space chart for ambuja cements

8/4/2019 SPACE Chart for Ambuja Cements

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Neeraj Patki

Ketan Nimsudkar

Viraj BhatShambhavi Jha


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AnalysisWe would be analyzing company on following

parameters :

Companys Competitive advantage

Companys Financial Strength

Industry Strength

Environmental Stability


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Companys Competitive AdvantageFactor Score

(-7 to 0)Remarks

Market Share -1

14 % - 3rd

in Industry Market Leader ACC- 17 %. Market Share is rising for last 3 years

Product Quality 0 High QualityOne of the Lowest Cost Cement Producer

Product Life Cycle

-2Past half of the Growth Stage

Product ReplacementCycle

0 Is not much significant, as it is nottechnology dependent product.

Customer Loyalty -5 Not much.Brand differences are not visible enough


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Companys Competitive Advantage


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Companys Competitive AdvantageFactor Score Remarks

Competitors Capacity

Utilization

-2 Almost All the Big competitors are near 100

% UtilizationAmbuja is aggressively expanding capacity

Technological Know-How -7 Technology not a trade secret

Vertical Integration 0 Captive power plants at multiple places.Power cost is 40 % of total cost.

Captive port at Muldwarka, Sea Transport


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Companys Competitive Advantage

Company ProductionInstalledCapacity

CapacityUtilization(%)

ACC 17,902 18,640 96

Gujarat Ambuja 15,094 14,860 100

Ultratech 13,707 17,000 80

Grasim 14,649 14,115 100

India Cements 8,434 8,810

95JK Group 6,174 6,680 92

Jaypee Group 6,316 6,531 96

Century 6,636 6,300 100

Madras

Cements4,550 5,470

84


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Companys Financial StrengthFactor Score (0 to 7) Remarks

ROI 4 ROE 23%

RO- net worth 19 %Leverage 4 Debt Reduced over the years

D/E ratio= 0.03More Owners fund

Liquidity 7 Fairly liquid positionLiabilities covered

Capital Reqd./CapitalAvailable

7 Operating profit growingWorking capital requirements easily

fulfilled


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Companys Financial StrengthFactor Score (0 to 7) Remarks

Cash Flow 6 Net cash flow positive

No borrowings required for fulfillingWC needs

Ease of exit from themarket

2 High exit barriers

Risk Involved in thebusiness

5 Low risk in northern market


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Industry StrengthFactor Score

(0 to 7)Remarks

Growth Potential 6 10.5 % CAGR.Gov-backed construction projects have

created strong demand for cement in thecountry.Industry players will continue to increasetheir output

Profit Potential 5 Profits will remain strong for some years

but may gradually erode, due to expectedoversupply.However Industry dominated by large

players may give control over pricing.


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Industry StrengthFactor Score Remarks

Financial stability 5 Demand Supply controlled by fewer playersGrowth in Economy will translate into

growth of sectorDownturns may affect temporarily

Technological Know-How 4 Technology not a trade secretIndusty is highly up to date

Resource Utilization 6 High

Capital Intensity 5

Highly Capital Intensive


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Industry StrengthFactor Score Remarks

Ease of entry into market 6 Highly Capital IntensiveEase only for bigger players as technologyreadily availableAverage Gestation Period : 2-3 YrsHolcim, La Farge,HeidelBerg

Productivity, CapacityUtilization

7 Highly ProductiveNearing 100 % Capacity utilization


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Environmental StabilityFactor Score

(-7 to 0)Remarks

Technological Changes

-1Technology up to date.Rapid changes less likely

Demand Variation -3 Usually, the demand for cement grows at about3%-4% above the growth rate of GDP.Cement demand rises with the progress ineconomic development, reaches a peak level, and

then starts declining once all the developmentalprojects are in place and the country hasachieved a very high level of economic growth

Rate of Inflation -5 High Inflation.Increase in Fuel and Energy Costs


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Environmental StabilityFactor Score

(-7 to 0)Remarks

Price Range of competingproducts -1

Not much DifferenceBrand differences are not very visible

Barriers to entry intomarket

-3 Capital IntensiveNo technological or IPR barrier

Competitive pressure -4 HighNew entrants also coming in

Price elasticity ofDemand

-2 Prices nearly fixHigh infrastructure growthDemand less likely to deviate


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Average Scores

Factor Score

Companys Competitive Advantage -2.13Companys Financial Strength 5Industry Strength 5.5

Environmental Stability -2.72


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SPACE Chart

0-7

-7

7

7

Financial Strength


Industry StrengthCompetitiveAdvantage

-2.13

5.5

-2.71

5


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SPACE Chart

0-7

-7

7

7

Financial Strength


Industry StrengthCompetitiveAdvantage

-2.13

5.5

-2.71

5


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StrategiesAggressive Posture :

It must exploit existing opportunities.

It should continue its development and investment

strategies to weaken the competition Should look for related acquisitions

Must control its resources to have competitiveadvantage.

Continue sea transportation Keep control over cheaper resources

Keep investing in captive plants

Should Focus on overall cost leadership

space chart for ambuja cements

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