cement - hdfc securities - 3qfy20e results previe… · star cement** 0.7 13.6 23.2 5,923 (2.9)...

Cement

3QFY20E Results Preview

10 Jan 2020

Saurabh Dugar [email protected] +91-22-3021 2072

Rajesh Kumar Ravi [email protected] +91-22-3021 2077

2

3QFY20E RESULTS PREVIEW

Q3FY20E: Pricing and cost tailwinds continue Another quarter of flattish sales growth: Cement demand

remained flattish YoY for the third consecutive qtr, on account of

continued slowdown in construction activities. We estimate the

aggregate demand for the 11 cement companies under coverage

(adjusted for Century Textiles vols in UltraTech) to grow a modest

2% YoY (better than the 2% decline in 1HFY20).

Mixed pricing trends YoY across regions: As per our channel checks,

cement prices fell QoQ across markets owing to weak demand.

Trade prices in 3Q fell ~2-3% QoQ across the north/central regions

while it slid by ~5-7% QoQ across east/west/south markets. On YoY

basis, this implies that north/central/west trade prices are up

11/6/5% YoY while that east/south prices are down 8/3% YoY.

Prices in NE region and Chhattisgarh have fallen only marginally

while prices in AP/T markets have declined ~10%+ QoQ.

Opex to decline YoY on account of lower energy costs : We

estimate companies’ input cost to moderate QoQ/YoY on full

benefits of low cost fuel. This along with, reduced freight cost YoY

(benefits from lower diesel prices and absence of busy-season

railway surcharge) should keep opex low. However, we expect fixed

cost inflation to remain high (on subdued vol growth). Thus we

expect total opex to decline 2% YoY (for our coverage universe).

Op margins to remain healthy: Despite muted demand and

subsequent price slide QoQ, we estimate average unitary EBITDA for

our coverage universe at a robust Rs 954/MT (+25% YoY) – a 7-year

high for Dec-qtr. We estimate healthy margins for north/central/Guj

based cos (on strong regional pricing), while margins for AP/T based

cos t are hit hard (dual impact of weak vols and pricing). We have

plotted macro trends for cement prices and opex items in this report.

Aggregate EBITDA to surge 31% YoY in 3QFY20E driven by robust

margins for sales in the north/central/Gujarat markets and overall

lower opex. Thus, in our coverage universe we see solid EBITDA

growth for UltraTech, Ambuja, Shree Cement, JK Lakshmi and JK

Cement. We estimate flattish EBITDA for south and east focused

companies (weak pricing impact). However, we estimate sharp

EBITDA decline in case of Deccan Cement (poor sales and pricing in

AP/T) and Star Cement (weak pricing and high cost inflation).

Estimate revisions and outlook: Given the lower than estimated

demand and pricing across south and east markets, we have

reduced profit estimates and TPs for Dalmia Bharat, Orient

Cements, Star Cement and Deccan Cements. We have also trimmed

Shree Cement’s PAT to factor in the recent QIP. We maintain our

estimates/TP for all other cos. We remain bullish on the sector

owing to continued cost tailwinds and as we expect demand to

recover which will support realisations. In our view, the healthy

pricing in north/central markets should sustain owing to high

regional clinker utilisation and low supply influx. Price stability in

south and east markets is contingent upon double digit demand

recovery, in our view.

Top picks: UltraTech , JK Cement and Dalmia Bharat

3


Financial Summary: 3QFY20E

Source: Company, HDFC sec Inst Research ** Consolidated estimates ^ Q4CY19 Estimates

Y/E March (Rs mn)

Net Sales (Rs mn) EBITDA (Rs mn) EBITDA Margin (%) Adj. PAT (Rs mn) Adj. EPS (Rs)

3Q FY20E

YoY (%)

QoQ (%)

3Q FY20E

YoY (%)

QoQ (%)

3Q FY20E

YoY (pp)

QoQ (pp)

3Q FY20E

YoY (%)

QoQ (%)

3Q FY20E

YoY (%)

QoQ (%)

ACC** ^ 40,320 3.5 14.3 5,328 4.3 (4.4) 13.2 0.1 (2.6) 2,997 17.6 (1.0) 15.9 17.6 (1.0)

Ambuja ^ 31,409 9.7 19.6 5,874 45.4 33.5 18.7 4.6 2.0 3,509 35.3 49.6 1.8 35.3 49.6

Dalmia ** Bharat

22,517 3.7 0.7 4,186 7.9 (11.9) 18.6 0.7 (2.7) (69) (0.4)

Deccan Cem 1,184 (31.6) (11.8) 101 (55.7) (36.8) 8.6 (4.7) (3.4) 34 (69.9) (63.0) 4.9 (69.9) (63.0)

JK Cement 14,023 10.1 11.8 2,712 28.8 6.7 19.3 2.8 (0.9) 1,104 81.3 1.5 14.3 81.3 1.5

JK Lakshmi 10,017 7.1 7.1 1,463 48.9 (1.6) 14.6 4.1 (1.3) 429 190.9 (6.5) 3.6 190.9 (6.5)

Orient Cem 5,652 (1.0) 9.7 508 34.1 (5.3) 9.0 2.3 (1.4) (95) (0.5)

Ramco Cem 12,607 4.2 (4.2) 2,404 12.4 (18.6) 19.1 1.4 (3.4) 1,128 11.6 (32.9) 4.8 11.6 (32.9)

Shree Cement 29,381 5.7 4.9 8,390 21.6 (0.6) 28.6 3.7 (1.6) 3,432 22.0 11.1 95.1 17.8 7.2

Star Cement ** 4,620 10.9 20.8 1,008 (17.3) 56.7 21.8 (7.5) 5.0 760 (7.7) 70.2 1.8 (7.7) 70.2

UltraTech Cem**

108,998 16.7 13.3 22,535 55.0 17.5 20.7 5.1 0.7 8,231 100.7 42.3 28.5 91.0 33.9

Aggregate 280,727 9.5 10.7 54,509 31.3 7.6 19.4 3.2 (0.6) 29,691 55.6 23.7

4


Operational Summary: 3QFY20E

Source: Company, HDFC sec Inst Research ** Consolidated estimates ^ Q4CY19 Estimates

Y/E March (Rs mn)

Sales Volume (mn MT) NSR (Rs/MT) EBITDA (Rs/MT) Opex (Rs/MT)

3Q FY20E

YoY (%)

QoQ (%)

2Q FY20E

YoY (%)

QoQ (%)

2Q FY20E

YoY (pp)

QoQ (pp)

2Q FY20E

YoY (%)

QoQ (%)

ACC** ^ 7.7 2.0 18.8 4,820 0.9 (4.0) 663 5.7 (21.4) 4,157 0.2 (0.5)

Ambuja ^ 6.4 5.2 23.3 4,871 4.3 (3.0) 911 38.2 8.3 3,960 (1.3) (5.3)

Dalmia Bharat ** 4.7 6.0 6.0 4,752 (2.2) (5.0) 883 1.8 (16.9) 3,869 (3.1) (1.8)

Deccan Cement 0.3 (30.8) (5.9) 3,533 (1.2) (6.3) 302 (36.1) (32.8) 3,231 4.1 (2.7)

JK Cement 2.6 3.2 15.2 5,440 6.7 (2.9) 1,052 24.8 (7.3) 4,388 3.1 (1.8)

JK Lakshmi 2.3 (1.3) 10.4 4,405 8.6 (3.0) 643 50.9 (10.8) 3,762 3.6 (1.5)

Orient Cement 1.4 (5.0) 15.5 3,942 4.2 (5.0) 354 41.1 (18.0) 3,588 1.6 (3.5)

Ramco Cements 2.8 2.0 2.9 4,485 1.9 (5.0) 858 8.6 (13.0) 3,627 0.4 (2.9)

Shree Cement 6.2 4.5 8.4 4,513 4.6 (3.0) 1,353 27.0 (6.7) 3,160 (2.7) (1.3)

Star Cement** 0.7 13.6 23.2 5,923 (2.9) (1.5) 1,357 (27.2) 27.1 4,566 7.9 (7.7)

UltraTech Cem** 22.1 14.3 18.0 4,942 2.2 (4.0) 1,022 35.7 (0.5) 3,920 (4.0) (4.9)

Aggregate 57.3 7.0 15.0 4,814 2.8 (3.6) 947 25.0 (5.9) 3,866 (1.5) (3.1)

5


Demand & Price trends

Industry vol growth remains flattish for the 3rd qtr in a row Weak demand has pulled down utilisation marginally YoY

Cement prices continue to decline QoQ owing to weak demand- south and east are most impacted YoY Pan India prices continue to decline: down 5% QoQ, Up 2% YoY

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

Jun

-14

Oct

-14

Feb

-15

Jun

-15

Oct

-15

Feb

-16

Jun

-16

Oct

-16

Feb

-17

Jun

-17

Oct

-17

Feb

-18

Jun

-18

Oct

-18

Feb

-19

Jun

-19

Oct

-19

Industry volume growth%

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Utilisation (RHS)%

200

250

300

350

400

Jan

-18

Feb

-18

Mar

-18

Apr

-18

May

-18

Jun-

18

Jul-

18

Aug

-18

Sep

-18

Oct

-18

Nov

-18

Dec

-18

Jan

-19

Feb

-19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19

Aug

-19

Sep

-19

Oct

-19

Nov

-19

Dec

-19

North Central East West SouthRs/bag

200

250

300

350

400

Jan

-18

Feb

-18

Ma

r-1

8A

pr-1

8M

ay-1

8Ju

n-1

8Ju

l-1

8A

ug-1

8S

ep

-18

Oct

-18

Nov

-18

Dec

-18

Jan

-19

Feb

-19

Mar

-19

Apr

-19

May

-19

Jun

-19

Jul-

19

Aug

-19

Sep

-19

Oct

-19

Nov

-19

Dec

-19

Pan IndiaRs/bag

Source: Bloomberg, HDFC sec Inst Research

6


Energy Cost trends

Crude price is down 9% YoY, despite recovering 2% QoQ Thus diesel prices are down 6% YoY (+1% QoQ)

Imported petcoke prices continue to fall in 3Q: down 26/14% YoY/QoQ

Even domestic petcoke prices continue to slide: down 32/8% YoY/QoQ

0

20

40

60

80

100

Mar

-15

Jun-

15

Sep

-15

De

c-1

5

Mar

-16

Jun-

16

Se

p-1

6

Dec

-16

Mar

-17

Jun-

17

Sep

-17

Dec

-17

Mar

-18

Jun-

18

Sep

-18

Dec

-18

Mar

-19

Jun-

19

Se

p-1

9

Dec

-19

USD/Bbl Brent Price

40

45

50

55

60

65

70

75

80

Dec

-15

Mar

-16

Jun

-16

Sep

-16

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Ma

r-1

8

Jun

-18

Sep

-18

Dec

-18

Ma

r-1

9

Jun

-19

Sep

-19

Dec

-19

(Rs/Litre) Average diesel price (daily)Trailing Three Month Avg price

0

20

40

60

80

100

120

140

De

c-1

5

Mar

-16

Jun

-16

Sep

-16

Dec

-16

Mar

-17

Jun

-17

Sep

-17

De

c-1

7

Mar

-18

Jun

-18

Se

p-1

8

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

USA Gulf Petcoke Saudi PetcokeUSD/MT

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Dec

-15

Mar

-16

Jun-

16

Sep

-16

De

c-1

6

Mar

-17

Jun-

17

Sep

-17

Dec

-17

Ma

r-1

8

Jun-

18

Sep

-18

Dec

-18

Mar

-19

Jun-

19

Sep

-19

Dec

-19

Rs/MT Domestic Petcoke

Source: Bloomberg, Industry, HDFC sec Inst Research

7


Energy Cost trends

Indonesian coal prices are down 11/2% YoY/QoQ South African coal prices are down 22% YoY, despite 13% QoQ recovery

40

50

60

70

80

90

100

De

c-1

5

Mar

-16

Jun

-16

Sep

-16

De

c-1

6

Mar

-17

Jun

-17

Sep

-17

De

c-1

7

Mar

-18

Jun

-18

Sep

-18

De

c-1

8

Mar

-19

Jun

-19

Sep

-19

De

c-1

9

USD/MT Indonesian Coal

0

20

40

60

80

100

120

De

c-1

5

Mar

-16

Jun

-16

Sep

-16

De

c-1

6

Mar

-17

Jun

-17

Sep

-17

De

c-1

7

Mar

-18

Jun

-18

Sep

-18

De

c-1

8

Mar

-19

Jun

-19

Sep

-19

De

c-1

9

USD/MT South African Coal

Source: Bloomberg, Industry, HDFC sec Inst Research

8


Operating Performance Trends

We expect 2% YoY vol growth for our coverage universe… …and avg utilisation at ~77% vs 79/68% YoY/QoQ

While NSR continues to rise YoY, the momentum has reduced in 3Q Ex- freight NSR growth has also moderated in 3Q

(5.0)

-

5.0

10.0

15.0

20.0

25.0

Jun

-15

Sep

-15

De

c-1

5

Mar

-16

Jun

-16

Sep

-16

De

c-1

6

Mar

-17

Jun

-17

Sep

-17

De

c-1

7

Mar

-18

Jun

-18

Sep

-18

De

c-1

8

Mar

-19

Jun

-19

Sep

-19

De

c-1

9

Vol growth YoY (coverage universe )%

-

20.0

40.0

60.0

80.0

100.0

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Total Sales Vol Utilisation (RHS)Mn MT %

-15

-10

-5

0

5

10

15

20

2,000

2,500

3,000

3,500

4,000

4,500

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Avg NSR Ex-freight NSR Ex-freight YoY (RHS)Rs/ MT %

-10

-5

0

5

10

15

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Avg NSR NSR YoY (RHS)Rs/ MT %

Source: Industry, Company, HDFC sec Inst Research

9


Operating Performance Trends

Falling fuel/diesel prices has accelerated input cost reduction Unitary fixed costs inflation to remain high owing to subdued volume growth YoY

-15

-10

-5

0

5

10

15

400

600

800

1,000

1,200

1,400

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Avg Fixed costs Fixed costs YoY (RHS)Rs/MT %

-15

-10

-5

0

5

10

3,000

3,200

3,400

3,600

3,800

4,000

4,200

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Avg Opex Opex YoY (RHS)Rs/MT %

-

5.0

10.0

15.0

20.0

25.0

30.0

400

600

800

1,000

1,200

1,400

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Avg Unitary EBITDA OPM (RHS)Rs/MT %

-15

-10

-5

0

5

10

15

20

1,000

1,200

1,400

1,600

1,800

2,000

Jun

-14

Sep

-14

De

c-1

4M

ar-1

5Ju

n-1

5Se

p-1

5D

ec-

15

Mar

-16

Jun

-16

Sep

-16

De

c-1

6M

ar-1

7Ju

n-1

7Se

p-1

7D

ec-

17

Mar

-18

Jun

-18

Sep

-18

De

c-1

8M

ar-1

9Ju

n-1

9Se

p-1

9D

ec-

19

Avg Input cost Input Cost YoY (RHS)Rs/MT %

Overall opex is expected to decline further in 3Q Op margin remains strong in 3QFY20 owing to pricing and cost tailwinds – Seasonally 7-yr high !!

Source: Industry, Company, HDFC sec Inst Research

10


3QFY20E: Company wise expectations

COMPANY 3QFY20E

OUTLOOK WHAT’S LIKELY KEY MONITORABLES

ACC (Q4CY19E) GOOD

We estimate consol Rev/EBIDTA/APAT to grow by 4/4/18% YoY to Rs 40.3/5.3/3.0 bn resp.

We expect volumes to grow by 2% YoY to 7.7 mn MT while NSR to fall by 4% QoQ to Rs 4,820/MT(+1% YoY).

We estimate Opex to remain flattish YoY, thus leading to unitary EBITDA of Rs 663/MT (+6% YoY,-21% QoQ)

Status on various on-going expansions

Ambuja Cement (Q4CY19E)

STRONG

We estimate standalone Rev/EBIDTA/APAT to grow by 10/45/35% YoY to Rs 31.4/5.9/3.5 bn resp.

We expect volume to grow by 5% YoY to 6.4mn MT. We est NSR to fall by 3% QoQ (+4% YoY) to Rs4,871/MT. Large exposure to north & central markets is driving up NSR gains YoY

We estimate opex to fall 1% YoY at Rs , thus leading to unitary EBITDA of Rs 911/MT (+38% YoY, +8% QoQ).

Status on various on-going expansions

Dalmia Bharat AVERAGE

We estimate consol Rev/EBIDTA to grow by 4/8% YoY to Rs 22.5/4.2 bn resp. However, we estimate marginal net loss owing to large capital charges.

Volumes are expected to grow by 6% YoY to 4.7mn MT while weak pricing in south and east should pull down NSR is expected to fall by 5% QoQ (-2% YoY) to Rs 4,752/MT.

We estimate Opex to fall 3% YoY at Rs 3,869/MT, thus leading to an unitary EBITDA of Rs 883/MT (+2% YoY, -17% QoQ).

Progress of various organic expansions in east

Status on Murli plant acquisitions Status on the mutual fund recovery

11


COMPANY 3QFY20E


Deccan Cement WEAK

We estimate Rev/EBIDTA/APAT to fall sharply by 32/56/70% YoY to Rs 1,184/101/34 mn resp.

We expect volume to fall by 31% YoY to 0.34mn MT and NSR to fall by 6% QoQ (-1% YoY) to Rs 3,533/MT on weak demand in AP/T markets

We estimate opex to increase by 4% YoY at Rs 3,231/MT, thus leading to low unitary EBITDA of Rs 302/MT (down 36/33% YoY/QoQ).

Progress on WHRS and new expansion plans

JK Cement STRONG

We estimate standalone Rev/EBIDTA/APAT to increase by 10/29/81% YoY to Rs 14.0/2.7/1.1 bn resp.

We expect Grey cement volumes/ NSR to firm up 3/10% YoY leading to unitary EBITDA of ~Rs 650/MT (+60% YoY). Thus, we estimate grey EBITDA to surge ~65% YoY.

We estimate standalone white cem/putty vol to rise 2% YoY, leading to flattish segmental EBITDA YoY.

Status of various expansions in the northern/ Gujarat markets

Progress on white cement sales from UAE plant into India and African countries

JK Lakshmi Cement STRONG

We estimate Rev/EBIDTA/APAT to grow by 7/49/191% YoY to Rs 10.0/1.5/0.4 bn resp.

We expect volume to fall by 1% YoY to 2.27mn MT and NSR to fall by 3% QoQ (+9% YoY) to Rs 4,405/MT. Large presence in North/Guj markets is boosting realisation.

We estimate Opex to increase by 4% YoY at Rs 3,762/MT, thus leading to unitary EBITDA of Rs 643/MT (+51% YoY, -11% QoQ).

Future cement capacity expansion plans

Ramp-up of Udaipur Cement


12


COMPANY 3QFY20E


Orient Cement WEAK

We estimate Rev to fall by 1% YoY to Rs 5.7 bn, while we estimate EBITDA to recover 34% YoY (on low base) to Rs 0.51 bn. APAT to still remain negative at Rs 95 mn from Rs 138 mn.

We expect volumes to fall by 5% YoY to 1.4mn MT on weak demand in south and Maharashtra. Even NSR should fall by 5% QoQ (+4% YoY on low base) to Rs 3,942/MT.

We est opex to rise 2% YoY at Rs 3,588/MT, thus leading to unitary EBITDA of Rs 354/MT (+41% YoY, -18% QoQ)

Expansion plans – organic/ inorganic

Ramco Cements GOOD

We estimate Rev /EBITDA/APAT to grow 4/12/12% YoY to Rs 12.6/2.4/1.1 bn.

We expect volumes to notch up 2% YoY to 2.8mn MT but NSR to fall by 5% QoQ (+2% YoY) to Rs 4,485/MT.

We est opex to remain flattish at ~Rs 3,600/MT, leading to unitary EBITDA of Rs 858/MT (+9% YoY, -13% QoQ).

Status on various on-going expansions in the east/south markets

Shree Cement STRONG

We estimate Rev /EBITDA/APAT to grow 6/22/22% YoY to Rs 29.4/8.4/3.4 bn.

We expect cement volumes to increase by 5% YoY to 6.2mn MT but NSR to cool off 3% QoQ (+5% YoY) to Rs 4,513/MT.

We est opex to fall 3% YoY to Rs 3,160/MT, leading to unitary EBITDA of Rs 1,353/MT (+27% YoY, -7% QoQ).

Ramp-up at southern plants, Organic/ inorganic expansion plans


13


COMPANY 3QFY20E


Star Cement AVERAGE

While we estimate consol Rev to grow 11% YoY to Rs 4.6 bn, we est EBITDA/APAT to fall 17/8% YoY to Rs 1.0/0.8 bn resp.

While sales volumes are up 14% YoY to 0.74mn MT, we estimate NSR to fall 2/3% QoQ/YoY to Rs 5,923/MT.

We est opex to inflate 6% YoY Rs 3,076/MT, leading to unitary EBITDA of Rs 1,357/MT (-27% YoY, +27% QoQ).

Coal mining situation /availability in Meghalaya post SC ruling to resume legal mining in the state

Status on Star’s Siliguri grinding expansion and plans on brownfield expansion in NE region

UltraTech Cement STRONG

We estimate consol Rev /EBITDA/APAT to grow by 17/55/101% YoY to Rs 109.0/22.5/8.2 bn resp.

We expect cement volumes to increase by 14% YoY to 22.1 mn MT (adjusted for Century, we est 2% YoY vol growth). We model in 4% QoQ NSR fall (+2% YoY) to Rs 4,942/MT.

We est opex to decline 4% Rs 3,920/MT, leading to unitary EBITDA of Rs 1,022/MT YoY (+36% YoY, -1% QoQ).

Progress on Bara grinding expansion Ramp-up at acquired cement plants of

Binani Cement and Century Textiles


14


Estimates & Target Price revisions

FY20E FY21E FY22E

Old New % Ch Old New % Ch Old New % Ch

Revenue (Rs bn) 99.81 98.41 (1.4) 111.73 106.81 (4.4) 99.81 98.41 (1.4)

EBITDA (Rs bn) 23.14 22.21 (4.0) 24.98 21.98 (12.0) 23.14 22.21 (4.0)

APAT (Rs bn) 4.19 3.02 (27.9) 5.05 2.72 (46.0) 4.19 3.02 (27.9)

AEPS (Rs/share) 21.8 15.7 (27.9) 26.2 14.1 (46.0) 32.9 18.6 (43.4)

Target Price (Rs/share) 1,500 1,275 (15.0)

Dalmia Bharat

FY20E FY21E FY22E


Revenue (Rs bn) 6,707 5,941 (11.4) 7,249 6,548 (9.7) 9,290 8,269 (11.0)

EBITDA (Rs bn) 1,174 881 (24.9) 1,294 1,110 (14.2) 1,554 1,359 (12.6)

APAT (Rs bn) 720 504 (30.0) 733 601 (18.0) 655 525 (19.8)

AEPS (Rs/share) 51.4 36.0 (30.0) 52.3 42.9 (18.0) 59.3 52.7 (11.0)

Target Price (Rs/share) 610 520 (14.7)

Deccan Cement

Owing to weak pricing across south and east markets and delays in Murli acquisition, we trim FY21 vol estimates by 2% and FY20/21/22E NSR est by ~1-2% each. Thus, we lower our consol EBITDA est by 4/12/4% resp, leading to TP downgrade to Rs 1275 (12x Sep’21E EBITDA).

We cut our EBITDA estimates for FY20/21/22 by 25/14/13% each owing to weak sales and pricing in the AP/T markets. We have cut vol estimates ~9-10% each and FY20/21 NSR by 3/1% resp. Thus, we lower TP to Rs 520 (6x Sep’21E EBITDA).

Source: Company, HDFC sec Inst Research

15


Estimates & Target Price revisions

FY20E FY21E FY22E


Revenue (Rs bn) 26.30 24.60 (6.5) 28.57 26.71 (6.5) 31.05 29.30 (5.6)

EBITDA (Rs bn) 4.27 3.62 (15.1) 4.84 4.16 (14.0) 5.28 4.65 (12.0)

APAT (Rs bn) 1.27 0.80 (37.0) 1.78 1.29 (27.4) 2.34 1.96 (16.5)

AEPS (Rs/share) 6.2 3.9 (37.0) 8.7 6.3 (27.4) 11.4 9.5 (16.5)

Target Price (Rs/share) 150 120 (20.0)

Orient Cement

FY20E FY21E FY22E


Revenue (Rs bn) 125.11 125.11 0.0 142.43 142.43 0.0 159.14 159.14 0.0

EBITDA (Rs bn) 37.83 37.83 0.0 42.25 42.25 0.0 45.39 45.39 0.0

APAT (Rs bn) 17.43 17.43 0.0 19.53 19.53 0.0 21.50 21.50 0.0

AEPS (Rs/share) 500.4 483.2 (3.4) 560.7 541.4 (3.4) 617.0 595.8 (3.4)

Target Price (Rs/share) 20,000 20,000 -

Shree Cement

To factor in the weak demand and pricing scenario across south and Maharashtra markets, we reduce vol est for FY20/21/22E by 4-5% and NSR by ~1-2% each. Thus, we lower EBITDA estimates by 15/14/12% each, leading to lower TP of Rs 120 (8x Sep’21E EBITDA).

While we maintain our revenue/EBITDA/PAT estimates, we trim EPS by 3% each to factor in the impact of 3% equity dilution on the recently concluded QIP in 3QFY20. We maintain out TP of Rs20,000 (15x Sep’ 21E EBITDA).


16


Stock Price Performance

Company Price Performance (absolute)

1w 1m 3m 6m 12m

Nifty (0.5) 2.3 8.0 5.7 12.5

UltraTech Cement 3.4 5.7 8.5 (2.5) 15.0

Shree Cement 7.5 12.3 23.4 7.6 39.6

Ambuja Cements 1.3 4.1 8.1 (1.5) (2.3)

ACC (0.5) 0.8 1.3 (4.4) 2.2

Ramco Cements 4.4 2.8 13.8 3.1 28.3

Dalmia Bharat (2.1) (3.9) 4.0 (19.2) N/A

JK Cements 4.4 10.7 21.5 30.7 82.3

Star Cement (0.4) 4.3 3.2 (18.5) (9.1)

JK Lakshmi 5.0 14.5 11.3 (6.5) 5.0

Orient Cement 7.1 13.0 (7.2) (20.4) 3.2

Deccan Cement 12.5 14.8 (2.7) (14.5) (16.4)


17


Peer Set Comparison

Source: Company, HDFC sec Inst Research, ^The corresponding financial years are CY18/19/20, 1 USD =Rs65 assumed

Company Mcap

(Rs bn) CMP

(Rs/sh) Reco TP

EV/EBITDA (x) EV/MT (USD) Net D:E (x) RoE (%)

FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E

UltraTech Cement 1,205 4,388 BUY 5,350 19.4 14.4 13.2 193 191 185 0.6 0.5 0.3 8.3 12.2 11.9

Shree Cement 795 22,815 NEU 20,000 28.8 20.8 18.2 297 281 262 0.0 (0.3) (0.3) 13.5 15.1 13.7

Ambuja Cements ^ 413 208 BUY 240 13.9 11.8 10.6 136 133 122 (0.7) (0.7) (0.7) 5.9 6.4 6.7

ACC ^ 279 1,486 BUY 1,940 11.7 10.0 8.8 120 116 113 (0.3) (0.4) (0.4) 11.0 13.1 13.7

Ramco Cements 189 803 BUY 850 19.7 15.8 13.9 190 174 164 0.3 0.4 0.3 12.1 15.3 15.2

Dalmia Bharat 155 803 BUY 1,275 9.7 8.5 8.5 109 111 92 0.3 0.3 0.3 2.8 2.8 2.5

JK Cements 98 1,274 BUY 1,523 14.2 10.7 9.5 124 104 105 0.8 1.0 0.9 10.5 14.9 15.2

Star Cement 39 93 BUY 135 8.5 8.6 6.8 160 132 116 (0.1) (0.1) (0.2) 17.9 16.7 17.7

JK Lakshmi 38 319 BUY 483 12.0 7.0 6.3 70 68 68 0.8 0.6 0.5 5.3 15.7 17.2

Orient Cement 16.9 82 BUY 120 9.4 8.0 6.8 57 56 55 1.2 1.1 0.9 4.6 7.4 11.1

Deccan Cement 4.66 332 BUY 520 4.1 5.0 4.7 27 30 36 (0.2) (0.1) 0.1 11.9 11.5 12.1

18


Rating Definitions

BUY :Where the stock is expected to deliver more than 10% returns over the next 12 month period

NEUTRAL :Where the stock is expected to deliver (-) 10% to 10% returns over the next 12 month period

SELL :Where the stock is expected to deliver less than (-) 10% returns over the next 12 month period

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19


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cement - hdfc securities - 3qfy20e results previe… · star cement** 0.7 13.6 23.2 5,923 (2.9)...

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