In-line performance; cost pressure to · PDF fileMT of cement. At the same time, ACC plans to...

October 31, 2014

ICICI Securities Ltd | Retail Equity Research

Result Update

In-line performance; cost pressure to stay… • ACC’s Q3CY14 revenues came in line with our expectations. Sales

grew 9.3% YoY to | 2741.8 crore. Cement sales volumes grew 1.4% YoY (down 11.5% QoQ) to 5.6 MT. Realisations were up 7.7% YoY and 3.0% QoQ to | 4878/tonne

• Despite an improvement in topline, margin for the quarter remained lower than our expectations although they were up 217 bps YoY to 11.2%. According to the company, manufacturing and distribution costs continued to face escalations. Freight cost per tonne increased 14.7% YoY. Power & fuel was also up 10.6% YoY on per tonne basis

• With a fall in margins, its net profit was lower than our estimates at | 192.4 crore (vs. I-direct estimate: | 203.8 crore)

• As per the management, the cancellation of four coal blocks by the Supreme Court will not have any major impact as all blocks were non-operational

Second largest player in industry with balanced regional mix ACC is the second-largest pan-India cement manufacturer with cement production capacity of 30 MT. The company has increased its capacity at 10% CAGR over the past five years. ACC’s market share declined from 13% to 10% over the past five years, as capacity expansions were back-ended. However, we expect its market share to increase, going forward, with stabilisation of new capacities. ACC’s regional mix is among the most balanced in the country while its key markets are the south and eastern regions, which together account for ~54% of volume sales. Capacity to increase to 35 MT by CY15E The company is replacing existing facilities at Jamul, Chhattisgarh with a clinker plant with capacity of 2.8 MTPA and local grinding capacity of 1.1 MT of cement. At the same time, ACC plans to increase the grinding capacity at Sindhri, Jharkhand to 1.35 MT of cement while a new plant with annual capacity of 2.7 MT is scheduled to be built in Kharagpur. Construction plans at both these locations are progressing well. With their commissioning, the company's total cement production capacity is expected to increase to 35 MT by FY15E from the existing 30 MT. Margin expansion – key focus area for company ACC is still one of the higher cost producers due to high fixed costs structure and legacy plants. However, with proposed synergies from the Holcim restructuring, we expect efficiencies to improve, going ahead. ACC’s pet coke usage is likely to be 20% by next year. Similarly, usage of alternative fuel is expected to rise from the current 2% to 5% over the next 12 months. The 7.7 MW waste heat recovery facility is likely to be commissioned soon. The company is also focusing on increasing the volume of premium products to improve realisation. Overall, ACC is targeting cost savings of ~| 200 crore on power & fuel and ~| 100 crore on freight over the next 24 months. Strong balance-sheet; maintain HOLD We remain positive on the company due to its pan-India presence, strong balance sheet to withstand the current slowdown and its compelling valuations. However, we expect margins to continue to remain under pressure due to high cost pressure led by freight hikes and other costs over the short-term. Hence, we maintain our HOLD rating with a revised target price of | 1635/share (i.e. valuing the stock at CY16E EV/EBITDA of 15.0x, EV/tonne of $140/tonne on CY16E capacity of 34.8 MT).

Rating matrix

Rating : HoldTarget : | 1635Target Period : 12-15 monthsPotential Upside : 9%

What’s Changed? Target Changed from |1585 to |1635EPS CY14E Changed from |62.3 to |56.9EPS CY15E Changed from |74.3 to |67.0EPS CY16E Introduced at |74.7Rating Unchanged

Quarterly Performance

Q3CY14 Q3CY13 YoY (%) Q2CY14 QoQ (%)Revenue 2,741.8 2,508.6 9.3 3,009.0 -8.9EBITDA 305.9 225.3 35.8 401.3 -23.8EBITDA (%) 11.2 9.0 217 bps 13.3 -218 bpsPAT 192.6 118.9 62.1 243.2 -20.8 Key Financials | Crore CY13 CY14E CY15E CY16E

Net Sales 10903.5 11711.2 12360.4 13525.4

EBITDA 1368.8 1452.8 1687.6 1872.3

PAT 1094.6 1061.7 1186.4 1339.7EPS (|) 58.3 56.5 63.1 71.3 Valuation summary

CY13 CY14E CY15E CY16E

PE (x) 25.8 26.5 23.8 21.0

Target PE (x) 28.1 28.9 25.9 22.9

EV to EBITDA (x) 18.8 17.8 15.4 13.8

EV/Tonne(US$) 140 140 129 129

Price to book (x) 3.6 3.4 3.2 2.9

RoNW (%) 14.0 12.6 13.3 13.9

RoCE (%) 9.9 9.9 10.9 11.3 Stock data

Amount

Mcap | 28185 crore

Debt (CY13) Nil

Cash & Invest (CY13) | 2545 crore

EV | 25740 crore

52 week H/L | 1526 / 911

Equity cap | 187.8 crore

Face value | 10

Particular

Price performance (%)

1M 3M 6M 12M

ACC -5.92 -4.75 3.57 24.59

Ambuja Cement -0.88 -7.76 -4.29 5.49

Shree Cement -1.07 14.39 45.78 88.07

UltraTech Cement -10.85 -10.61 4.52 18.25

ACC (ACC) | 1500

Analyst

Rashesh Shah [email protected]


Variance analysis Q3CY14 Q3CY14E Q3CY13 YoY (%) Q2CY14 QoQ (%) Comments

Net Sales 2,741.8 2,734.8 2,508.6 9.3 3,009.0 -8.9The growth was driven by 1.4% YoY growth in volumes and 7.7% YoY increase in realisations

Other Incomes 105.5 88.4 100.5 4.9 88.4 19.2Raw Material Expenses 487.6 420.8 386.1 26.3 488.0 -0.1Employee Expenses 191.9 160.4 172.4 11.3 194.0 -1.1Change in stock -75.7 0.0 50.9 -248.6 15.3 -594.1Power and fuel 626.1 583.3 558.0 12.2 621.2 0.8

Freight 591.6 635.8 508.4 16.4 670.2 -11.7 Freight cost remained an ongoing concern. It increased 14.7% YoY on a per tonne basisOthers 614.5 595.0 607.5 1.2 619.1 -0.7EBITDA 305.9 339.6 225.3 35.8 401.3 -23.8

EBITDA Margin (%) 11.2 12.4 9.0 217 bps 13.3 -218 bpsHigher fuel and freight costs during the quarter resulted in lower than expected margins for the quarter

Interest 11.5 0.0 11.0 3.8 11.1 3.2Depreciation 141.9 159.9 147.0 -3.5 140.1 1.2PBT 258.0 268.2 167.8 53.8 338.5 -23.8Total Tax 68.4 64.4 51.2 33.5 98.4 -30.5PAT 192.6 203.8 118.9 62.1 243.2 -20.8

Key MetricsVolume (MT) 5.6 5.8 5.5 1.4 6.4 -11.5 Volume growth remained in line with estimates

Realisation (|) 4,879 4,689 4,528 7.7 4,739 3.0Realisation came in higher than our estimates of | 4879/tonne due to overall improvement in demand

EBITDA per Tonne (|) 544 582 407 33.8 632 -13.9

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change Old New % Change Comments

Revenue 11,456.7 11,711.2 2.2 12,441.9 12,360.4 -0.7 NA 13,525.4 NAWe have revised our CY14E revenue marginally upwards on expectations of a better business environment

EBITDA 1,498.4 1,452.8 -3.0 1,829.2 1,687.6 -7.7 NA 1,872.3 NAEBITDA Margin (%) 13.1 12.4 -67 bps 14.7 13.7 -105 bps NA 13.8 NA

PAT 1,306.1 1,061.7 -18.7 1,451.9 1,186.4 -18.3 NA 1,339.7 NA

We have reduced our PAT assumption on the back of lower other income expectations and higher operating costs

EPS (|) 69.5 56.5 -18.7 77.3 63.1 -18.3 NA 71.3 NA

CY14E CY15E CY16E

Source: Company, ICICIdirect.com Research Assumptions

CommentsCY12 CY13 CY14E CY15E CY16E CY14E CY15E CY16E

Volume (MT) 24.1 23.9 24.5 25.6 27.3 24.8 26.1 NA We maintain our volume growth guidance for CY14 and CY15

Realisation (|) 4,566 4,556 4,776 4,832 4,954 4,615 4,774 NAWe expect pricing power to improve led by better sales volume. Hence, we have revised our realisation guidance marginally upwards

EBITDA per Tonne (|) 825 572 592 660 686 604 702 NA Accordingly, we have revised upward the EBITDA/tonne

Current Earlier

Source: Company, ICICIdirect.com Research


Company Analysis Pan-India presence to reduce regional risk

ACC is a pan-India player with installed capacity of 30.5 MTPA distributed across all regions, thereby insulating the company from any weakness in a particular region. Out of total capacity, the company has ~10 MTPA capacity in the southern region, ~6.2 MTPA capacity in the eastern region, ~6 MTPA capacity in the northern region, ~4.5 MTPA capacity in the central region and ~ 4 MTPA capacity in the western region.

Recovery in southern region to benefit company

ACC has a third of its total capacity in the southern region. With the resolution of political problems in the region along with expectations of an overall recovery in the demand environment, going forward, ACC should benefit from its presence in the southern market.

To increase capacity to ~35 MT by FY15E

ACC is planning to expand its capacity to ~35 MTPA by FY15E. Out of the new capacity planned, almost all the expansion will be in the eastern region with the largest plant of 2.7 MTPA coming up at Kharagpur.

Higher free operating cash flow sufficient for expansion plans

The company has consistently been generating healthy operating cash flows for many years. Higher operating cash flow has ensured that the company does not require debt for further expansion. At the end of CY13, ACC was a totally debt-free company. Going by the present scenario, the company will not need to raise debt for the planned expansion of 5 MT given strong cash flows.

Exhibit 2: Healthy operating cash flow

1882

1166 1343934

16551299

1891

-300

200

700

1200

1700

2200

CY10 CY11 CY12 CY13 CY14E CY15E CY16E

| Cr

ore

Operating Cashflow


Exhibit 1: Capex plans Existing Capacity (MT) 30.5

Planned capacity addition

Jamul 1.1

Sindri 0.45

Kharagpur 2.7

Total 4.25

Total Capacity by 2015 (MT) 34.75 Source: Company, ICICIdirect.com Research

Regional presence

Central14%

East22%

West13%

South32%

North19%


Old, inefficient plants lead to higher cost of production…

ACC has one of the oldest manufacturing plants in the industry, resulting in higher operating costs for the company. As can be seen from the chart below, its other costs per tonne, which includes maintenance costs of the plants, as percentage of industry average, is much higher than ‘total costs except other costs’, on a per tonne basis. For example, for CY07, if the industry’s ‘average costs per tonne after deduction of other costs’ was | 100, the same for ACC was | 99.1 while the industry’s ‘average other costs per tonne’ was | 100 while that for ACC was | 137.8. Higher other costs are the result of older machinery of the company. Exhibit 3: Costs as percentage of industry average costs

100.7

109.7 108.9104.5

137.8

113.6

121.8

139.2

125.6131.7 133.0

99.1 94.6 88.4

80

90

100

110

120

130

140

150

CY07 CY08 CY09 CY10 CY11 CY12 CY13

Total Costs except Other cost Other Costs


…but efforts on to improve efficiency and reduce cost

To improve efficiency and reduce overall cost, the company has adopted a two-pronged approach. One is phasing out of old and inefficient plants. As a result, ACC has reduced power usage per tonne from 85 Kwhr in CY07 to 81 Kwhr in CY13. The second approach is to reduce dependency on power purchase from outside. Captive power plant capacity of the company has increased from ~237 MW in CY08 to ~384 MW till CY12. The company met ~69% of its power requirement through captive sources in CY07 and the remaining through the state grid while the contribution of captive source increased to ~77% in CY13. This helped in reducing overall cost per tonne for the company. Further, with proposed synergies from the Holcim restructuring, we expect efficiencies to improve, going ahead.

Exhibit 4: Units of power used per tonne of cement

74

7977 75

79 78

8380 79 78

75

8785 85

8381

8986

83 8185 86

8481

777979

8182

87

8186

8487

85

65

70

75

80

85

90

95


Kwh/

tonn

e

Shree JK Lakshmi UltraTech Ambuja ACC

Source: Company, ICICIdirect.com, Research

Exhibit 5: Purchased power share declines to 23.5% in CY13

31.4 30.4 24.7 25.1 28.2 25.6 23.5

68.6 69.6 75.3 74.9 71.8 74.4 76.5

0

20

40

60

80

100


(%)

Purchased Own Generation



Expect ACC’s revenue CAGR at ~7.4% during CY13-16E

Revenues have grown at a CAGR of 12.2% during CY10-13. The growth was mainly led by realisation growth at 7.9% CAGR for CY10-13 while volumes grew at a CAGR of 4.0% during the same period. Going forward, we expect revenue CAGR of 7.4% during CY13-16E with volume growth at 4.5% CAGR. Realisation growth is expected at only 2.8% CAGR due to pricing pressure in the industry on account of oversupply. The company is well on track on the capacity expansion front and will likely remain ahead of its target of 35MT by CY15. However, the full impact of the capacity expansion would be seen after full stabilisation in CY16E.

Exhibit 6: Expect revenue CAGR of 7.3% during CY13-15E

77179594

11010 10904 11711 1236013525

-2,0004,0006,0008,000

10,00012,00014,00016,000


Sales (| crore)


Exhibit 7: Capacity addition plans Existing Capacity (MT) 30.5

Planned capacity addition

Jamul 1.1

Sindri 0.45

Kharagpur 2.7

Total 4.25

Total Capacity by 2015 (MT) 34.75


Exhibit 8: Volume to grow at 4.5% CAGR during CY13-16E

23.7 24.1 23.924.5

25.6

27.3

20.0

22.0

24.0

26.0

28.0

30.0

CY11 CY12 CY13 CY14E CY15E CY16E

MT

Sales Volumes


Exhibit 9: Realisation to pick up from CY15 led by recovery in demand

4043

4566 45564776 4832

4954

3500

4000

4500

5000

5500

CY11 CY12 CY13 CY14E CY15E CY16E

| / t

onne

-2.00.02.04.06.08.010.012.014.0

(%)

Realisation (|/tonne) -LS Growth (%) -RS


Exhibit 10: Q3CY14 volume growth remains muted…

5.43 5.91 6.42 6.12 5.54 5.856.48 6.35

5.62

0.0

6.0

Q3CY

12

Q4CY

12

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

In M

T

-10.0

-5.0

0.0

5.0

10.0

(%)

Sales volumes -LHS Growth (%) -RHS


Exhibit 11: Realisation remains better with growth of 7.7% YoY

4682 4554 4534 4559 4528 4604 45794739

4879

3500

4000

4500

5000

5500

Q3CY

12

Q4CY

12

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

|

-10.0

0.0

10.0

20.0

30.0

(%)

Realisation-LHS Growth (%) -RHS



Margins to improve but excess capacity in industry to limit its expansion Despite an expected recovery in demand, we expect ACC’s operating margins to improve progressively given the pressure on pricing led by excess capacity in the industry coupled with higher operating costs on account of higher raw material, freight costs and legacy plants.

Exhibit 12: Expect EBITDA/tonne of |686 in CY16E

731 719825

572 592660 686

0

200

400

600

800

1000


EBITDA/Tonne


Exhibit 13: Margins to improve led by improvement in realisations

20.1

16.9 17.7

12.6 12.413.7 13.8

10

15

20

25


(%)

EBITDA Margin (%)


Exhibit 14: Q2CY14 EBITDA/tonne declines due to higher operating costs

777535

696 710407 449 564 632 544

0

200

400

600

800

1000

Q3CY

12

Q4CY

12

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

| pe

r ton

ne


Exhibit 15: Pick-up in margins expected, going forward, with synergies from Ambuja Cement and replacement of older plants

23.4

16.6

11.715.3 15.6

9.0 9.812.3 13.3

11.2

0

5

10

15

20

25Q2

CY12

Q3CY

12

Q4CY

12

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

(%)

EBITDA Margin


Expect net profit CAGR of 8.7% during CY13-16E After witnessing a sharp decline in profit in CY13, we expect net margins to improve to 10.8% in CY16E from 10.0% in CY13. Overall, we expect net profit to grow at a CAGR of 8.7% during CY13-16E. Exhibit 16: Profitability trend

1021.5

1301.8 1293.2

1069.41219.7

1404.2

1094.6

10.89.99.1

10.09.5

13.0

14.5

0200400600800

1000120014001600


| cr

ore

0

4

8

12

16

(%)

Net profit - LS Net profit margin -RS



Outlook and valuation We see CY14 as a year of stabilisation that, in turn, would arrest a fall in profitability. Further, with a capacity expansion of 2.8 MT in Jamul (Chhattisgarh), we expect CY15 to witness healthy volume growth. We expect sales volume and realisation CAGR of 4.5% and 2.8%, respectively, during CY13-16E. This, in turn, should lead to sales and PAT CAGR of 7.4% and 7.0%, respectively, during the same period. At the CMP of | 1,500, the stock is trading at 23.8x and 21.0x its CY15E and CY16E earnings, respectively. The stock is trading at an EV/EBITDA of 15.4x and 13.8x CY15E and CY16E EBITDA, respectively. On an EV/tonne basis, its valuation is at lowest levels ($129/tonne on CY15E capacity) among large players. Given its diversified presence in India and potential for margin expansion, we maintain our positive stance with a HOLD rating and revise our target price to | 1635/share (i.e. valuing the stock at CY16E EV/EBITDA of 15.0x (EV/tonne of $140/tonne). Exhibit 17: Key assumptions | per tonne CY11 CY12 CY13 CY14E CY15E CY16E

Sales Volume (mtpa) 23.7 24.1 23.9 24.5 25.6 27.3

Net Realisation 4043 4566 4556 4776 4832 4954

Total Expenditure 3324 3741 3984 4183 4172 4269

Stock Adjustment -40 8 3 -7 0 0

Raw material 630 632 698 778 751 775

Power & Fuel 922 987 996 1025 980 995

Employees 227 253 277 315 323 337

Freight 642 916 963 1056 1073 1082

Others 943 945 1048 1016 1045 1080

EBITDA per Tonne 719 825 572 592 660 686 Source: ICICIdirect.com Research


Exhibit 18: One year forward EV?EBITDA

2000

12000

22000

32000

42000

Oct-0

6

Apr-0

7

Oct-0

7

Apr-0

8

Oct-0

8

Apr-0

9

Oct-0

9

Apr-1

0

Oct-1

0

Apr-1

1

Oct-1

1

Apr-1

2

Oct-1

2

Apr-1

3

Oct-1

3

Apr-1

4

Oct-1

4

(| c

rore

)EV 15.1x 13.0x 11.0x 9.0x 5.0x


Exhibit 19: One year forward EV/tonne

1000

2000

3000

4000

5000

6000

7000

Oct-0

6

Apr-0

7

Oct-0

7

Apr-0

8

Oct-0

8

Apr-0

9

Oct-0

9

Apr-1

0

Oct-1

0

Apr-1

1

Oct-1

1

Apr-1

2

Oct-1

2

Apr-1

3

Oct-1

3

Apr-1

4

Oct-1

4

Milli

on $

EV $170 $150 $130 $110 $90 $70


Exhibit 20: Valuation

Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE

(Rs cr) (%) (Rs) (%) (x) ($) (x) (%) (%)CY13 10903.5 -2.0 58.2 3.3 25.4 137.2 18.5 14.0 10.0CY14E 11711.2 7.4 56.9 -2.3 26.0 137.7 17.5 12.7 10.0CY15E 12360.4 5.5 64.9 14.0 22.8 125.6 15.0 13.6 11.0CY16E 13525.4 9.4 74.7 15.1 19.8 116.8 12.5 14.4 11.7



Company snapshot

Target Price: 1635

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan-

08

Apr-0

8

Jul-0

8

Oct-0

8

Jan-

09

Apr-0

9

Jul-0

9

Oct-0

9

Jan-

10

Apr-1

0

Jul-1

0

Oct-1

0

Jan-

11

Apr-1

1

Jul-1

1

Oct-1

1

Jan-

12

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Jan-

15

Apr-1

5

Jul-1

5

Oct-1

5

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventJan-08 The ready mixed concrete business was hived off to a new subsidiary called ACC Concrete Ltd. ACC also acquired 40% stake in Alcon Cement Company Pvt Ltd to

strengthen its presence in GoaDec-09 The company acquired 100% equity stake in National Limestone Co Pvt Ltd, making it a wholly-owned subsidiary of the company. Also, it acquired a 100% equity

stake in Encore Cements & Additives Pvt Ltd, which has a slag grinding plant in Vishakhapatnam in coastal Andhra Pradesh

Jan-10 Encore Cement and Additives Pvy Ltd became a wholly-owned subsidiary of the company

May-11 The company installed the world's largest kiln at Wadi, Karnataka, southern region, with a capacity of 12,500 tonnes per day.

Feb-12 The company looked to set up a new clinker production facility of 2.79 MTPA and allied grinding facility at Jamul. The existing clinkering and grinding lines at Jamul will be phased out

May-12 CCI completes probe into alledged cartilsation by 39 cement companies and finds these companies, including ACC, guilty of cartelisation

Jun-12 CCI passes an order against several cement manufacturers including ACC and imposes a penalty of 0.5 times the profit for 2009-10 and 2010-11. For ACC, the penalty works out to | 1147.59 crore

Oct-12 The company's wholly-owned subsidiary company, ACC Concrete Ltd was amalgamated with the company

Nov-12 Files petition with COMPAT against CCI order that imposed penalty of | 1,147.6 crore on ACC

Dec-12 Holcim hikes royalty payment to 1% of sales w.e.f. January 1, 2013

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%

Sep-13 To expand its capacity by nearly 4 MTPA in the eastern region in the next three years with an investment of over | 3000 crore Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Holcim Group 30-Sep-14 50.01 93.9 0.02 Life Insurance Corporation of India 30-Sep-14 8.08 15.2 0.03 Aberdeen Asset Management (Asia) Ltd. 30-Sep-14 2.57 4.8 0.04 Norges Bank Investment Management (NBIM) 30-Sep-14 1.37 2.6 0.25 Aranda Investments (Mauritius) Pte. Ltd. 30-Sep-14 1.36 2.6 -2.16 J.P. Morgan Asset Management (Hong Kong) Ltd. 30-Jun-14 1.23 2.3 0.07 JPMorgan Asset Management U.K. Limited 30-Sep-14 1.09 2.1 -1.78 Reliance Capital Asset Management Ltd. 30-Sep-14 1.08 2.0 0.39 The Vanguard Group, Inc. 30-Sep-14 0.72 1.3 0.110 UTI Asset Management Co. Ltd. 31-Aug-14 0.61 1.2 0.0

(in %) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14Promoter 50.30 50.30 50.30 50.30 50.30FII 20.90 19.99 19.71 19.73 19.80DII 11.92 12.91 13.15 12.81 12.50Others 16.88 16.80 16.84 17.16 17.40

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesFranklin Templeton Asset Management (India) Pvt. Ltd. 11.34m 0.50m Aranda Investments (Mauritius) Pte. Ltd. -47.83m -2.12m ICICI Prudential Asset Management Co. Ltd. 10.36m 0.42m JPMorgan Asset Management U.K. Limited -37.47m -1.66m BNP Paribas Investment Partners Asia Ltd. 8.44m 0.35m APG Asset Management -8.82m -0.43m Reliance Capital Asset Management Ltd. 7.54m 0.33m RS Investments -7.70m -0.41m JM Financial Asset Management Pvt. Ltd. 6.34m 0.28m Amundi Hong Kong Limited -6.93m -0.32m

Buys Sells


Financial summary Profit and loss statement | Crore (Year-end March) CY13 CY14E CY15E CY16E

Total operating Income 10,903.5 11,711.2 12,360.4 13,525.4

Growth (%) -2.0 7.4 5.5 9.4

Raw material 1676.2 1908.6 1921.3 2115.8

Power & Fuel 2382.4 2513.0 2507.1 2716.4

Employees 662.5 773.1 825.9 919.1

Freight 2304.7 2588.5 2745.2 2953.5

Others 2508.9 2492.1 2673.4 2948.4

Total Operating Exp. 9,534.7 10,275.3 10,672.9 11,653.1

EBITDA 1,368.8 1,435.9 1,687.6 1,872.3

Growth (%) -35.2 4.9 17.5 10.9

Depreciation 583.8 613.2 697.9 766.5

Interest 51.7 43.9 40.8 44.0

Other Income 480.3 491.6 505.0 580.0

Exceptional items 0.0 0.0 0.0 0.0

PBT 1,213.6 1,270.4 1,453.9 1,641.8

Total Tax 131.9 234.7 267.5 302.1

PAT 1,081.7 1,035.6 1,186.4 1,339.7

Adjusted PAT 1,094.6 1,061.7 1,186.4 1,339.7

Growth (%) -15.4 -3.0 11.7 12.9

Adjusted EPS (|) 58.2 56.5 63.1 71.3


Cash flow statement | Crore (Year-end March) CY13 CY14E CY15E CY16E

Profit after Tax 1,094.6 1,061.7 1,186.4 1,339.7

Add: Depreciation 583.8 613.2 697.9 766.5

(Inc)/dec in Current Assets -545.1 -371.6 -319.4 -270.1

Inc/(dec) in CL and Prov. -199.2 351.5 -265.8 54.7

CF from operating activities 934.2 1,654.8 1,299.1 1,890.9

(Inc)/dec in Investments 338.3 0.0 0.0 0.0

(Inc)/dec in Fixed Assets -745.6 -1,275.0 -800.0 -1,150.0

Others -63.3 -9.8 0.0 0.0

CF from investing activities -470.5 -1,284.8 -800.0 -1,150.0

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

Inc/(dec) in loan funds 15.0 0.0 0.0 0.0

Dividend paid & dividend tax -664.6 -637.5 -637.5 -637.5

Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0

Others 11.0 156.8 0.0 0.0

CF from financing activities -638.6 -480.7 -637.5 -637.5

Net Cash flow -174.9 -110.7 -138.4 103.4

Opening Cash 680.7 505.8 395.1 256.7

Closing Cash 505.8 395.1 256.7 360.0


Balance sheet | Crore (Year-end March) CY13 CY14E CY15E CY16E

Liabilities

Equity Capital 187.9 187.9 187.9 187.9

Reserve and Surplus 7,625.4 8,206.5 8,755.3 9,457.6

Total Shareholders funds 7,813.4 8,394.4 8,943.3 9,645.5

Total Debt 100.0 100.0 100.0 100.0

Other Liabilities 822.3 822.5 822.5 822.5

Total Liabilities 8,735.7 9,316.9 9,865.7 10,568.0

Assets

Gross Block 9,215.5 10,890.5 11,990.5 13,140.5

Less: Acc Depreciation 4,590.5 5,203.8 5,901.6 6,668.1

Net Block 4,625.0 5,686.7 6,088.9 6,472.4

Capital WIP 1,749.8 1,349.8 1,049.8 1,049.8

Total Fixed Assets 6,374.8 7,036.5 7,138.7 7,522.2

Investments+Goodwill 2,152.9 2,162.9 2,162.9 2,162.9

Inventory 1,122.3 1,301.6 1,339.8 1,461.6

Debtors 397.2 354.6 438.9 429.4

Loans and Advances 1,528.6 1,750.5 1,957.6 2,100.0

Other Current Assets 19.5 32.5 22.4 37.6

Cash 505.8 395.1 256.7 360.0

Total Current Assets 3,573.4 3,834.3 4,015.3 4,388.7

Creditors 2,195.5 2,424.8 2,316.2 2,352.9

Provisions 1,169.8 1,292.0 1,134.9 1,152.9

Total Current Liabilities 3,365.3 3,716.8 3,451.1 3,505.8

Net Current Assets 208.0 117.5 564.2 882.9

Application of Funds 8,735.7 9,316.9 9,865.7 10,568.0


Key ratios (Year-end March) CY13 CY14E CY15E CY16E

Per share data (|)

EPS 58.2 56.5 63.1 71.3

Cash EPS 89.3 89.1 100.3 112.1

BV 415.7 446.7 476.0 513.3

DPS 30.0 29.0 29.0 29.0

Cash Per Share 26.9 21.0 13.7 19.2

Operating Ratios (%)

EBITDA Margin 12.6 12.4 13.7 13.8

PAT Margin 10.0 9.1 9.6 9.9

Inventory days 37.8 37.8 39.0 37.8

Debtor days 11.7 11.7 11.7 11.7

Creditor days 73.2 72.0 70.0 63.0

Return Ratios (%)

RoE 14.0 12.6 13.3 13.9

RoCE 9.9 9.9 10.9 11.3

RoIC 32.5 17.7 15.2 15.2

Valuation Ratios (x)

P/E 25.8 26.5 23.8 21.0

EV / EBITDA 18.8 17.8 15.4 13.8

EV / Net Sales 2.4 2.2 2.1 1.9

Market Cap / Sales 2.6 2.4 2.3 2.1

Price to Book Value 3.6 3.4 3.2 2.9

Solvency Ratios

Debt/EBITDA 0.1 0.1 0.1 0.1

Debt / Equity 0.0 0.0 0.0 0.0

Current Ratio 1.1 1.0 1.2 1.3

Quick Ratio 0.9 0.9 1.1 1.1



ICICIdirect.com coverage universe (Cement)

CMP M Cap(|) TP(|) Rating (| Cr) FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E

ACC* 1500 1,635 HOLD 28,185 18.8 17.8 15.4 13.8 140 140 129 129 9.9 9.9 10.9 11.3 14.0 12.6 13.3 13.9Ambuja Cement* 227 225 HOLD 34,782 19.5 15.6 14.6 10.9 164 154 151 149 11.4 8.1 8.0 9.3 13.6 9.2 9.1 10.1UltraTech Cem 2548 3,180 BUY 68,002 18.9 16.4 12.4 9.4 202 183 163 148 11.9 12.3 14.9 18.1 12.5 12.9 14.9 16.6Shree Cement^ 9090 8,600 HOLD 30,165 22.3 17.6 13.5 11.6 259 237 193 183 13.0 14.0 16.7 16.7 16.7 16.8 18.9 17.5Heidelberg Cem* 88 105 BUY 1,994 37.5 11.9 9.7 6.7 100 89 89 84 -0.5 6.0 7.8 12.1 -4.9 7.5 7.1 12.7India Cement 111 141 BUY 3,195 11.1 8.1 6.4 5.4 71 65 63 58 3.9 6.4 8.3 9.1 -0.9 1.2 4.0 5.1JK Cement 604 660 BUY 3,916 5.5 7.8 11.1 15.3 120 85 85 78 5.2 7.4 9.9 15.1 5.2 7.4 9.9 15.1JK Lakshmi Cem 367 423 BUY 4,202 17.5 12.1 9.1 6.2 132 94 85 77 6.1 8.7 11.6 15.4 7.1 10.4 14.8 18.1Mangalam Cem 278 322 BUY 700 21.7 6.7 5.6 3.7 51 50 52 49 2.1 11.7 14.6 20.7 5.8 9.5 13.4 18.7

RoE (%)RoCE (%)EV/Tonne ($)EV/EBITDA (x)Company



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In-line performance; cost pressure to · PDF fileMT of cement. At the same time, ACC plans to...

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