 38.0

Creditor days 141.1 130.0 125.0 110.0

Return Ratios (%)

RoE -0.9 2.0 4.1 6.2

RoCE 3.9 7.1 9.0 10.6

RoIC 3.9 6.9 8.9 10.4

Valuation Ratios (x)

P/E NM 43.1 18.5 11.3

EV / EBITDA 11.2 8.3 6.6 5.6

EV / Net Sales 1.4 1.4 1.2 1.1

Market Cap / Sales 0.7 0.7 0.6 0.6

Price to Book Value 0.8 0.9 0.8 0.7

Solvency Ratios

Debt/EBITDA 5.2 4.1 3.2 2.7

Debt / Equity 0.7 0.8 0.7 0.6

Current Ratio 2.0 2.0 2.2 2.4

Quick Ratio 2.0 2.0 2.2 2.4



ICICIdirect.com coverage universe (Cement)

CMP M Cap(|) TP(|) Rating (| Cr) FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E

ACC* 1551 1,635 HOLD 28,392 19.0 21.4 16.1 14.4 141 146 134 134 9.9 8.3 10.2 10.5 14.0 14.1 11.9 12.4Ambuja Cement* 250 241 HOLD 35,091 19.7 15.5 14.6 12.3 164 165 163 149 11.4 8.3 8.1 8.7 13.6 9.2 9.1 9.7UltraTech Cem 3008 3,240 HOLD 85,550 23.8 21.6 16.5 12.6 253 227 199 181 11.9 10.8 12.7 15.9 12.5 11.9 13.1 15.7Shree Cement^ 11084 11,200 HOLD 37,236 27.4 25.2 20.4 17.0 300 248 225 225 13.0 11.0 12.8 14.1 16.7 13.5 15.3 15.9Heidelberg Cem* 78 105 BUY 1,972 37.2 12.2 10.2 8.4 99 88 89 86 -0.5 6.2 8.2 10.2 -4.9 7.6 7.6 10.2India Cement 103 127 BUY 3,226 11.2 8.3 6.6 5.6 71 68 66 65 3.9 7.1 9.0 10.6 -0.9 2.0 4.1 6.2JK Cement 680 735 BUY 4,406 5.5 7.8 10.9 14.7 130 93 91 86 5.2 8.5 9.7 14.7 5.2 8.5 9.7 14.7JK Lakshmi Cem 379 458 BUY 4,449 18.3 15.9 11.7 8.4 139 106 99 89 6.1 7.7 9.6 13.5 7.1 9.4 12.6 15.7Mangalam Cem 281 322 BUY 750 22.8 12.1 7.3 5.6 54 54 56 55 2.1 6.2 12.1 15.4 5.8 4.4 10.8 13.9

RoE (%)RoCE (%)EV/Tonne ($)EV/EBITDA (x)Company

*CY14E, CY15E, CY16E ; ^JY15E,JY16E,JY17E. # Target price achieved Source: Company, ICICIdirect.com Research


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Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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