cement snippets - volume ii issue (i)

8/6/2019 Cement Snippets - Volume II Issue (i)

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CCEEMM EENN TT SSNN II PPPPEETT SS

16 January 2007

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Go South

Cement prices in the south has already started moving up as mentioned

in our Cement Snippets Volume I, Issue (iv) dated January 5, 2007.

Price Outlook

South India

Andhra Pradesh

A price hike of Rs3/bag per week has been affected from January 5,

2007. Thus, cement prices will increase by Rs12/bag in the current

month. (Refer Cement Snippets, Volume I, Issue (iv)).Karnataka

Currently, retail cement prices quote between Rs206-216/bag and no

price hikes have been announced as yet.

Tamil Nadu

Prices are expected to increase by Rs4/bag from January 18, 2007.

Kerala

No price hikes are expected in Kerala.

Major players in South India

Table 1: India Cements Table 2: Madras Cements

(As % of domestic dispatches)

2QFY07

South 97.48

Andhra Pradesh 19.46

Tamil Nadu 38.57

Karnataka 20.36


2QFY07

South 96.35


Tamil Nadu 48.89

Karnataka 9.67

Table 3: Kesoram Industries


2Q FY07

South 51.35


Tamil Nadu 2.26

Karnataka 26.50

Source: CMA

ALCHEMY EQUITY RESEARCH

Urmik Chhaya

+91 22 6639 9176

[email protected]

Nirav Parikh

+91 22 6639 9147

[email protected]


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Alchemy Equity Research

16 January 2007

Cement Snippet

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East

Cement prices in the region were stable and are not expected to move up before February 2007. Cement

stocks with stockists are at high levels and would curtail price hikes even as demand is expected to pickup.

WestMumbai

The current retail price is at Rs215-220/bag. Cement prices are expected to increase by Rs3-5/bag from

January 10, 2007. Cement prices are expected to touch Rs240/bag in the peak season.

Pune

Some areas in Pune have seen cement being sold at around Rs250+/bag primary due to wagon

availability in the south, which disrupted cement supply. However, there is no change in the prices

charged by companies.

Nagpur

Cement prices in the region are expected to move up by Rs5/bag from February 2007.

NorthCement prices in the region are expected to increase from February 2007. Currently, retail cement

prices in the region quote between Rs205-215/bag. Though price hikes were earlier expected from the

second half of January, 2007, the same did not take place due to slower than expected demand.

Central

Currently, retail prices of cement in the region were Rs197-200/bag and are expected to increase by

Rs5/bag from tomorrow.

OutlookWe maintain our recommendation to switch to south India based cement companies (Refer to our report

Cycle Elongates Look South dated November 27th

, 2006) and our Buy on Madras Cement and India

Cements.


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Valuat ions Summ aryMadras CementsEarnings Model

Y/E March FY06 FY07E FY08E FY09E

Net Sales (Rs Mn) 10,057.93 15,092.45 17,691.53 22,777.84

EBIDTA (Rs Mn) 2,106.15 6,094.04 7,527.58 8,666.99

EBIDTA (%) 20.89 40.38 42.55 38.05

Net Profit (Rs Mn) 797.22 3,444.29 4,308.74 4,832.25

EPS (Rs.) (Fully Diluted) 65.43 285.12 356.68 400.02

EPS Growth (%) 335.80 25.10 12.15

Per Ton Analysis FY06 FY07E FY08E FY09E

Net Realisation (Net of Freight) (Rs) 1,974.83 2,886.26 3,045.84 2,953.10

P & F (Rs) 538.64 527.85 509.52 525.09

Freight (Rs) 378.90 366.66 431.97 540.32

EBIDTA (Rs) 447.04 1,165.56 1,313.23 1,130.99

EV (US$) 189.88 142.69 134.39

Valuations FY06 FY07E FY08E FY09E

D/E (x) 1.54 0.95 0.93 0.71

P/E (x) 12.70 10.15 9.05

EV/EBIDTA (x) 8.04 6.42 5.61

ROE (%) 21.94 62.65 47.70 36.75

ROCE (%) 12.52 38.66 33.91 29.50


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India CementsEarnings Model

Y/E March FY05 FY06 FY07 FY08 FY09

Net Sales (Rs Mn) 11514.31 15293.81 21589.88 24998.74 26528.58EBIDTA (Rs Mn) 1254.18 2502.70 7656.24 9671.05 9455.58

EBIDTA (%) 10.89 16.36 35.46 38.69 35.64

Net Profit (Rs Mn) -588.23 357.46 4882.78 6128.63 5929.81

EPS (Rs) (Fully Diluted) 1.56 20.34 25.53 24.70

EPS Growth (%) 1203.46 25.52 -3.24

Per Ton Analysis FY05 FY06 FY07 FY08 FY09

Net Realization (Net of Freight) (Rs) 2099.62 2097.34 2917.56 3119.01 3052.15

P&F (Rs) 790.06 651.17 694.38 676.25 669.25

Freight (Rs) 257.48 337.66 405.19 425.45 446.73EBIDTA (Rs) 228.32 344.63 1030.83 1205.54 1086.85

EV (US $) 190.61 184.84 160.13

Valuations FY05 FY06 FY07 FY08 FY09

P/E 12.37 9.85 10.18

EV/EBIDTA 9.64 7.55 7.49

ROE (%) 5.89 40.00 32.41 23.76

ROCE (%) 5.83 17.64 20.87 18.47

Publ icat ionsReports Theme Published Date

Cement Monthly May 22-Jun-06

Cement Monthly June 25-Jul-06

Cement ACC Cycle Comparisons 16-Aug-06

Cement Industry Till FY08 25-Aug-06

Gujarat Ambuja Cements Ltd 25-Aug-06

Shree Cement 25-Aug-06

ACC 25-Aug-06

Ultratech Cement 25-Aug-06

Grasim Industries 25-Aug-06

Cement Monthly - August 25-Sep-06Cement Snippets - Volume I,Issue (i)

14-Nov-06

Cement Industry Cycle Elongates - Look South 27-Nov-06

India Cements 27-Nov-06

Madras Cement 27-Nov-06

Cement Snippets Volume I,Issue (ii)

4-Dec-06

Cement Snipptes Volume I,Issue (iii)

18-Dec-06

Cement Monthly - November 27-Dec-06

Cement Snipptes Volume I,Issue (iv)

5- Jan - 07


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