Ambuja Cement (AMBCE) | 223 - ICICI...
Transcript of Ambuja Cement (AMBCE) | 223 - ICICI...
July 26, 2018
ICICI Securities Ltd | Retail Equity Research
Result Update
Higher realisation drives sales growth…
Ambuja’s results were above our estimates. Revenues increased
5.5% YoY (up 5.4% QoQ) to | 3,016.9 crore (above I-direct estimate
of | 2,953.6 crore) led by 5.3% YoY increase in volumes to 6.4 MT
(vs. I-direct estimate of 6.4 MT) and 0.2% YoY increase in realisation
to | 4,736 (vs. I-direct estimate of | 4,625)
EBITDA margin declined 213 bps YoY to 20.6% mainly led by 15.9%
YoY increase in power cost and 19.1% YoY increase in freight cost.
However, margins remained above our estimates. EBITDA per tonne
declined 9.2% YoY to | 977/t (vs. our estimate | 789/t)
Demand to improve on higher infra spend, revival in rural demand…
Better monsoons, hike in minimum support prices and pre-election
spending are expected to lead to better demand from rural regions (that
has remained a laggard till now). This, coupled with higher infra spend, is
expected to drive cement demand. Consequently, we expect cement
volumes to increase at a CAGR of 7.6% in CY17-19E. In addition, we
expect an improvement in pricing to continue in the company’s key
markets, especially in the north led by a pick-up in demand. Hence, we
expect revenues to increase at 10.6% CAGR in CY17-19E.
Capacity expansion to further boost volumes…
Over the past few years, Ambuja had registered muted growth in capacity
expansion (2% CAGR in CY13-17). However, the recent announcement of
capacity expansion of 3.1 MT (10.5% of overall capacity) clinker plant at
Marwar, Rajasthan allays concerns on growth in the medium term. The
company plans to invest | 1,391 crore towards the first phase of 1.7 MT,
which is expected to be commissioned in the second half of 2020.
Master supply agreement with ACC to boost profits
The board has approved master supply agreement (MSA) with ACC for
three years commencing from the date of execution. The proposed
agreement will help unlock synergy between ACC and Ambuja. Under the
agreement, ACC and Ambuja can procure from each other clinker,
cement, raw materials (including fuels, fly ash, slag) & spare parts and
undertake toll grinding in certain plants. This will enable both companies
to lower their lead distance, maximise utilisation of assets as well as spare
inventory. According to the management, this is expected to result in
synergy benefits of ~3-5% of profit before tax.
Capex not adequate to capture growth potential: downgrade to HOLD
Higher infra spend along with a revival in the rural economy is expected
to boost cement demand by 8% in FY18-20E. This, coupled with limited
supply (3% CAGR in FY18-20E) is expected to drive utilisation and pricing.
In order to capture this growth, the company is planning to expand its
capacity by 1.7 MT by CY20. However, we believe the capacity expansion
is not adequate compared to other peers. This will negatively impact the
company’s market share and limit its volume growth. Further, the 1.7 MT
greenfield capacity expansion at US$136/t looks higher and return ratio
dilutive, in our view. Hence, we downgrade the stock from BUY to HOLD
with a revised target price of | 245/share (i.e. at 12.0x CY19E EV/EBITDA
and EV/tonne of US$161).
Rating matrix
Rating : Hold
Target : | 245
Target Period : 12-15 months
Potential Upside : 10%
What’s Changed?
Target Changed from | 285 to | 245
EPS CY18E Changed from | 6.8 to | 6.9
EPS CY19E Changed from | 8.7 to | 8.5
Rating Changed from Buy to Hold
Quarterly Performance
Q2CY18 Q2CY17 YoY (%) Q1CY18 QoQ (%)
Revenue 3,016.9 2,860.0 5.5 2,862.6 5.4
EBITDA 622.3 651.0 -4.4 507.1 22.7
EBITDA (%) 20.6 22.8 -213 bps 17.7 291 bps
PAT 499.3 392.2 27.3 271.8 83.7
Key Financials
| Crore CY16 CY17 CY18E CY19E
Net Sales 9196.6 10446.9 11674.6 12788.5
EBITDA 1692.3 1940.1 2299.8 2805.3
PAT 932.2 1249.6 1377.1 1693.7
Adjusted EPS (|) 4.7 6.3 6.9 8.5
Valuation summary
CY16 CY17 CY18E CY19E
PE (x) 47.5 35.4 32.2 26.1
Target PE (x) 52.2 38.9 35.3 28.7
EV to EBITDA (x) 18.0 15.0 13.0 10.8
EV/Tonne(US$) 155 147 148 146
Price to book (x) 2.3 2.2 2.2 2.1
RoNW (%) 6.7 8.6 9.5 11.4
RoCE (%) 9.5 11.3 14.1 17.2
Stock data
Amount
Market cap | 44280 crore
Debt (CY17) | 33 crore
Cash & Invest (CY17) | 3497 crore
EV | 40816 crore
52 week H/L | 291 / 223
Equity capital | 309.9 crore
Face value | 2
Particular
Price performance (%)
1M 3M 6M 12M
ACC 11.7 -6.3 -14.9 -14.9
UltraTech Cement 7.8 -2.2 -7.2 -1.5
Ramco Cement -0.9 -16.6 -11.5 4.1
Research Analyst
Rashesh Shah
Devang Bhatt
Ambuja Cement (AMBCE) | 223
ICICI Securities Ltd | Retail Equity Research Page 2
Source: Company, ICICI Direct Research Variance analysis
Q2CY18 Q2CY18E Q2CY17 YoY (%) Q1CY18 QoQ (%) Comments
Net Sales 3,016.9 2,953.6 2,860.0 5.5 2,862.6 5.4 Higher volume growth drives revenues in the quarter
Other Incomes 191.1 68.8 56.0 241.3 50.7 276.8
Raw Material Expenses 289.6 236.3 237.9 21.7 270.4 7.1 The increase in RM cost was mainly due to increase in fly ash and gypsum cost
Employee Expenses 175.8 172.4 169.7 3.6 169.6 3.7
Change in stock -78.4 0.0 -9.0 N.A -58.6 N.A
Power and fuel 654.7 655.9 564.7 15.9 635.1 3.1 The rise in power & fuel cost was mainly due to higher pet coke prices
Freight 878.4 867.9 737.5 19.1 828.8 6.0 Increase in diesel prices led to higher freight cost and increase in lead distance
Others 474.4 517.2 508.4 -6.7 510.2 -7.0
EBITDA 622.3 503.8 651.0 -4.4 507.1 22.7
EBITDA Margin (%) 20.6 17.1 22.8 -213 bps 17.7 291 bps Higher power and freight cost dented margins
Interest 19.2 26.9 16.5 16.4 25.7 -25.4
Depreciation 136.4 152.1 143.9 -5.2 139.3 -2.0
PBT 657.8 393.5 546.6 20.3 392.8 67.5
Total Tax 158.6 110.2 154.4 2.7 121.1 31.0
PAT 499.3 283.3 392.2 27.3 271.8 83.7
PAT during the quarter increased mainly led by lower depreciation expenses and
higher other income
Key Metrics
Volume (MT) 6.37 6.39 6.05 5.3 6.22 2.4 Improving demand from IHB and infra spend drove volumes
Realisation (|) 4,736 4,625 4,727 0.2 4,602 2.9
EBITDA per Tonne (|) 977 789 1,076 -9.2 815 19.8 Higher input cost dented EBITDA/t
Source: Company, ICICI Direct Research
Change in estimates
CY19E
(| Crore) Old New % Change Old New % Change Comments
Revenue 11,537.1 11,674.6 1.2 12,750.3 12,788.5 0.3 Revenues are expected to increase at a CAGR of 10.6% over CY17-19E
EBITDA 2,259.0 2,299.8 1.8 2,790.3 2,805.3 0.5
EBITDA Margin (%) 19.6 19.7 12 bps 21.9 21.9 5 bps Cost efficiency in power and other cost to drive margins
PAT 1,356.0 1,377.1 1.6 1,733.0 1,693.7 -2.3
EPS (Diluted) (|) 6.8 6.9 1.6 8.7 8.5 -2.3
CY18E
Source: Company, ICICI Direct Research
Assumptions
Comments
CY15 CY16 CY17 CY18E CY19E CY18E CY19E
Volume (MT) 21.5 21.1 23.0 25.0 26.6 24.8 26.6 Capacity expansion and macro tailwind to drive volumes
Realisation (|) 4,351 4,343 4,553 4,675 4,815 4,661 4,801 Price improvement in the company's key markets to boost realisation
EBITDA per Tonne (|) 667 780 845 921 1,056 913 1,051 We expect EBITDA/tonne at | 1,056/t in CY19E
EarlierCurrent
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 3
Annual Report Analysis
Market share gains in CY17
The company’s volume in CY17 increased 9.0% YoY to 23.0 MT vs.
industry volume growth of 6.0% YoY. Consequently, Ambuja’s utilisation
has increased from 71.5% in CY16 to 77.5% in CY17. Total 70% of
Ambuja’s retail sales came from small towns and villages.
Expansion plans
The Board has approved capacity addition of 1.7 MT (~5% of total
capacity) by setting up a greenfield clinkerisation unit at Marwar Mundwa
in Nagaur district, Rajasthan. The company has earmarked | 137.3 crore
for site development, infrastructure, engineering design, tendering and
contracting of the project. It has also commenced civil construction work
for the ancillary building and is in its finishing stages. Ambuja is also
investing in securing limestone mines and has acquired a new mining
lease at the Maldi Mopar mines for its Bharatpur plant. The company aims
to commence operations at these mines by June 2019. Ambuja has also
acquired new mining lease at Loadhva for Ambujanagar plant in Gujarat
and a new mining lease at the Nandagaon Ekodi mines for its plant in
Maharashtra. Apart from these investments, the company is planning to
set up a railway siding at the Rabriyawas unit in Rajasthan by end of 2019
and operationalise its coal block by 2018.
Higher input cost leads to increase in operating cost/t
The operating cost/t increased 4.0% YoY mainly led by higher fly ash
cost, pet coke prices and diesel prices. However, the company was able
to limit the increase in operating cost due to various cost reduction
measures like reduction in gypsum cost by 2.0%, increase in usage of
alternative fuels by 1.0% to 4.2% and fixed cost optimisation. Going
forward, the cost is further expected to improve due to master supply
agreement (MSA) with Ambuja Cements. The proposed agreement will
help unlock synergy between ACC and Ambuja leading to lower lead
distance and maximise utilisation of assets as well as spare inventory.
Healthy growth in operating cash flow
Operating cash flow increased by | 439 crore in CY17 mainly led by | 317
crore increase in profitability.
Improvement in return ratios
With increase in utilisation (up from 71.5% to 77.5%) and improvement in
operating margins (up from 18.4% to 18.6%) led to increase in RoCE from
9.5% in CY16 to 11.3% in CY17.
Renewal of agreement for payment of technology & knowhow fees to
Holcim Technologies
The company has renewed the technology & knowhow agreement for a
further period of three years effective from January 1, 2018 on the same
terms and conditions except that the proposed fees shall be @1% of the
net sales of the company for each financial year or at such rate as may be
determined by the competent authorities of India and Switzerland under
the Bilateral Advance Pricing Agreement (BAPA). The company has paid
| 102.8 crore (increased from nil in CY12 to 8.2% of PAT in CY17) as
technology know how fees to Holcim Technology. In addition,
remuneration to top management, independent directors and non-
executive directors accounted for 1.4% of PAT.
Increase in EPS drives dividend per share in CY18
Dividend per share (DPS) increased 28.5% YoY to | 3.6/share mainly led
by 34.1% YoY increase EPS.
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Third largest player with no exposure to volatile southern region
Ambuja Cement is the third largest cement manufacturer in India with
cement production capacity of ~29.7 MT. The company has a presence in
all regions except south where the issue of overcapacity persists. Out of
total capacity of ~29.7 MT, highest capacity is in the north and west
region, which is ~12 MT each while capacity in east regions is ~6 MT.
Strong presence in north keeps plant utilisation at healthy levels
Due to the company’s strong focus on the northern region where demand
is continuously rising, Ambuja has been able to maintain higher utilisation
even in a difficult business environment. Along with higher utilisation
level, availability of sea transport and majority of sale through retailers
has helped the company to keep healthy EBITDA margins.
To reach capacity of 34 MT by CY21E
The company is planning to expand its capacity to ~34 MTPA by CY21E.
Out of the new capacity planned, 1.7 MTPA will come up in the northern
region while the central region is expected to see capacity expansion by
3.0 MTPA, respectively.
Exhibit 1: Capex plans
State Region MT
Current Capacity in CY17 29.7
Additions :
Marwar Mundwa, Nagaur Rajasthan North 1.7
Dadri, Gautam Buddha Nagar Uttar Pradesh Central 1.5
Osara, Mandsaur Madhya Pradesh Central 1.5
Total by CY21E 34.4
Source: Company, ICICI Direct Research
Lower raw material cost due to lower use of purchased clinker
The company has maintained lower raw material cost compared to the
industry for many years. Raw material cost per tonne for the company
has come down drastically after commissioning of two new clinkerisation
plants at Bhatpara and Rauri in CY10, which reduced the amount of
purchased clinker for the company. Barring CY09, its total RM cost has
consistently remained below industry average.
Exhibit 2: Lower raw material cost per tonne compared to industry
298278
302
388 372 368396
577
642
693 704677 678
305
474
516
0
100
200
300
400
500
600
700
800
CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
(|
/tonne)
Ambuja Industry
Source: Company, ICICI Direct Research
Capacity Share
North
40%
West
40%
East
20%
ICICI Securities Ltd | Retail Equity Research Page 5
Expect revenue CAGR of 10.6% during CY17-19E
Revenues have grown at 1.5% CAGR in CY12-17 led by realisation CAGR
of 0.6% and volume CAGR of 0.9% during the same period. For CY17-
19E, we expect sales CAGR of 10.6% with realisation CAGR of 2.8% and
volume CAGR of 7.6% during the same period led by increase in infra
spend by the government. The company is well on track on the capacity
expansion front and will expand current capacity of 29.7 MT to ~34 MT
by CY21E.
Exhibit 3: Expect expansion led revenue CAGR of 10.6% during CY17-19E
9087
99119368 9173
10454
11675
12789
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
CY13 CY14 CY15 CY16 CY17 CY18E CY19E
Sales (| crore)
Source: Company, ICICI Direct Research
Exhibit 4: Capacity addition plans
State Region MT
Current Capacity in CY17 29.7
Additions :
Marwar Mundwa, Nagaur Rajasthan North 1.7
Dadri, Gautam Buddha Nagar Uttar Pradesh Central 1.5
Osara, Mandsaur Madhya Pradesh Central 1.5
Total by CY21E 34.4
Source: Company, ICICI Direct Research
Exhibit 5: Volume to grow at 7.6% CAGR during CY17-19E
21.6 21.5 21.5 21.1
23.0
25.0
26.6
-2.0
3.0
8.0
13.0
18.0
23.0
28.0
CY13 CY14 CY15 CY16 CY17 CY18E CY19E
Sales Volumes (MT)
Source: Company, ICICI Direct Research
Exhibit 6: Realisation to pick up led by recovery in demand
4207
4601
4351 4343
4553
4675
4815
3800
4000
4200
4400
4600
4800
5000
CY13 CY14 CY15 CY16 CY17 CY18E CY19E
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Realisation (|/tonne) -LS Growth (%) -RS
Source: Company, ICICI Direct Research
Exhibit 7: Q2CY18 sales volume up 5.3% YoY
4.505.00
6.02 6.05
5.02
5.876.22 6.37
0.0
2.0
4.0
6.0
8.0
10.0
Q3C
Y16
Q4C
Y16
Q1C
Y17
Q2C
Y17
Q3C
Y17
Q4C
Y17
Q1C
Y18
Q2C
Y18
In M
T
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
(%
)
Sales volumes -LHS Growth (%) -RHS
Source: Company, ICICI Direct Research
Exhibit 8: Q2CY18 realisations up 0.2% YoY
4477 4449
4251
47274621 4624 4602
4736
3000
3500
4000
4500
5000
Q3C
Y16
Q4C
Y16
Q1C
Y17
Q2C
Y17
Q3C
Y17
Q4C
Y17
Q1C
Y18
Q2C
Y18
(|
)
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
(%
)
Realisation-LHS Growth (%) -RHS
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 6
Margins to improve led by higher realisation, cost rationalisation
Given the up-tick in demand, we expect operating margins of Ambuja to
improve led by higher realisation and better cost efficiency.
Exhibit 9: Expect EBITDA/tonne of | 1,056 by CY19E
731
864
667
780845
921
1056
0
200
400
600
800
1000
1200
CY13 CY14 CY15 CY16 CY17 CY18E CY19E
EBITDA/Tonne
Source: Company, ICICI Direct Research
Exhibit 10: Margins to improve led by cost efficiency
17.4
19.3
15.4
18.2
19.7
21.9 21.9
10.0
15.0
20.0
25.0
30.0
CY13 CY14 CY15 CY16 CY17 CY18E CY19E
(%
)
EBITDA Margin (%)
Source: Company, ICICI Direct Research
Exhibit 11: Q2CY18 EBITDA/tonne increases 24.5% YoY
1004
684 669 655
1076
706
921
815
977
0
200
400
600
800
1000
1200
Q2C
Y16
Q3C
Y16
Q4C
Y16
Q1C
Y17
Q2C
Y17
Q3C
Y17
Q4C
Y17
Q1C
Y18
Q2C
Y18
EBITDA per Tonne (|)
Source: Company, ICICI Direct Research
Exhibit 12: Margins improve due to lower RM cost
15.3 15.0 15.4
22.8
15.3
19.9
22.9
17.720.6
0.0
5.0
10.0
15.0
20.0
25.0Q
2C
Y16
Q3C
Y16
Q4C
Y16
Q1C
Y17
Q2C
Y17
Q3C
Y17
Q4C
Y17
Q1C
Y18
Q2C
Y18
EBITDA Margin (%)
Source: Company, ICICI Direct Research
Expect net profit to increase at CAGR of 16.4% over CY17-19E
We expect net margins to improve to 13.2% in CY19E (from 12.0% in
CY17) led by better demand and higher realisation in CY19E. As a result,
we expect net profit to increase at a CAGR of 16.4% over CY17-19E.
Exhibit 13: Profitability trend
1295
1496
808
932
1250
1377
1694
15.0
8.6
10.1
12.0 11.8
14.2
13.2
0
200
400
600
800
1000
1200
1400
1600
1800
CY13 CY14 CY15 CY16 CY17 CY18E CY19E
| c
rore
7.0
9.0
11.0
13.0
15.0
17.0
19.0
(%
)
Net profit - LS Net profit margin -RS
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 7
Outlook and valuations
Higher infra spend along with a revival in the rural economy is expected
to boost cement demand by 8% in FY18-20E. This, coupled with limited
supply (3% CAGR in FY18-20E) is expected to drive utilisation and pricing.
In order to capture this growth, the company is planning to expand its
capacity by 1.7 MT by CY20. However, we believe the capacity expansion
is inadequate compared to other peers. This will negatively impact the
company’s market share and limit its volume growth. Further, the 1.7 MT
greenfield capacity expansion at US$136/t looks higher and return ratio
dilutive in our view. Hence, we downgrade the stock from BUY to HOLD
with a revised target price of | 245/share (i.e. at 12.0x CY19E EV/EBITDA
and EV/tonne of US$161).
Exhibit 14: Fair value calculations (in | crore)
Fair value calculation in | crore
EBITDA Estimates CY19E 2,805.3
Target EV/EBITDA 10.7
Target Enterprise value 30,016.4
Debt 33.1
Balance Cash (post invetsment) 3,497.1
Target equity value 33,480.4
O/s shares post ACC deal 198.6
Fair value of Ambuja [A] 168.6
Cost of Investment in ACC (50% stake) [A] 10,909.9
ACC's fair equity valuation 33,786.0
Valuation of 50% stake [B] 16,893.0
Holding company discount 10.0%
Net value to Ambuja 15,203.7
O/s shares post ACC deal 198.6
Fair value of Investment in ACC [B] 76.6
Fair value per share [A+B] 245
Source: Company, ICICI Direct Research
Exhibit 15: Assumptions
| per tonne CY14 CY15 CY16 CY17 CY18E CY19E
Sales Volume (mtpa) 22 22 21 23 25 27
Net Realisation 4601 4351 4343 4553 4675 4815
Total Expenditure 3737 3684 3564 3708 3754 3759
Stock Adjustment 7 12 -14 -28 -55 0
Raw material 388 372 368 396 410 400
Power & Fuel 1052 955 867 973 990 954
Employees 270 274 280 288 287 300
Freight 1137 1166 1171 1251 1303 1250
Others 884 906 892 828 818 855
EBITDA per Tonne 864 667 780 845 921 1056
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 8
Exhibit 16: One year forward EV/Tonne
0
2000
4000
6000
8000
10000
12000
14000
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Million $
EV $260 $230 $200 $175 $150 $121
Source: Company, ICICI Direct Research
Exhibit 17: Valuation
Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) ($) (x) (%) (%)
CY16 9196.6 -1.8 4.7 -9.9 47.5 154.9 18.0 6.7 9.5
CY17 10446.9 13.6 6.3 34.0 35.4 147.2 15.0 8.6 11.3
CY18E 11674.6 11.8 6.9 10.2 32.2 148.0 13.0 9.5 14.1
CY19E 12788.5 9.5 8.5 23.0 26.1 145.7 10.8 11.4 17.2
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 9
Recommendation History vs. Consensus Estimate
0
100
200
300
400
500
Jul-
18
Jun-
18
May-
18
Mar-
18
Feb-
18
Jan-
18
Nov-
17
Oct-
17
Sep-
17
Jul-
17
Jun-
17
May-
17
Mar-
17
Feb-
17
Dec-
16
Nov-
16
Oct-
16
Aug-
16
Jul-
16
Jun-
16
Apr-
16
Mar-
16
Feb-
16
Dec-
15
Nov-
15
Sep-
15
Aug-
15
Jul-
15
(|
)
0.0
20.0
40.0
60.0
80.0
100.0
(%
)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICI Direct Research
Key events
Date Event
Sep-11 Acquires 60% shareholding in Dirk India Pvt Ltd, Maharashtra for | 16.51 crore. The company enters into a joint venture for speciality cement manufacturing facility
in Goa with Counto Microfine Products Pvt Ltd
Jun-12 CCI imposes a fine of 50% of annual profit of fisacl year ending 2010 and 2011, a total of | 6000 crore, on 11 cement companies including Amubuja cement for
alleged cartalisaion
Sep-12 The inter-ministerial panel recommends de-allocation of coal blocks held by five companies, including Ambuja Cement
Dec-12 Ambuja Cement discontinues providing monthly production and sales updates citing provision in new accounting norms
Mar-13 Obtains a stay on penalty of | 1163 crore imposed on it by CCI but ordered to deposit 10% of the amount
Jul-13 Holcim Group to consolidate its holding in ACC through Ambuja Cements. The transaction will result in Ambuja holding 50% stake in ACC, in which Holcim India
currently holds 50.01%
Mar-15 Ambuja Cement secures block at Gare-Palma Sector-IV/8 in the state of Chhattisgarh
Feb-16 Ambuja commissions 0.9 mt grinding unit at Sankrail
Aug-16 Ambuja acquires 50.05% stake in ACC
Feb-18 Ambuja plans to expand its capacity by 3.1 MT at Marwar in Rajasthan
Apr-18 Board approves MSA with ACC
Source: Company, ICICI Direct Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Holcim Group 30-Jun-18 63.1 1,253.2 0.0
2 Life Insurance Corporation of India 30-Jun-18 5.9 116.4 -14.8
3 Capital Research Global Investors 30-Jun-18 2.6 52.2 0.0
4 Capital World Investors 31-Dec-16 2.4 46.7 11.5
5 The Vanguard Group, Inc. 31-May-18 1.4 27.3 0.1
6 GIC Private Limited 30-Jun-18 1.3 25.9 2.8
7 Aberdeen Asset Management (Asia) Ltd. 31-May-18 1.3 25.4 -1.3
8 ICICI Prudential Asset Management Co. Ltd. 30-Jun-18 1.2 24.3 12.1
9 HDFC Asset Management Co., Ltd. 30-Jun-18 1.1 22.5 5.7
10 Reliance Nippon Life Asset Management Limited 30-Jun-18 1.0 19.9 -5.4
(in %) Jun-17 Sep-17 Dec-17 Mar-18 Jun-18
Promoter 63.60 63.59 63.56 63.55 63.55
FII 16.74 16.60 17.22 16.45 16.51
DII 11.48 12.21 11.99 12.95 12.79
Others 8.18 7.60 7.23 7.05 7.15
Source: Reuters, ICICI Direct Research
Recent Activity
Investor name Value Shares Investor name Value Shares
ICICI Prudential Asset Management Co. Ltd. 36.7 12.1 Life Insurance Corporation of India -44.9 -14.8
HDFC Asset Management Co., Ltd. 17.4 5.7 Goldman Sachs Asset Management International -18.2 -6.0
GIC Private Limited 8.6 2.8 Reliance Nippon Life Asset Management Limited -16.3 -5.4
IDFC Asset Management Company Private Limited 8.3 2.7 Harding Loevner LP -7.3 -1.7
Caisse de Depot et Placement du Quebec 5.9 1.4 Aberdeen Asset Management (Asia) Ltd. -3.8 -1.3
Buys Sells
Source: Reuters, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 10
Financial summary
Profit and loss statement | Crore
(Year-end March) CY16 CY17 CY18E CY19E
Total operating Income 9,196.6 10,446.9 11,674.6 12,788.5
Growth (%) -1.8 13.6 11.8 9.5
Raw material 746.5 846.5 887.4 1062.4
Power & Fuel 1832.0 2234.2 2472.3 2533.2
Employees 590.9 661.4 716.8 796.8
Freight 2472.8 2872.0 3255.0 3320.0
Others 1884.8 1900.8 2043.3 2270.9
Total Operating Exp. 7,527.0 8,514.8 9,374.8 9,983.2
EBITDA 1,669.6 1,932.0 2,299.8 2,805.3
Growth (%) 16.1 15.7 19.0 22.0
Depreciation 848.9 572.9 589.8 607.1
Interest 74.2 107.2 98.7 107.4
Other Income 510.2 359.1 416.8 400.0
Exceptional items 0.0 0.0 0.0 0.0
PBT 1,256.8 1,611.0 2,028.2 2,490.7
Total Tax 347.2 369.6 651.1 797.0
PAT 909.5 1,241.4 1,377.1 1,693.7
Adjusted PAT 932.2 1,249.6 1,377.1 1,693.7
Growth (%) 15.4 34.0 10.2 23.0
Adjusted EPS (|) 4.7 6.3 6.9 8.5
Source: ICICI Direct Research
Cash flow statement | Crore
(Year-end March) CY16 CY17 CY18E CY19E
Profit after Tax 932.2 1,249.6 1,377.1 1,693.7
Add: Depreciation 848.9 572.9 589.8 607.1
(Inc)/dec in Current Assets -12.0 -841.8 -608.5 -563.2
Inc/(dec) in CL and Provisions 322.8 461.8 -434.5 -434.4
CF from operating activities 2,091.8 1,442.5 923.9 1,303.2
(Inc)/dec in Investments -10,723.3 1,384.3 0.0 0.0
(Inc)/dec in Fixed Assets -641.4 -394.1 -1,100.0 -1,200.0
Others
CF from investing activities -11,364.7 990.2 -1,100.0 -1,200.0
Issue/(Buy back) of Equity 86.8 0.0 0.0 0.0
Inc/(dec) in loan funds 2.9 1.5 0.0 0.0
Dividend paid & dividend tax -654.4 -841.4 -929.3 -929.3
Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0
Others 8,366.5 527.0 0.0 0.0
CF from financing activities 7,801.8 -312.8 -929.3 -929.3
Net Cash flow -1,471.1 2,119.8 -1,105.4 -826.1
Opening Cash 2,848.4 1,377.3 3,497.1 2,391.7
Closing Cash 1,377.3 3,497.1 2,391.7 1,565.5
Source: Company, ICICI Direct Research
Balance sheet | Crore
(Year-end March) CY16 CY17 CY18E CY19E
Liabilities
Equity Capital 397.1 397.1 397.1 397.1
Reserve and Surplus 18,640.9 19,576.1 20,023.9 20,788.3
Total Shareholders funds 19,038.0 19,973.2 20,421.0 21,185.4
Total Debt 31.5 33.1 33.1 33.1
Deferred Tax Liability 492.9 1,454.5 654.5 154.5
Total Liabilities 19,562.4 21,460.8 21,108.6 21,373.0
Assets
Gross Block 12,614.3 12,357.6 13,855.5 15,055.5
Less: Acc Depreciation 6,635.6 6,635.6 7,225.4 7,832.5
Net Block 5,978.7 5,722.0 6,630.1 7,223.0
Capital WIP 320.0 397.9 0.0 0.0
Total Fixed Assets 6,298.7 6,119.9 6,630.1 7,223.0
Investments 13,229.0 11,844.7 11,844.7 11,844.7
Inventory 937.5 1,052.5 1,171.4 1,264.7
Debtors 300.1 308.0 371.5 372.8
Loans and Advances 1,041.6 1,668.2 2,067.7 2,536.1
Other Current Assets 34.5 126.9 153.3 153.6
Cash 1,377.3 3,497.1 2,391.7 1,565.5
Total Current Assets 3,691.0 6,652.6 6,155.7 5,892.8
Creditors 2,361.2 2,519.8 2,934.9 3,040.2
Provisions 1,295.0 636.6 587.0 547.2
Total Current Liabilities 3,656.3 3,156.4 3,521.9 3,587.5
Net Current Assets 34.7 3,496.2 2,633.8 2,305.3
Application of Funds 19,562.4 21,460.8 21,108.6 21,373.0
Source: Company, ICICI Direct Research
Key ratios
(Year-end March) CY16 CY17 CY18E CY19E
Per share data (|)
Adjusted EPS 4.7 6.3 6.9 8.5
Cash EPS 9.0 9.2 9.9 11.6
BV 95.9 100.6 102.8 106.7
DPS 2.8 3.6 4.0 4.0
Cash Per Share 6.9 17.6 12.0 7.9
Operating Ratios (%)
EBITDA Margin 18.4 18.6 19.7 21.9
PAT Margin 10.1 12.0 11.8 13.2
Inventory days 36.4 34.8 34.8 34.8
Debtor days 11.6 10.6 10.6 10.6
Creditor days 89.4 85.3 85.3 85.3
Return Ratios (%)
RoE 6.7 8.6 9.5 11.4
RoCE 9.5 11.3 14.1 17.2
RoIC 6.9 10.4 12.4 15.2
Valuation Ratios (x)
P/E 47.5 35.4 32.2 26.1
EV / EBITDA 18.0 15.0 13.0 10.8
EV / Net Sales 4.6 3.9 3.6 3.3
Market Cap / Sales 4.8 4.2 3.8 3.5
Price to Book Value 2.3 2.2 2.2 2.1
Solvency Ratios
Debt/EBITDA 0.0 0.0 0.0 0.0
Debt / Equity 0.0 0.0 0.0 0.0
Current Ratio 1.0 2.1 1.7 1.6
Quick Ratio 0.6 1.0 1.1 1.2
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 11
ICICI Direct Research coverage universe (Cement)
CMP M Cap
(|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
ACC* 1,525 1800 Buy 28,661 35.0 49.2 59.7 16.7 13.8 10.8 131 121 117 14.0 16.4 19.7 9.9 11.4 13.7
Ambuja Cement* 223 245 Hold 44,280 6.3 6.9 8.5 15.0 13.0 10.8 147 148 146 11.3 14.1 17.2 8.6 9.5 11.4
UltraTech Cem 4,124 4800 Buy 113,163 89.6 116.4 160.2 21.5 16.9 13.5 237 223 210 10.0 12.2 14.9 9.5 11.1 13.4
Shree Cement 17,363 18500 Hold 60,423 397.8 436.3 491.9 23.8 20.8 18.2 307 258 251 15.3 16.2 16.0 15.6 14.9 14.8
Heidelberg Cem 156 180 Buy 3,535 5.9 7.2 8.7 12.3 11.5 10.2 127 126 121 14.8 17.0 19.9 12.8 14.4 15.9
India Cement 115 160 Buy 3,533 3.3 5.1 5.6 9.6 8.7 8.2 72 70 68 5.1 5.7 5.9 1.9 3.0 3.1
JK Cement 805 1150 Buy 5,629 51.3 28.4 46.8 9.7 14.2 10.6 88 88 87 14.6 9.6 12.3 16.7 8.8 13.1
JK Lakshmi Cem 335 440 Buy 3,943 7.1 5.0 7.6 13.2 13.5 11.9 73 66 66 8.8 8.2 9.4 5.8 3.9 5.7
Mangalam Cem 226 275 Hold 603 4.3 4.8 10.3 10.9 11.1 8.6 39 40 41 7.2 6.6 8.9 2.2 2.4 5.0
Star Cement 119 150 Buy 4,988 7.9 6.8 7.3 10.1 10.2 9.3 239 220 213 21.6 19.2 18.6 22.4 16.7 15.6
Ramco Cement704 930 Buy 16,761 23.5 28.4 34.8 16.1 14.2 11.4 179 173 143 10.4 10.7 12.2 13.7 14.9 16.1
Sagar Cement765 900 Buy 1,563 12.9 19.5 28.1 13.1 11.4 9.6 77 64 45 8.1 9.3 10.8 3.4 4.9 6.6
Company
EV/Tonne ($)EV/EBITDA (x)EPS (|) RoCE (%) RoE (%)
Source: Company, ICICI Direct Research, *FY18,FY19E,FY20E is CY17,CY18,CY19
ICICI Securities Ltd | Retail Equity Research Page 12
RATING RATIONALE
ICICI Direct Research endeavours to provide objective opinions and recommendations. ICICI Direct Research
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]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st
Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai – 400 093
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We /I, Rashesh Shah CA, Darpan Thakkar MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
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meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
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This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
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receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
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ICICI Securities Ltd | Retail Equity Research Page 13
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The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
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company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
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