UltraTech Cement (ULTCEM)content.icicidirect.com/mailimages/IDirect_UltraTech_Q2...Freight 1,347.3 1,405.2 1,290.9 4.4 1,552.7 -13.2 Logistic cost increased due to a hike in rail freight

October 20, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Power cost rationalisation drives margin… • Standalone revenues increased 4.5% YoY (down 6.9% QoQ) to | 5,620

crore (vs. I-direct estimate: | 5,526 crore) due to 4.0% YoY growth in volumes (led by capacity expansion) & 0.5%YoY increase in realisations

• EBITDA/tonne increased 7.6% YoY in Q2FY16 to | 834/tonne (vs. I-direct estimate: | 842/tonne) due to a decline in power & fuel costs as there was an increase in pet coke consumption (from 50% to 65% YoY in fuel mix). RM cost during the quarter increased due to DMF levy (30% of royalty on limestone with effect from December 1, 2015)

• Acquisition of Jaiprakash Associates’ 5 MT Madhya Pradesh asset has been delayed by six months due to provision on transfer of mines in the recently introduced MMR&D Act. The management expects clarity on these provisions/amendments by the government in next three months

Largest pan-India player in cement industry

UltraTech Cement is the largest player in capacity terms (~64.7 MT) with a market share of over ~18% in India. The company has consistently remained ahead of its peers in terms of capacity expansion with a CAGR of 23% vs. peer’s CAGR of 13% in the past five years. In Q2FY16, UltraTech commissioned 1.6 MT grinding unit at Jhajjar, Haryana and 1.6 MT grinding unit at Dankuni, West Bengal. Further, with ongoing organic, inorganic expansion, total capacity is set to reach ~71 MT (consolidated capacity at 74.8 MT) by FY17E while industry capacity is expected to grow at a modest pace in the next three years. This, in turn, is expected to help the company further gain its leadership position, going forward. During the quarter, the company commissioned the 5 MW WHR plant taking total capacity of WHR plant to 53 MW. UltraTech plans to further add 5 MW of WHR plant by FY16, which will further help lower fuel cost in coming quarters.

To benefit from strong demand recovery due to pan-India exposure

We expect the company to grow at a higher rate than the industry in coming years led by capacity expansion. The same has also been reflected in the current quarterly results with volume growth of 4.0% YoY. Further, given the likelihood of higher spending on infra development coupled with a rebound in economic growth, we expect strong demand recovery over the next three years. UltraTech, being the largest pan-India player, would be one of the major beneficiaries of a demand recovery.

Healthy operating cash flow, low debt/equity to fuel expansion

The company is expected to generate over ~| 4000 crore of operating cash flows annually and incur capex of | 3,900 crore annually. Further, considering the strong balance sheet of the company with minimal debt (D/E of 0.3:1), we believe the expansion plan will not add any stress to the balance sheet. This will consolidate the company’s position in the industry.

Well positioned to reap benefits of recovery in demand!!!

With the government’s focus on infrastructure and initiatives like smart cities, concretisation of roads, and housing for all, cement demand is expected to improve, going forward. We assign premium valuations multiple to UltraTech vs. its peer companies due to industry-leading growth (on the back of consistent capacity additions), higher margins and healthy cash flows. Hence, we continue to maintain our positive view on the stock with a BUY recommendation and revise our target price to | 3,600/share (i.e. at 14.0x FY17E EV/EBITDA and EV/tonne of $220/tonne).

UltraTech Cement (ULTCEM) | 2922 Rating matrix Rating : BuyTarget : | 3600Target Period : 9-12 monthsPotential Upside : 23%

What’s changed? Target Price Changed from | 3650 to | 3600EPS FY16E Changed from | 100.1 to | 103.8EPS FY17E Changed from | 138.0 to | 143.4Rating Unchanged

Quarterly performance

Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%)Revenue 5,620.0 5,379.0 4.5 6,037.0 -6.9EBITDA 927.4 829.5 11.8 1,092.6 -15.1EBITDA (%) 16.5 15.4 108 bps 18.1 -160 bpsPAT 393.0 410.1 -4.2 590.8 -33.5

Key financials | Crore FY14 FY15 FY16E FY17E

Net Sales 20077.9 22653.7 27505.8 32337.5

EBITDA 3616.0 3915.3 5514.5 7229.8

Net Profit 2144.5 2014.7 2847.3 3934.9

EPS (|) 78.2 73.4 103.8 143.4 Valuation summary

FY14 FY15 FY16E FY17E

PE (x) 37.2 39.6 28.0 20.3

EV to EBITDA (x) 22.3 21.3 15.3 11.6

EV/Tonne(US$) 237 220 187 180

Price to book (x) 4.7 4.2 3.7 3.2

RoNW (%) 12.5 10.6 13.3 15.7

RoCE (%) 11.7 10.9 14.5 17.9 Stock data

Amount

Mcap | 80070 crore

Debt (FY15) | 7,574 crore

Cash & Invest (FY15) | 2,916 crore

EV | 84728 crore

52 week H/L | 3399 / | 2386

Equity cap | 274.2 crore

Face value | 10

Particular

Price performance

1M 3M 6M 12M

ACC 1.5 -6.1 -8.3 -0.8

Ambuja Cement 0.1 -16.2 -14.9 1.3

Shree Cement 2.2 5.3 22.6 46.4

UltraTech Cement -1.3 -10.1 3.2 25.1 Research Analyst

Rashesh Shah [email protected]

Devang Bhatt [email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments

Net Sales 5,620.0 5,526.6 5,379.0 4.5 6,037.0 -6.9 The revenue growth was driven by expanded capacity through acquisitionsOther Incomes 105.0 115.6 121.7 -13.7 159.2 -34.1

Raw Material Expenses 904.4 946.0 835.7 8.2 1,045.3 -13.5Increase in RM cost was mainly due to a hike in limestone royalty and impact of DMF, which will be 30% of limestone royalty w.e.f. December 1, 2015

Employee Expenses 340.5 304.3 310.1 9.8 312.8 8.9

Power and fuel 1,058.9 999.4 1,144.9 -7.5 1,097.3 -3.5

Energy cost declined due to an increase in pet coke consumption in the fuel mix (65% in Q2FY16 vs 50% in Q2FY15), decline in pet coke cost and increase in share of thermal power plant & WHRMS (53 MW)

Freight 1,347.3 1,405.2 1,290.9 4.4 1,552.7 -13.2

Logistic cost increased due to a hike in rail freight (2.7% hike from April 1 2015), increase in lead distance and higher share of road transport. For the quarter, rail:road: sea mix was at 29:69:3 vs. 30:67:2 in Q2FY15

Others 1,041.5 926.4 968.1 7.6 936.3 11.2 Other expenses increased due to higher maintenance costEBITDA 927.4 945.3 829.5 11.8 1,092.6 -15.1EBITDA Margin (%) 16.5 17.1 15.4 108 bps 18.1 -160 bps The EBITDA margin improved due to lower energy cost

Depreciation 333.3 278.7 302.4 10.2 282.7 17.9The increase in depreciation expenses was due to change in useful life of ancillary asset

Interest 130.3 138.3 143.4 -9.1 138.3 -5.8PBT 568.9 643.8 505.5 12.5 830.9 -31.5Total Tax 175.9 199.6 95.4 84.3 240.1 -26.8

PAT 393.0 444.3 410.1 -4.2 590.8 -33.5PAT declined mainly on account of a decline in other income and increase in depreciation expenses

Key MetricsVolume (MT) 11.12 11.23 10.70 4.0 12.41 -10.4 The volume growth was mainly led by capacity expansionRealisation (|) 5,053 4,922 5,028 0.5 4,866 3.8 Prices during the quarter were flat due to poor demand led by monsoon EBITDA per Tonne (|) 834 842 775 7.6 881 -5.3 EBITDA/tonne improved mainly due to lower energy cost

Source: Company, ICICIdirect.com Research

Change in estimates

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

Revenue 27,038.5 27,505.8 1.7 31,933.9 32,337.5 1.3Revenues are expected to improve led by a demand revival in H2FY16

EBITDA 5,388.3 5,514.5 2.3 7,032.9 7,229.8 2.8We expect EBITDA to improve led by a decline in energy cost

EBITDA Margin (%) 19.9 20.0 12 bps 22.0 22.4 33 bpsPAT 2,745.5 2,847.3 3.7 3,787.2 3,934.9 3.9EPS (|) 100.1 103.8 3.7 138.0 143.4 3.9

FY16E FY17E

Source: Company, ICICIdirect.com Research Assumptions

CommentsFY13 FY14 FY15 FY16E FY17E FY15 FY16E FY17E

Volume (MT) 41.7 42.6 46.1 54.0 60.4 46.1 53.9 60.4 We expect volumes to increase mainly led by capacity expansion

Realisation (|) 4,800 4,713 4,913 5,098 5,351 4,918.0 5,017.0 5,290.0We expect realisation to remain healthy mainly due to better realisation in south

EBITDA per Tonne (|) 1,084 849 849 1,022 1,196 850.0 1,000.0 1,165.0We expect EBITDA/tonne to remain healthy on acount of improved realisation and lower power cost

EarlierCurrent



Company Analysis Largest pan-India player in cement Industry

UltraTech Cement is the largest player in terms of capacity (~64.7 MT) with a market share of over ~18% in India. The company has consistently remained ahead of its peers in terms of capacity expansion with a CAGR of 23% vs. peer’s CAGR of 13% in the past five years. In Q2FY16, UltraTech commissioned 1.6 MT grinding unit at Jhajjar, Haryana and 1.6 MT grinding unit at Dankuni, West Bengal. Further, with ongoing organic and inorganic expansion, the total capacity is set to reach ~71 MT (consolidated capacity at 74.8 MT) by FY17E while the industry capacity is expected to grow at a modest pace over the next three years. This, in turn, is expected to help the company to further gain its leadership position, going forward.

Demand expected to revive in H2FY16

UltraTech derives majority of its revenue from northern, western India, at 28%, 33%, respectively. Other than this, 14% of revenue is from eastern India where prices remain strong while 25% of its revenue comes from southern India where prices are improving. On the whole, the sales mix across India is well distributed, indicating lower volatility in blended realisation, going forward. The company has indicated some green shoots of recovery in demand from big-ticket infra projects in north. Further, in the east sustained infra spending in Odisha, Bihar and Chhattisgarh are expected to continue to drive volume growth in H2FY16. In south, the company expects demand from Seemandhra and Telangana to pick up in H2FY16.

Operates at healthy EBITDA/tonne vis-à-vis industry

With lower lead distances due to a pan-India presence, captive power plants and higher sales realisations due to a higher trade mix coupled with higher white cement sales realisation, the company generates highest EBITDA/tonne in the industry. It has also been able to reduce its power consumption per tonne gradually through various initiatives. Power requirement of ~80% is met through captive power plants, which helps the company in reducing per tonne cost. Other than this, the company also has increased pet coke consumption, which has helped in reducing power cost.

Exhibit 1: Gradual reduction in power requirement

85.1

83.182.0

81.3 81.1

79.0

74

76

78

80

82

84

86

FY09 FY10 FY11 FY12 FY13 FY14

Kwh/T of cement


Exhibit 2: Higher EBITDA/tonne vis-à-vis peer group

1,05

0

1,01

6

704 765 91

4

843

775

749

1,01

3

881

867

837

548 610 78

7

820

724

624

845

718

-

200

400

600

800

1,000

1,200

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

EBIT

DA/to

nne

(|)

Ultratech Industry

Source: Company, ICICIdirect.com Research Peer set includes ACC, Ambuja, Shree cement and India cement

Regional presence

North28%

West33%

South25%

East14%


Expect revenue CAGR of 19.5% during FY15-17E

Revenues have grown at a CAGR of 14.4% in FY11-15 mainly led by higher realisations (CAGR of 7.3%). However, due to higher capacity addition, we expect expansion led revenue CAGR of 19.5% in FY15-17E. The company is well on track on the capacity expansion front and will likely remain ahead of its target of 71 MT by FY17E (including the Jaiprakash Associate’s deal). Considering this, we expect volume CAGR of 14.5% during FY15-17E. We expect the blended realisation to increase at a CAGR of 4.4% during FY15-17E on account of an expected pick-up in demand.

Exhibit 3: Expect expansion led revenue CAGR of 19.5% during FY15-17E

1321018184 20021 20078

2265427506

32338

-5,000

10,000

15,00020,000

25,00030,00035,000

FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Sales (| crore)


Exhibit 4: Capacity addition plans (standalone) Clinker Grey Cement White Cement

Opening FY15 48 60.2 5.6

Additions Q1FY16 - - -

Q2FY16 - 3.2 -

Q3FY16 - - -

Q4FY16 - 1.6 -

Q1FY17 - 4.9* -

Q2FY17 - 1.6

Closing FY17 48 71.5 5.6 Source: Company, ICICIdirect.com Research * Board approval for acquisition of Jaiprakash’s MP plant with capacity of 4.9MT

Exhibit 5: Volume to grow at CAGR of 14.5% during FY15-17E

41.6 41.7 42.6 46.154.0

60.4

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

FY12 FY13 FY14 FY15 FY16E FY17E

Sales Volumes


Exhibit 6: Realisation to pick up led by higher price realisation in south

43744800 4713 4913 5098 5351

0

1000

2000

3000

4000

5000

6000

FY12 FY13 FY14 FY15 FY16E FY17E

-5.0

0.0

5.0

10.0

15.0

20.0

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


Exhibit 7: Robust volume growth led by capacity expansion…

10.39.4 10.0

12.5 12.010.7 11.3 12.2 12.4

11.1

02468

101214

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Mill

ion

Tonn

e

Sales Volume


Exhibit 8: …realisation growth increases 0.5% YoY during the quarter

4799

4802

4792

4662 4725

5028

4860 50

45

4866 50

53

4000

4250

4500

4750

5000

5250

5500

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

(|)

Realisation



Margins to improve but excess capacity in industry to limit expansion

Given the expected recovery in demand, we expect industry operating margins to improve at a faster pace due to high operating leverage. However, we expect the benefit to start flowing in from FY16E onwards with some moderation in operating costs due to lower fuel cost advantage along with healthy demand recovery. This, in turn, would help the company in achieving over 22% margins by FY17E.

Exhibit 9: Expect EBITDA/tonne of |1196 in FY17E

713

9621084

849 8491022

1196

0200400600800

100012001400


EBITDA/Tonne


Exhibit 10: Margins to improve led by improvement in realisations

19.222.0 22.6

18.0 17.320.0

22.4

10.0

15.0

20.0

25.0

30.0


EBITDA Margin (%)


Exhibit 11: Q2FY16 EBITDA per tonne improves due to lower energy cost

1016

704 765914 843 775 749

1013881 834

0200400600800

10001200

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

| pe

r ton

ne


Exhibit 12: Pick-up in margins expected, going forward

21.2

14.7 16.019.6

17.815.4 15.4

20.118.1 16.5

0

5

10

15

20

25Q1

FY14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

(%)

EBITDA Margin


Expect net profit CAGR of 39.8 % during FY15-17E

After witnessing a sharp decline in profit in FY15, we expect net margins to improve to 12.2% in FY17E, which is still lower than the average NPM of 13.5% in FY12. Exhibit 13: Profitability trend

1404.0

2446.2 2655.62144.5

2014.7 2847.3

3934.9

10.6

13.5 13.310.7

8.910.4

12.2

0

1000

2000

3000

4000

5000


| cr

ore

0.02.04.06.08.010.012.014.016.0

(%)

Net profit - LS Net profit margin -RS



Outlook and valuation The company is well on track on the capacity expansion front and will likely remain ahead of its target of 71 MT by FY17E (including the Jaiprakash Associates deal). Considering this, we expect volume growth at 14.5% CAGR in FY15-17E. We expect blended realisations to increase moderately at 4.4% CAGR over the same period. We estimate blended EBITDA/tonne at | 1,022/tonne in FY16E and | 1,196/tonne in FY17E. At the CMP of | 2,922, the stock is trading at 15.3x and 11.6x its FY16E and FY17E EV/EBITDA, respectively. We believe the industry’s capacity utilisation bottomed at ~69% in FY14. With the government taking measures to boost infrastructure development through steps like long-term fund availability for major infra projects, higher budgetary allocation towards public infrastructure development, we expect robust cement demand growth in FY15-17E to reach 319 MT (i.e. at CAGR of 8.6%, 1.1x of GDP in line with last 10 year’s average vs. CAGR of 5.5% and 7.5% in the last five and 10 years, respectively). The company expects government infra spends to gain momentum especially on construction of concrete roads and new capital city creation in Andhra Pradesh. UltraTech is well positioned to reap the benefit of a recovery in demand and generate healthy free cash flows in future. We assign premium valuations multiple to UltraTech vs. its peer companies due to its ability to generate higher margins and healthy cash flows. Hence, we continue to maintain our positive view on the stock with a BUY recommendation and revise our target price to | 3,600/share (i.e. at 14.0x FY17E EV/EBITDA and EV/tonne of $220/tonne). Exhibit 14: Key assumptions | per tonne FY13 FY14 FY15 FY16E FY17E

Sales Volume* 42 43 46 54 60

Net Realisation* 4800 4713 4913 5098 5351

Total Expenditure 3716 3864 4063 4076 4155

Raw material 671 781 772 820 790

Power & Fuel 1031 971 1029 896 955

Freight 1012 1075 1171 1221 1225

Employees 232 238 264 294 285

Others 771 799 828 846 900

EBITDA per Tonne 1084 849 849 1022 1196 Source: ICICIdirect.com Research; * Blended (grey + white + clinker)


Exhibit 15: One year forward EV/EBITDA

2000100001800026000340004200050000580006600074000820009000098000

Oct-0

7

Apr-0

8

Oct-0

8

Apr-0

9

Oct-0

9

Apr-1

0

Oct-1

0

Apr-1

1

Oct-1

1

Apr-1

2

Oct-1

2

Apr-1

3

Oct-1

3

Apr-1

4

Oct-1

4

Apr-1

5

Oct-1

5

(| C

rore

)

EV 15.5x 14.0x 12.5x 11.1x 8.0x


Exhibit 16: One year forward EV/Tonne

0

5000

10000

15000

20000

Oct-0

7

Apr-0

8

Oct-0

8

Apr-0

9

Oct-0

9

Apr-1

0

Oct-1

0

Apr-1

1

Oct-1

1

Apr-1

2

Oct-1

2

Apr-1

3

Oct-1

3

Apr-1

4

Oct-1

4

Apr-1

5

Oct-1

5

Milli

on $

EV $200 $170 $150 $130 $90


Exhibit 17: Valuation Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) ($) (x) (%) (%)

FY13 20020.9 0.3 96.8 -19.3 30.1 259 17.8 17.4 18.7FY14 20077.9 0.3 78.2 -19.3 37.3 238 22.4 12.5 11.7FY15 22653.7 12.8 73.4 -6.1 39.7 221 21.4 10.6 10.9FY16E 27505.8 37.0 103.8 32.7 28.1 188 15.3 13.3 14.5FY17E 32337.5 42.7 143.4 95.3 20.3 180 11.7 15.7 17.9



Company snapshot

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Oct-0

9

Jan-

10

Apr

-10

Jul-1

0

Oct-1

0

Jan-

11

Apr

-11

Jul-1

1

Oct-1

1

Jan-

12

Apr

-12

Jul-1

2

Oct-1

2

Jan-

13

Apr

-13

Jul-1

3

Oct-1

3

Jan-

14

Apr

-14

Jul-1

4

Oct-1

4

Jan-

15

Apr

-15

Jul-1

5

Oct-1

5

Jan-

16

Apr

-16

Jul-1

6

Oct-1

6

Target price: | 3600

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventJul-10 Samruddhi Cement amalgamated with UltraTech Cement. Combined capacity of the company stayed at 48.8 MTPA with additional capacity of 25.7 MTPA of

Samruddhi Cement placing the company among the top 10 cement companies in the world and largest in IndiaMar-11 The company's wholly-owned subsidiary, UltraTech Cement Middle East Investments Ltd completes acquisition of ETA Star Cement (ETA) and acquires management

control of ETA's operations in the UAE, Bahrain and Bangladesh. The company's capacity stands augmented to 52 MTPAJun-12 CCI publishes an order against several cement manufacturers including ACC Ltd and imposes a penalty of 0.5 times of the profit for the year 2009-10 and 2010-11.

For UltraTech, the amount works out to | 1175.49 croreJul-12 Announces that the company has signed an agreement with the shareholders of Gotan Lime Stone Khanij Udyog Pvt Ltd (GKUPL), Rajasthan to acquire 100% equity

shares of GKUPL. With this acquisition, GKUPL becomes a wholly-owned subsidiary of the companySep-13 Announces that the company will acquire 4.8 MT of Gujarat Cement plant of Jaypee Cement. Other than this, ~ 10 MTPA capacity will be commissioned by FY15.

Total cement capacity is expected to reach ~70 MTPAJun-14 Company starts including Jaypee Cement operations in quarterly result from Q1FY15

Sep-14 Commissions 1.4 MT cement mill at Karnataka and 25 MW power plant at AP

Dec-14 Board approves acquisition of cement business of Jaiprakash Associates in MP with capacity of 4.9 MT

Aug-15 Commissioned a bulk terminal with a capacity of 2 MT in Pune, Maharashtra.Sep-15 Commissioned a cement grinding unit with a capacity of 1.6 MT at Jhajjar, Haryana.

Sep-15 Commissioned a cement grinding unit with a capacity of 1.6 MT at Dankuni, West Bengal.

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Last filing date % O/S Position (m) Change (m)1 Aditya Birla Group 30-Jun-15 61.66 169.2 0.02 Aberdeen Asset Management (Asia) Ltd. 30-Jun-15 2.53 6.9 0.03 Life Insurance Corporation of India 30-Jun-15 2.26 6.2 0.24 Aberdeen Asset Managers Ltd. 31-Aug-15 1.93 5.3 0.05 OppenheimerFunds, Inc. 30-Jun-15 1.41 3.9 0.06 UTI Asset Management Co. Ltd. 31-Aug-15 0.77 2.1 -0.17 The Vanguard Group, Inc. 30-Sep-15 0.67 1.8 0.08 Franklin Advisers, Inc. 31-Jul-15 0.60 1.7 0.09 APG Asset Management 31-Mar-15 0.56 1.5 -0.110 J.P. Morgan Asset Management (Hong Kong) Ltd. 31-Aug-15 0.48 1.3 0.0

(in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15Promoter 61.69 61.69 61.69 61.69 61.69FII 19.89 19.52 19.32 18.52 18.43DII 5.68 5.88 5.86 6.77 7.10Others 12.74 12.91 13.13 13.02 12.78

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor Name Value Shares Investor Name Value SharesGMO LLC 26.41m 0.57m William Blair & Company, L.L.C. -28.30m -0.60m Life Insurance Corporation of India 11.13m 0.24m Driehaus Capital Management, LLC -20.10m -0.47m Tata Asset Management Limited 6.92m 0.16m Columbia Threadneedle Investments (US) -18.35m -0.43m Franklin Templeton Asset Management (India) Pvt. Ltd. 5.82m 0.13m HDFC Asset Management Co., Ltd. -13.04m -0.30m British Columbia Investment Management Corp. 3.29m 0.09m Morgan Stanley Investment Management Inc. (US) -7.60m -0.16m

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary Profit and loss statement | Crore (Year-end March) FY14 FY15 FY16E FY17E

Total operating Income 20,077.9 22,653.7 27,505.8 32,337.5

Growth (%) 0.3 12.8 21.4 17.6

Raw material cost 3327.4 3560.1 4423.6 4773.8

Power & Fuel cost 4135.4 4742.9 4833.5 5770.9

Freight cost 4580.8 5399.2 6585.5 7402.4

Employees cost 1014.6 1218.3 1584.7 1722.2

Others 3403.7 3817.9 4563.9 5438.5

Total Operating Exp. 16,461.9 18,738.4 21,991.3 25,107.7

EBITDA 3,616.0 3,915.3 5,514.5 7,229.8

Growth (%) -20.0 8.3 40.8 31.1

Depreciation 1,052.3 1,133.1 1,337.3 1,456.1

Interest 319.2 547.5 546.5 658.2

Other Income 531.0 651.5 469.7 587.2

PBT 2,775.6 2,886.2 4,100.4 5,702.7

Total Tax 631.0 871.5 1253.1 1767.8

PAT 2,144.5 2,014.7 2,847.3 3,934.9

Growth (%) -19.2 -6.1 41.3 38.2

Adjusted EPS (|) 78.2 73.4 103.8 143.4


Cash flow statement | Crore (Year-end March) FY14 FY15 FY16E FY17E

Profit after Tax 2,144.5 2,014.7 2,847.3 3,934.9

Add: Depreciation 1,052.3 1,133.1 1,337.3 1,456.1

(Inc)/dec in Current Assets -641.7 -599.7 -1,341.3 -2,566.7

Inc/(dec) in CL and Provisions -886.7 1,566.5 833.2 1,505.6

CF from operating activities 1,668.4 4,114.6 3,676.5 4,329.9

(Inc)/dec in Investments -602.4 1,206.4 -200.0 0.0

(Inc)/dec in Fixed Assets -2,338.0 -6,240.8 -3,950.0 -3,900.0

Others 389.9 496.2 0.0 0.0

CF from investing activities -2,550.5 -4,538.3 -4,150.0 -3,900.0

Issue/(Buy back) of Equity 0.2 0.2 0.0 0.0

Inc/(dec) in loan funds 979.6 1,638.1 800.0 0.0

Dividend paid & dividend tax -288.8 -288.5 -802.6 -802.6

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

Others 6.9 217.3 342.5 450.0

CF from financing activities 697.9 1,567.0 339.9 -352.6

Net Cash flow 135.2 119.9 -133.6 77.2

Opening Cash 142.3 277.5 397.4 263.8

Closing Cash 277.5 397.4 263.8 341.1


Balance sheet | Crore (Year-end March) FY14 FY15 FY16E FY17E

Liabilities

Equity Capital 274.2 274.4 274.4 274.4

Reserve and Surplus 16,823.3 18,766.8 21,154.0 24,736.2

Total Shareholders funds 17,097.6 19,041.2 21,428.4 25,010.6

Total Debt 4,875.1 6,513.2 7,313.2 7,313.2

Deferred Tax Liability 2,295.8 2,792.0 2,792.0 2,792.0

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 24,268.5 28,346.4 31,533.6 35,115.8

Assets

Gross Block 25,317.3 31,558.1 35,308.1 37,496.5

Less: Acc Depreciation 9,442.3 10,575.4 11,912.7 13,368.8

Net Block 15,875.0 20,982.7 23,395.4 24,127.7

Capital WIP 2,038.4 2,038.4 2,238.4 3,950.0

Total Fixed Assets 17,913.5 23,021.2 25,633.8 28,077.7

Investments 5,391.7 5,208.8 5,408.8 5,408.8

Inventory 2,368.4 2,751.4 3,277.3 3,810.4

Debtors 1,281.0 1,203.2 2,112.6 1,785.6

Loans and Advances 2,506.7 2,800.5 2,700.6 5,060.4

Other Current Assets 15.3 16.0 22.0 22.7

Cash 277.5 397.4 263.8 341.1

Total Current Assets 6,448.9 7,168.6 8,376.3 11,020.2

Creditors 4,512.6 5,749.1 6,308.2 7,512.7

Provisions 973.0 1,303.0 1,577.1 1,878.2

Total Current Liabilities 5,485.6 7,052.1 7,885.3 9,390.9

Net Current Assets 963.3 116.5 491.0 1,629.3

Others Assets 0.0 0.0 0.0 0.0

Application of Funds 24,268.5 28,346.4 31,533.5 35,115.8


Key ratios (Year-end March) FY14 FY15 FY16E FY17E

Per share data (|)

EPS 78.2 73.4 103.8 143.4

Cash EPS 116.6 114.7 152.5 196.5

BV 623.5 693.9 780.9 911.5

DPS 9.0 9.0 25.0 25.0

Cash Per Share 10.1 14.5 9.6 12.4

Operating Ratios (%)

EBITDA Margin 18.0 17.3 20.0 22.4

PBT / Total Operating income 13.8 12.7 14.9 17.6

PAT Margin 10.7 8.9 10.4 12.2

Inventory days 42.9 41.2 40.0 40.0

Debtor days 20.9 20.0 22.0 22.0

Creditor days 89.2 82.7 80.0 78.0

Return Ratios (%)

RoE 12.5 10.6 13.3 15.7

RoCE 11.7 10.9 14.5 17.9

RoIC 14.1 11.9 15.9 20.5

Valuation Ratios (x)

P/E 37.3 39.7 28.1 20.3

EV / EBITDA 22.4 21.4 15.3 11.7

EV / Net Sales 4.0 3.7 3.1 2.6

Market Cap / Sales 4.0 3.5 2.9 2.5

Price to Book Value 4.7 4.2 3.7 3.2

Solvency Ratios

Debt/EBITDA 1.3 1.7 1.3 1.0

Debt / Equity 0.3 0.3 0.3 0.3

Current Ratio 1.2 1.0 1.1 1.2

Quick Ratio 1.1 1.0 1.0 1.1



ICICIdirect.com coverage universe (Cement)

CMP M Cap(|) TP(|) Rating (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15

ACC* 1377 1560 Hold 25,367 61.8 41.3 68.9 19.0 16.2 10.8 130 111 108 13.7 12.6 16.6 14.1Ambuja Cement* 210 248 Hold 32,475 9.7 7.3 8.5 14.5 16.4 13.6 164 160 151 18.2 14.4 15.0 14.8UltraTech Cem 2922 3650 Buy 76,036 73.4 103.8 143.4 20.3 14.6 11.1 221 188 180 12.1 14.7 18.1 10.6Shree Cement^ 12748 12,500 Hold 43,674 122.5 118.7 240.8 33.8 29.8 21.0 303 252 231 9.2 10.5 16.4 10.1Heidelberg Cem 82 80 Buy 1,813 2.6 2.7 5.3 10.0 11.4 8.1 86 86 83 9.2 9.1 12.6 -0.1India Cement 84 75 Hold 2,304 1.0 5.8 6.4 7.8 6.5 5.4 52 52 45 6.8 9.1 9.8 0.8JK Cement 654 710 Hold 4,965 22.4 12.2 26.7 15.5 14.4 12.1 91 88 94 8.5 8.5 10.8 9.5JK Lakshmi Cem 374 373 Hold 4,390 8.1 -0.2 7.5 16.9 20.9 15.8 143 102 92 8.3 5.0 8.2 12.0Mangalam Cem 231 212 Hold 566 8.9 -17.3 19.3 12.2 60.1 8.3 45 46 49 7.2 -0.9 10.9 5.3SFCL 137 266 Buy 5,905 4.1 9.0 15.2 8.2 5.6 3.7 169 162 110 12.8 21.0 31.1 13.4

EV/EBITDA (x) RoCE (%)Company

EPS (|) EV/Tonne ($)

*CY14, CY15E, CY16E ; ^June year end


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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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UltraTech Cement (ULTCEM)content.icicidirect.com/mailimages/IDirect_UltraTech_Q2...Freight 1,347.3 1,405.2 1,290.9 4.4 1,552.7 -13.2 Logistic cost increased due to a hike in rail freight