Current price 242.00

Sector Cement

No of shares 1549988086

52 week high 286.85

52 week low 192.35

BSE Sensex 27490.59

Nifty 8331.95

Average Volume 1669019

BSE Code 500425

NSE Symbol AMBUJACEM

Ambuja Cements Ltd.

Recommendation

– BUY/HOLD

Date – 04/05/2015

Company Overview

Ambuja Cements Ltd, a part of Holcim, is an India-based cement manufacturing company. Holcim is a supplier

of cement and aggregates (crushed stone, gravel and sand). Its activities include the manufacture and

distribution of cement, and the production, processing and distribution of aggregates, ready-mix concrete and

asphalt. It also offers consulting, research, trading, engineering and other services. The Company has five

integrated cement manufacturing plants and eight cement grinding units. Its cement capacity is approximately

28.75 million tons. The Company manufactures Portland Pozollana cement and ordinary Portland cement. The

Company operates in cementitious materials segment. The Company’s subsidiaries include M.G.T. Cements

(Private) Limited, Chemical Limes Mundwa (Private) Limited, Kakinada Cements Limited, Dirk India (Private)

Limited, Dirk Pozzocrete (MP) Private Limited and Dang Cement Industries (Private) Limited.

The company was formerly known as Gujarat Ambuja Cements Ltd. and changed its name to Ambuja

Cements Limited in April 2007. The company was incorporated in 1981 and is headquartered in Mumbai,

India. Ambuja Cements Limited is a subsidiary of Holderind Investments Limited. It is the first Indian cement

manufacturer having a captive port with three terminals along the country's western coastline to facilitate

timely, cost effective and environmentally cleaner shipments of bulk cement to its customer. The company has

its own fleet of ships.

Ambuja Cements is the most profitable cement company in India, and the lowest cost producer of cement in

the world. One of the major reasons that Ambuja Cements is the lowest cost producer of cement in the world

is its emphasis on efficiency. Power consists over 40% of the production cost of cement. The company

improved efficiency of its kilns to get more output for less power. Thereafter Ambuja Cements set up a captive

power plant at a substantially lower cost than the national grid. The company sourced a cheaper and higher

quality coal from South Africa, and a better furnace oil from the Middle East. As a result, today, the company is

in a position to sell its excess power to the local state government.

Category No. of Shares Percentage

Other Companies 5,496,157 0.35

Foreign Promoters 780,308,553 50.34

Foreign Institutions 471,312,822 30.41

Financial

Institutions135,719,665 8.76

General Public 96,856,010 6.25

Foreign - NRI 13,740,196 0.89

NBFC and Mutual

Funds12,989,826 0.84

Others 1,402,994 0.09

Foreign - OCB 12,870 0.00

Foreign Industries 3,850 0.00

Market Cap (Rs Cr) – 36824.39

Company P/E (x) – 23.80

Industry P/E (x) – 32.36

Book Value (Rs) – 65.16

Price / BV (x) – 3.64

Dividend (%) – 250 %

EPS (TTM) – 8.35

Dividend Yield (%) – 2.11 %

Face Value (Rs) – 2

Share Holding Pattern Financial Details

Industry Overview

India's cement industry is a vital part of its economy, providing employment to more than a million people,

directly or indirectly. Ever since it was deregulated in 1982, the Indian cement industry has attracted huge

investments, from both Indian and foreign investors, making it the second largest in the world. The industry is

currently in a turnaround phase, trying to achieve global standards in production, safety, and energy-efficiency.

India has a lot of potential for development in the infrastructure and construction sector and the cement sector

is expected to largely benefit from it. Some of the recent major government initiatives such as development of

100 smart cities are expected to provide a major boost to the sector. The cement market in India is expected

to grow at a compound annual growth rate (CAGR) of 8.96 percent during the period 2014-2019. In India, the

housing sector is the biggest demand driver of cement, accounting for about 67 per cent of the total

consumption. The other major consumers of cement include infrastructure at 13 per cent, commercial

construction at 11 per cent and industrial construction at nine per cent. To meet the rise in demand, cement

companies are expected to add 56 million tonnes (MT) capacity over the next three years. The cement

capacity in India may register a growth of eight per cent by next year end to 395 MT from the current level of

366 MT. It may increase further to 421 MT by the end of 2017. The country's per capita consumption stands at

around 190 kg.

A total of 188 large cement plants together account for 97 per cent of the total installed capacity in the country,

while 365 small plants account for the rest. Of these large cement plants, 77 are located in the states of

Andhra Pradesh, Rajasthan and Tamil Nadu. The Indian cement industry is dominated by a few companies.

The top 20 cement companies account for almost 70 per cent of the total cement production of the country.

The eastern states of India along with the border states will be the newer and virgin markets for cement

companies and will contribute to their bottom line in future. In the next 10 years, India will become the main

exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world. A

large number of foreign players are also expected to enter the cement sector in the next 10 years, owing to the

profit margins, constant demand, and right valuation.

Balance Sheet

Dec '14 Dec '13 Dec '12 Dec '11 Dec '10

Sources Of Funds

Total Share Capital 309.95 309.17 308.44 306.87 305.97

Equity Share Capital 309.95 309.17 308.44 306.87 305.97

Share Application Money 0.00 0.00 0.00 0.01 1.34

Reserves 9,793.38 9,176.37 8,496.62 7,762.56 7,022.79

Networth 10,103.33 9,485.54 8,805.06 8,069.44 7,330.10

Secured Loans 5.86 5.86 0.00 0.00 0.00

Unsecured Loans 13.23 23.29 34.63 42.80 65.03

Total Debt 19.09 29.15 34.63 42.80 65.03

Total Liabilities 10,122.42 9,514.69 8,839.69 8,112.24 7,395.13

Application Of Funds

Gross Block 11,362.17 10,759.31 10,116.82 9,636.89 8,778.82

Less: Accum. Depreciation 5,135.06 4,696.78 4,254.45 3,450.43 3,151.07

Net Block 6,227.11 6,062.53 5,862.37 6,186.46 5,627.75

Capital Work in Progress 690.17 694.88 520.12 486.82 930.70

Investments 2,172.73 1,788.45 1,655.84 864.31 625.95

Inventories 888.39 933.94 983.93 924.97 901.86

Sundry Debtors 227.98 231.51 213.37 240.85 128.18

Cash and Bank Balance 2,458.12 2,341.09 2,253.72 2,069.08 198.40

Total Current Assets 3,574.49 3,506.54 3,451.02 3,234.90 1,228.44

Loans and Advances 1,236.35 912.19 935.33 769.35 422.61

Fixed Deposits 0.00 0.00 0.00 0.00 1,549.77

Total CA, Loans & Advances 4,810.84 4,418.73 4,386.35 4,004.25 3,200.82

Current Liabilities 2,569.64 2,348.81 2,143.57 2,238.35 1,893.98

Provisions 1,208.79 1,101.09 1,441.42 1,191.25 1,096.57

Total CL & Provisions 3,778.43 3,449.90 3,584.99 3,429.60 2,990.55

Net Current Assets 1,032.41 968.83 801.36 574.65 210.27

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.46

Total Assets 10,122.42 9,514.69 8,839.69 8,112.24 7,395.13

Contingent Liabilities 2,264.89 2,310.02 1,362.30 571.54 754.38

Book Value (Rs) 65.19 61.36 57.09 52.59 47.90

Profit and Loss Account

Dec '14 Dec '13 Dec '12 Dec '11 Dec '10

Income

Sales Turnover 9,978.12 9,160.35 9,730.30 8,554.26 8,286.20

Excise Duty 0.00 0.00 0.00 0.00 914.68

Net Sales 9,978.12 9,160.35 9,730.30 8,554.26 7,371.52

Other Income 428.98 418.44 69.74 223.62 214.58

Stock Adjustments -15.91 -118.33 200.83 -57.00 54.28

Total Income 10,391.19 9,460.46 10,000.87 8,720.88 7,640.38

Expenditure

Raw Materials 1,565.20 1,361.36 1,337.38 1,170.06 1,475.20

Power & Fuel Cost 2,265.22 2,062.92 2,329.07 2,001.37 1,697.34

Employee Cost 581.58 502.41 478.51 433.20 344.91

Other Manufacturing Expenses 0.00 0.00 0.00 0.00 227.03

Selling and Admin Expenses 0.00 0.00 0.00 0.00 1,633.14

Miscellaneous Expenses 3,621.77 3,464.50 3,313.20 2,915.60 199.42

Total Expenses 8,033.77 7,391.19 7,458.16 6,520.23 5,565.68

Operating Profit 1,928.44 1,650.83 2,472.97 1,977.03 1,860.12

PBDIT 2,357.42 2,069.27 2,542.71 2,200.65 2,074.70

Interest 64.48 65.08 75.66 52.63 48.69

PBDT 2,292.94 2,004.19 2,467.05 2,148.02 2,026.01

Depreciation 509.53 490.07 565.22 445.15 387.19

Profit Before Tax 1,783.41 1,514.12 1,901.83 1,702.87 1,638.21

Extra-ordinary items 0.00 0.00 0.00 0.00 64.22

PBT (Post Extra-ord Items) 1,783.41 1,514.12 1,901.83 1,702.87 1,702.43

Tax 287.05 219.55 604.77 474.01 435.55

Reported Net Profit 1,496.36 1,294.57 1,297.06 1,228.86 1,263.61

Total Value Addition 6,468.57 6,029.83 6,120.78 5,350.17 4,090.48

Equity Dividend 774.61 556.34 554.80 490.69 397.22

Corporate Dividend Tax 146.51 94.55 90.00 79.60 65.27

Per share data (annualised)

Shares in issue (lakhs) 15,497.46 15,458.60 15,421.84 15,343.69 15,298.59

Earning Per Share (Rs) 9.66 8.37 8.41 8.01 8.26

Equity Dividend (%) 250.00 180.00 180.00 160.00 130.00

Dividend and Bonus History

Index and Company Price Movement Comparison

Company Forecast

Name Value Action

RSI(14) 56.331 Buy

STOCH(9,6) 62.822 Buy

STOCHRSI(14) 75.322 Overbought

MACD(12,26) 0.740 Buy

ADX(14) 32.955 Buy

Williams %R -40.230 Buy

CCI(14) 57.3596 Buy

ATR(14) 1.6643 Less Volatility

Highs/Lows(14) 0.6143 Buy

Ultimate Oscillator 59.720 Buy

ROC -1.064 Sell

Bull/Bear Power(13) 2.7740 Buy

Technical Indicators

PBIT – 13.63 v/s 12.14

RoCE – 18.25 v/s 16.33

RoE – 14.87 v/s 12.96

Net Profit Margin – 14.37 v/s 13.55

Inventory Turnover – 11.23 v/s 9.81

D/E Ratio – Nil

Interest Cover – 28.66 v/s 23.88

Current Ratio – 1.27 v/s 1.28

Reserves – 9793.38 cr v/s 9176.37 cr

PAT – 1496.36 cr v/s 1294.57 cr

Total assets – 10122.42 cr v/s 9514.69 cr

Net sales – 9978.12 cr v/s 9160.35 cr

Book Value – 65.19 v/s 61.36

Important Ratios (YoY)

Days BSE NSE

30 249.57 249.76

50 256.10 256.27

150 237.21 237.33

200 231.38 231.48

Simple Moving Average

Investment Rationalize

Ambuja Cements Ltd, is the most profitable and third largest cement company in India, which is owned by

Holcim Ltd. and it is the lowest cost producer of cement in the world.

ACL is a debt free company with good dividend payout history with a good marketing and distribution

network with more than 8700 dealers and 29000 retailers all across India.

Government initiative of “Make in India” and improvements in real estate and construction industry will act as

a trigger to the growth of the company. Having manufacturing facilities across will help to reduce the logistics

expenses to a minimal level.

ACL have an attractive financial ratios with a very positive cash flow with help of successful business and

manufacturing model.

With the picking up of demand for the products ACL will be able to utilize the installed capacity to the fullest

and work in progress for expanding manufacturing capacity to the fullest.

Having Holcim Ltd. as promoter help s the company to reduce the material cost and having power

generation facility inside plants will help the company to reduce costs as well as improving profits margins.

Governmental initiative to build smart cities across India, Budget homes plans, construction of industrial

corridors and emphasis of development in North East India, will provide a big business potential to the ACL.

Potential merger of Ambuja Cements and Acc and income from subsidiaries M.G.T. Cements (Private)

Limited, Chemical Limes Mundwa Limited, Kakinada Cements Limited, Dirk India Limited, Dirk Pozzocrete

(MP) Private Limited and Dang Cement Industries Limited will act a game changer for the company.