ultratech cement (ultcem) - icici...

January 21, 2016

ICICI Securities Ltd | Retail Equity Research

Result Update

Cost efficiency drives margin expansion… • Standalone revenues increased 4.7% YoY (up 2.3% QoQ) to | 5,747.3

crore (vs. I-direct estimate: | 5,665.4 crore) due to 7.1% YoY growth in volumes to 11.60 MT (vs. I-direct estimate of 11.40 MT) led by capacity expansion. Realisation declined 2.2% YoY to | 4,955 (vs. I-direct estimate of | 4,953) due to pricing pressure across regions

• EBITDA/tonne increased 15.2% YoY in Q3FY16 to | 900/tonne (vs. I-direct estimate: | 833/tonne) due to a decline in power & fuel costs as there was an increase in pet coke consumption (from 51% to 74% YoY in fuel mix). RM cost during the quarter increased due to DMF levy

• The management expects amendment to the MMRD Act to get passed in the upcoming Budget session. It expects consolidation of acquired Madhya Pradesh units of Jaiprakash Associates by Q1FY17 end

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 the 1.6 MT grinding unit at Jhajjar, Haryana and 1.6 MT grinding unit at Dankuni, West Bengal. The management has also indicated that the Bihar and Maharashtra grinding unit (1.6 MT each) is expected to be commissioned by March 2016. Further, with ongoing organic, inorganic expansion, total capacity is set to reach ~72.8 MT (consolidated capacity at 75.8 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.

Green shoots visible in infra spending

We expect the company to grow at a higher rate than the industry in coming years led by capacity expansion. Some green shoots of recovery in demand from big-ticket infra projects are visible in North and South. Further, in the East sustained infra spending in Odisha, Bihar and Chhattisgarh are expected to continue to drive volume growth in Q4FY16 and FY17. In south, the company expects demand from Seemandhra and Telangana to pick up in FY17. UltraTech, being the largest pan-India player, would be one of the major beneficiaries of a demand recovery.

Operating efficiency to drive margins

In Q3FY16 total cost/tonne declined 5.4% YoY led by lower energy cost. Cost/tonne is expected to come down further led by commissioning of grinding units (in Haryana, West Bengal, Maharashtra and Bihar) coupled with power cost savings driven by decline in pet coke prices, higher share of WHRMS and increased use of pet coke (currently 74% that can go up to 80-90%). The full benefit of cost benefit will be reflected in Q4FY16 and FY17.

Well positioned to reap benefits of recovery in demand!

With the government’s focus on infrastructure and a gradual revival in housing demand led by stable housing prices and the Seventh Pay Commission, 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 a target price of | 3,600/share (i.e. at 20.0x FY17E EV/EBITDA and EV/tonne of $225/tonne).

UltraTech Cement (ULTCEM) | 2674 Rating matrix Rating : BuyTarget : | 3600Target Period : 9-12 monthsPotential Upside : 35%

What’s changed? Target Price UnchangedEPS FY16E Changed from | 76.6 to | 82.2EPS FY17E Changed from | 93.8 to | 100.5Rating Unchanged

Quarterly performance

Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%)Revenue 5,747.3 5,487.6 4.7 5,620.0 2.3EBITDA 1,043.9 845.7 23.4 927.4 12.6EBITDA (%) 18.2 15.4 275 bps 16.5 166 bpsPAT 508.6 364.4 39.6 393.0 29.4

Key financials | Crore FY14 FY15 FY16E FY17E

Net Sales 20077.9 22651.5 24171.5 26376.7

EBITDA 3616.0 3915.3 4510.1 5198.1

Net Profit 2144.5 2014.7 2254.8 2756.7

EPS (|) 78.2 73.4 82.2 100.5 Valuation summary

FY14 FY15 FY16E FY17E

PE (x) 34.2 36.4 32.5 26.6

EV to EBITDA (x) 20.5 19.7 17.2 14.8

EV/Tonne(US$) 218 203 191 169

Price to book (x) 4.3 3.9 3.5 3.2

RoNW (%) 12.5 10.6 10.8 11.9

RoCE (%) 11.7 10.9 11.6 12.9 Stock data

Amount

Mcap | 73375 crore

Debt (FY15) | 7574 crore

Cash & Invest (FY15) | 2916 crore

EV | 78033 crore

52 week H/L | 3399 / | 2530

Equity cap | 274.2 crore

Face value | 10

Particular

Price performance

1M 3M 6M 12M

ACC -10.1 -12.1 -16.7 -21.5

Ambuja Cement -6.3 -11.0 -25.6 -24.4

Shree Cement -11.5 -24.4 -14.8 -7.1

UltraTech Cement -7.0 -10.3 -22.0 -15.5 Research Analyst

Rashesh Shah [email protected]

Devang Bhatt [email protected]


Variance analysis Q3FY16 Q3FY16E Q3FY15 YoY (%) Q2FY16 QoQ (%) Comments

Net Sales 5,747.3 5,665.4 5,487.6 4.7 5,620.0 2.3The revenue growth was driven by 7% YoY increase in volumes (led by capacity expansion)

Other Incomes 131.8 105.0 144.5 -8.8 105.0 25.5

Raw Material Expenses 909.2 912.0 876.2 3.8 904.4 0.5Increase in RM cost was mainly due to the impact of DMF, which will be 30% of limestone royalty w.e.f. December 1, 2015

Employee Expenses 349.2 340.5 305.6 14.3 340.5 2.6

Power and fuel 1,068.2 1,080.6 1,205.8 -11.4 1,058.9 0.9

Energy cost declined due to an increase in pet coke consumption in the fuel mix (74% in Q3FY16 vs 51% in Q3FY15), 18% YoY decline in pet coke cost and increase in share of thermal power plant & WHRMS (57 MW)

Freight 1,398.0 1,379.4 1,315.3 6.3 1,347.3 3.8 Logistic cost increased due to a hike in rail freight (2.7% hike from April 1 2015)Others 978.8 1,000.0 939.1 4.2 1,041.5 -6.0EBITDA 1,043.9 952.9 845.7 23.4 927.4 12.6EBITDA Margin (%) 18.2 16.8 15.4 275 bps 16.5 166 bps The EBITDA margin improved due to lower energy cost

Depreciation 323.8 289.8 278.3 16.4 333.3 -2.8The increase in depreciation expenses was due to a change in useful life of ancillary asset

Interest 125.7 130.3 154.0 -18.4 130.3 -3.5PBT 726.2 637.8 557.8 30.2 568.9 27.7Total Tax 217.7 201.4 193.5 12.5 175.9 23.8PAT 508.6 436.4 364.4 39.6 393.0 29.4 PAT declined mainly on account of a fall in interest expenses

Key MetricsVolume (MT) 11.60 11.40 10.83 7.1 11.12 4.3 The volume growth was mainly led by capacity expansionRealisation (|) 4,955 4,953 5,068 -2.2 5,053 -1.9 Prices during the quarter declined due to pricing pressure across regions EBITDA per Tonne (|) 900 833 781 15.2 834 7.9 EBITDA/tonne improved mainly due to lower energy cost

Source: Company, ICICIdirect.com Research

Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 23,892.3 24,171.5 1.2 25,987.2 26,376.7 1.5

EBITDA 4,300.6 4,510.1 4.9 4,937.6 5,198.1 5.3We expect EBITDA to improve led by a decline in energy and freight cost

EBITDA Margin (%) 18.0 18.7 66 bps 19.0 19.7 71 bps

PAT 2,102.5 2,254.8 7.2 2,572.7 2,756.7 7.2We expect PAT to improve led by lower interest expenses

EPS (|) 76.6 82.2 7.2 93.8 100.5 7.2

FY16E FY17E

Source: Company, ICICIdirect.com Research Assumptions

CommentsFY13 FY14 FY15 FY16E FY17E FY15 FY16E FY17E

Volume (MT) 41.7 42.6 45.6 48.4 51.7 45.6 48.0 51.2 We expect volumes to increase mainly led by capacity expansion

Realisation (|) 4,800 4,713 4,963 4,996 5,105 4,963.0 4,978 5,076We expect realisation to remain healthy mainly due to better realisation in south

EBITDA per Tonne (|) 1,084 849 858 932 1,006 855.0 896.0 964.3We 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 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. The management has also indicated that the Bihar and Maharashtra grinding units (1.6 MT each) are expected to be commissioned by March 2016. Further, with the ongoing organic, inorganic expansion, total capacity is set to reach ~72.8 MT (consolidated capacity at 75.8 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.

Demand expected to revive in FY17

UltraTech derives majority of its revenue from northern, western India, at 29%, 32%, respectively. Other than this, 15% of revenue is from eastern India where prices remain strong while 24% 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 Q4FY16 and FY17. In south, the company expects demand from Seemandhra and Telangana to pick up in FY17.

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. Further, commissioning of various grinding units is expected to reduce freight cost/t.

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

1,01

6

704 765 91

4

843

775

781

1,01

3

881

834

837

548 610 78

7

820

718

630

845

703

740

-200

400600

8001,000

1,200

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

EBIT

DA/to

nne

(|)

Ultratech Industry

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

Regional presence

East15%

South24%

West32%

North29%


Expect revenue CAGR of 7.9% during FY15-17E

We expect revenues to grow at a CAGR of 7.9% YoY over the next two years led by capacity expansion. The company is well on track on the capacity expansion front and will likely remain ahead of its target of 72.8 MT by FY17E (including the Jaiprakash Associate deal). Considering this, we expect volume CAGR of 6.4% during FY15-17E. We expect the blended realisation to increase at a CAGR of 1.4% during FY15-17E.

Exhibit 3: Expect expansion led revenue CAGR of 7.9% during FY15-17E

13210

1818420021 20078

22652 2417126377

-

5,000

10,000

15,000

20,000

25,000

30,000

FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Sales (| crore)


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

Opening FY15 48 60.2

Additions Q1FY16 - -

Q2FY16 - 4.5

Q3FY16 - -

Q4FY16 - -

Q1FY17 - 3.2

Q2FY17 - 4.9*

Closing FY17 48 72.8

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

Exhibit 5: Volume to grow at CAGR of 6.4% during FY15-17E

41.6 41.7 42.6 45.6 48.4 51.7

0.010.020.030.040.050.060.070.0

FY12 FY13 FY14 FY15 FY16E FY17E

Sales Volumes


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

4374

48004713

4963 49965105

4000

4200

4400

4600

4800

5000

5200

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…

9.4 10.0

12.5 12.010.7 10.8

12.2 12.411.1 11.6

02468

101214

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

Milli

on T

onne

Sales Volume


Exhibit 8: Quarterly realisation trend

4802

4792

4662 4725

5028

5068

5045

4866 50

53

4955

4000

4250

4500

4750

5000

5250

5500

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

(|)

Realisation



Margins to improve led by operating efficiency

In Q3FY16 total cost/tonne declined 5.4% YoY led by lower energy cost. Going forward, cost/tonne is expected to come down further led by commissioning of various grinding units, WHRS, and increased use of pet coke. The full benefit of the recent decline in pet coke prices will be reflected in Q4FY16 and FY17. This, in turn, would help the company in achieving over 20% margins by FY17E.

Exhibit 9: Expect EBITDA/tonne of |1006 in FY17E

713

9621084

849 858932

1006

0

200

400

600

800

1000

1200


EBITDA/Tonne


Exhibit 10: Margins to improve led by improvement in realisations

19.222.0 22.6

18.0 17.318.7 19.7

10.0

15.0

20.0

25.0

30.0


EBITDA Margin (%)


Exhibit 11: Q3FY16 EBITDA per tonne improves due to lower energy cost

704 765914 843 775 781

1013881 834 900

0200400600800

10001200

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

| pe

r ton

ne


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

18.217.8

19.6

16.014.7

16.5

18.1

20.1

15.4

15.4

05

10152025

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

(%)

EBITDA Margin


Expect net profit CAGR of 17.0 % during FY15-17E

After witnessing a sharp decline in profit in FY15, we expect net margins to improve to 10.5% in FY17E, which is still lower than the average NPM of 13.3% in FY12. Exhibit 13: Profitability trend

2446.22655.6

2144.5

1404.0

2756.7

2254.82014.710.5

9.38.910.7

13.313.5

10.6

0

500

1000

1500

2000

2500

3000


| 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 72.8 MT by FY17E (including the Jaiprakash Associates deal). Considering this, we expect volume growth at 7.9% CAGR in FY15-17E. We expect blended realisations to increase moderately at 1.4% CAGR over the same period. We estimate blended EBITDA/tonne at | 932/tonne in FY16E and | 1,006/tonne in FY17E. At the CMP of | 2,674, the stock is trading at 17.2x and 14.8x 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 and 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 in 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 with a target price to | 3,600/share (i.e. at 20.0x FY17E EV/EBITDA and EV/tonne of $225/tonne). Exhibit 14: Key assumptions | per tonne FY13 FY14 FY15 FY16E FY17E

Sales Volume* 42 43 46 48 52

Net Realisation* 4800 4713 4963 4996 5105

Total Expenditure 3716 3864 4105 4064 4099

Raw material 671 781 780 806 790

Power & Fuel 1031 971 1039 908 908

Freight 1012 1075 1182 1219 1200

Employees 232 238 267 290 301

Others 771 799 836 842 900

EBITDA per Tonne 1084 849 858 932 1006

Source: ICICIdirect.com Research; * Blended (grey + white + clinker)


Exhibit 15: One year forward EV/EBITDA

2000100001800026000340004200050000580006600074000820009000098000

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

(| C

rore

)

EV 20.5x 18.5x 16.5x 14.5x 10.5x


Exhibit 16: One year forward EV/Tonne

0

5000

10000

15000

20000

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Milli

on $

EV $200 $170 $150 $132 $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 27.6 238 16.4 17.4 18.7FY14 20077.9 0.3 78.2 -19.3 34.2 218 20.5 12.5 11.7FY15 22651.5 12.8 73.4 -6.1 36.4 203 19.7 10.6 10.9FY16E 24171.5 20.4 82.2 5.1 32.5 191 17.2 10.8 11.6FY17E 26376.7 16.4 100.5 36.8 26.6 169 14.8 11.9 12.9



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-

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Apr

-12

Jul-1

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-13

Jul-1

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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

Jan-

17

Target price: | 3600

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventMar-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 Commissions a bulk terminal with a capacity of 2 MT in Pune, Maharashtra.

Sep-15 Commissions a cement grinding unit with a capacity of 1.6 MT at Jhajjar, Haryana.

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

Dec-15 Compat sets aside the Competition Commission of India (CCI) order of alleged cartelisation

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Last filing date % O/S Position (m) Change (m)1 Aberdeen Asset Management (Asia) Ltd. 30-Jun-15 2.5 6.94 0.02 Life Insurance Corporation of India 30-Sep-15 2.2 6.09 (0.1)3 Aberdeen Asset Managers Ltd. 30-Nov-15 1.5 4.00 0.04 OppenheimerFunds, Inc. 30-Sep-15 1.4 3.88 0.05 UTI Asset Management Co. Ltd. 30-Nov-15 0.8 2.14 0.06 The Vanguard Group, Inc. 30-Nov-15 0.7 1.82 0.07 Franklin Advisers, Inc. 30-Sep-15 0.6 1.66 0.08 Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Nov-15 0.6 1.63 0.09 DSP BlackRock Investment Managers Pvt. Ltd. 30-Nov-15 0.5 1.44 0.010 APG Asset Management 30-Jun-15 0.5 1.44 (0.1)

(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 SharesWilliam Blair Investment Management, LLC 25.4 0.6 Aditya Birla Group -7053 -168SBI Funds Management Pvt. Ltd. 4.3 0.1 William Blair & Company, L.L.C. -22.1 -0.5Axiom International Investors LLC 3.9 0.1 T. Rowe Price Hong Kong Limited -12.0 -0.3Kotak Mahindra Asset Management Company Ltd. 2.9 0.1 Life Insurance Corporation of India -4.5 -0.1ICICI Prudential Asset Management Co. Ltd. 1.9 0.0 Sydinvest -3.6 -0.1

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 22,651.5 24,171.5 26,376.7

Growth (%) 0.3 12.8 6.7 9.1

Raw material cost 3327.4 3560.1 3898.0 4081.8

Power & Fuel cost 4135.4 4742.9 4390.9 4691.4

Freight cost 4580.8 5397.0 5895.7 6200.1

Employees cost 1014.6 1218.3 1401.6 1555.2

Others 3403.7 3817.9 4075.2 4650.1

Total Operating Exp. 16,461.9 18,736.2 19,661.4 21,178.6

EBITDA 3,616.0 3,915.3 4,510.1 5,198.1

Growth (%) -20.0 8.3 15.2 15.3

Depreciation 1,052.3 1,133.1 1,252.4 1,320.6

Interest 319.2 547.5 519.9 502.6

Other Income 531.0 651.5 493.2 616.5

PBT 2,775.6 2,886.3 3,231.0 3,991.4

Total Tax 631.0 871.5 976.2 1234.6

PAT 2,144.5 2,014.7 2,254.8 2,756.7

Growth (%) -19.2 -6.1 11.9 22.3

Adjusted EPS (|) 78.2 73.4 82.2 100.5


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

Profit after Tax 2,144.5 2,014.7 2,254.8 2,756.7

Add: Depreciation 1,052.3 1,133.1 1,252.4 1,320.6

(Inc)/dec in Current Assets -641.7 -599.7 462.9 -2,711.3

Inc/(dec) in CL and Provisions -886.7 1,566.5 -993.8 1,975.1

CF from operating activities 1,668.4 4,114.6 2,976.3 3,341.2

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

(Inc)/dec in Fixed Assets -2,338.0 -6,240.8 -3,000.0 -2,500.0

Others 389.9 496.2 0.0 0.0

CF from investing activities -2,550.5 -4,538.3 -3,000.0 -2,500.0

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

Inc/(dec) in loan funds 979.6 1,638.1 825.0 -500.0

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 1,567.0 364.9 -852.6

Net Cash flow 135.2 119.9 341.2 -11.5

Opening Cash 142.3 277.5 397.5 738.7

Closing Cash 277.5 397.5 738.7 727.3


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 18,766.9 20,561.6 22,965.7

Total Shareholders funds 17,097.6 19,041.3 20,836.0 23,240.1

Total Debt 4,875.1 6,513.2 7,338.2 6,838.2

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 30,966.2 32,870.3

Assets

Gross Block 25,317.3 31,558.1 34,358.1 35,146.5

Less: Acc Depreciation 9,442.3 10,575.4 11,827.8 13,148.4

Net Block 15,875.0 20,982.7 22,530.3 21,998.2

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

Total Fixed Assets 17,913.5 23,021.2 24,768.7 25,948.2

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

Inventory 2,368.4 2,751.4 2,546.4 3,234.8

Debtors 1,281.0 1,203.2 1,710.6 1,469.0

Loans and Advances 2,506.7 2,800.5 2,033.8 4,296.6

Other Current Assets 15.3 16.0 17.4 19.0

Cash 277.5 397.5 738.7 727.3

Total Current Assets 6,448.9 7,168.6 7,046.9 9,746.7

Creditors 4,512.6 5,749.1 4,846.6 6,426.7

Provisions 973.0 1,303.0 1,211.7 1,606.7

Total Current Liabilities 5,485.6 7,052.1 6,058.3 8,033.4

Net Current Assets 963.3 116.5 988.6 1,713.3

Others Assets 0.0 0.0 0.0 0.0

Application of Funds 24,268.5 28,346.4 30,966.1 32,870.2


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

Per share data (|)

EPS 78.2 73.4 82.2 100.5

Cash EPS 116.6 114.7 127.8 148.6

BV 623.5 693.9 759.3 846.9

DPS 9.0 9.0 25.0 25.0

Cash Per Share 10.1 14.5 26.9 26.5

Operating Ratios (%)

EBITDA Margin 18.0 17.3 18.7 19.7

PBT / Total Operating income 13.8 12.7 13.4 15.1

PAT Margin 10.7 8.9 9.3 10.5

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 10.8 11.9

RoCE 11.7 10.9 11.6 12.9

RoIC 14.1 11.9 12.8 15.1

Valuation Ratios (x)

P/E 34.2 36.4 32.5 26.6

EV / EBITDA 20.5 19.7 17.2 14.8

EV / Net Sales 3.7 3.4 3.2 2.9

Market Cap / Sales 3.7 3.2 3.0 2.8

Price to Book Value 4.3 3.9 3.5 3.2

Solvency Ratios

Debt/EBITDA 1.3 1.7 1.6 1.3

Debt / Equity 0.3 0.3 0.4 0.3

Current Ratio 1.2 1.0 1.2 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 FY16E FY17E

ACC* 1224 1475 Hold 22,999 61.8 30.1 68.8 17.1 18.1 10.7 117 106 104 13.7 11.0 18.9 14.1 8.8 14.4Ambuja Cement* 192 225 Hold 29,771 9.7 5.7 7.7 13.0 18.2 13.9 164 135 130 17.8 12.4 15.9 14.4 8.6 11.3UltraTech Cem 2674 3600 Buy 73,375 73.4 82.2 100.5 19.7 17.2 14.8 203 191 169 10.9 11.6 12.9 10.6 10.8 11.9Shree Cement 9520 12,500 Buy 33,130 122.5 123.6 232.5 25.4 26.7 16.7 259 198 185 6.2 6.5 11.8 8.1 7.6 12.7Heidelberg Cem 68 81 Hold 1,836 2.6 0.8 2.5 9.1 13.6 9.9 81 82 82 9.2 6.7 9.5 -0.1 2.2 6.2India Cement 82 90 Hold 2,519 1.0 4.6 4.9 7.7 6.1 5.7 56 53 54 6.8 9.0 10.1 0.8 4.2 4.0JK Cement 455 710 Hold 3,182 22.4 11.2 8.7 12.0 11.2 13.0 76 73 85 8.5 8.4 7.4 9.5 4.6 3.5JK Lakshmi Cem 276 373 Hold 3,249 8.1 -3.0 6.7 13.5 17.9 12.3 119 82 74 7.8 3.3 7.3 7.2 -2.8 5.8Mangalam Cem 175 220 Hold 467 8.9 -19.2 18.4 10.2 61.6 7.1 40 40 44 7.2 -1.7 10.7 5.3 -10.7 9.3SFCL 123 215 Buy 2,731 2.9 5.7 11.9 8.2 6.9 4.9 158 154 107 11.2 16.9 24.3 9.4 15.4 24.8

CompanyEPS (|) EV/Tonne ($)EV/EBITDA (x) RoCE (%) RoE (%)

*CY14, CY15E, CY16E ; ^June year end


RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

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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