November 2, 2017 Ramco Cement (RAMCEM) |...

November 2, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Higher sales in east drive growth…

Ramco’s results were better than our expectations. Revenues increased

4.9% YoY to | 1,066.4 crore (above I-direct estimate of | 1,033.7 crore)

led by 6.0% YoY increase in volumes due to higher sales in eastern

region. However, realisation declined 1.0% YoY | 4,956 (vs I-direct

estimate of | 4,896)

EBITDA margin declined 648 bps YoY to 28.3% due to increase in

power & fuel cost (up 43.4% YoY) and increase in freight cost (up 17.5%

YoY). The company has reversed | 7.7 crore of provision made towards

district mineral fund. Adjusting for the same, the EBITDA margin was at

27.6% (in line with our estimate of 27.7%). EBITDA/t was at | 1,401/t (vs

I-direct estimate of |1,358/t)

Ramco operating markets (south, east) key beneficiary of affordable housing

Out of the overall infra spend, affordable housing has remained a key focus

of the government due to its positive multiplier impact. Out of 1.2 crore

affordable houses to be built by Government of India in FY18E-19E, ~40% of

these houses (48 lakh) has been allotted in Ramco’s operating markets. This,

coupled with higher budgetary allocation towards roads & irrigation by states

and central government in which Ramco has a major presence, is expected

to drive cement demand in the next three years. We expect Ramco’s

operating markets to grow at 7-8% CAGR in the next three to four years.

East the next growth frontier…

Ramco has adopted a strategy of gradually ramping up its presence in the

eastern region. The company has over the years penetrated the West

Bengal, Odisha market. It plans to further penetrate the east through capacity

expansion. Of the 3 MT capacity expansion planned by the company, 2 MT

will be in the east (1 MT each in West Bengal, Odisha) while 1 MT will be set

up in the south (in Andhra Pradesh). The capacity expansion in the east will

enable the company to remove capacity constraint and also increase its

market share. Apart from expansion in the east, the capacity expansion in AP

(south) will enable it to tap the growing opportunity of this market (that is

expected to grow at 14% CAGR in the next two or three years).

Healthy cash flow generation to keep balance sheet light!

During the downturn in the south in FY10-15, efficient management of cash

flows has enabled the company to reduce debt-equity from 1.6x to 1.0x in

FY15 and further to 0.4x in FY17. Going forward, we believe the company’s

robust cash flow generation (~| 3,500 crore in FY17-20E) will not only

enable to fund its capex through internal accruals but also reduce its debt-

equity further to 0.2x.

Well poised to capture upcoming growth; maintain BUY

Ramco is the second largest cement player in the south in terms of capacity.

The company enjoys strong brand recognition in Tamil Nadu and Kerala

compared to other leading brands. The entire southern region is expected to

grow 8.0% in coming years mainly led by higher government spending on

low cost housing, irrigation and other infra projects. Considering this,

coupled with capacity expansion we expect revenues to grow at a CAGR of

12.4 % in FY17-20E. Further, we expect the EBITDA margin to improve from

FY18E onwards mainly led by stabilisation of power costs and freight costs

on commissioning of grinding units. Considering the capacity expansion,

better leverage (D/E: 0.2x) and cost efficiency, Ramco is currently trading at

attractive valuations. Hence, we maintain our BUY rating on the stock and an

SOTP based target price of | 822 (i.e. 13x FY20E EV/EBITDA).

Ramco Cement (RAMCEM) | 718

Rating matrix

Rating : Buy

Target : | 822

Target Period : 9-12 months

Potential Upside : 15%

What’s changed?

Target Price

EPS FY18E

EPS FY19E

EPS FY20E

Rating

Unchanged

Changed from | 25.5 to | 26.3


Unchanged


Quarterly performance

Q2FY18 Q2FY17 YoY (%) Q1FY18 QoQ (%)

Revenue 1,066.4 1,016.3 4.9 1,028.8 3.7

EBITDA 301.5 353.2 -14.6 290.4 3.8

EBITDA (%) 28.3 34.8 -648 bps 28.2 4 bps

PAT 168.5 207.0 -18.6 155.8 8.2

Key financials

FY17 FY18E FY19E FY20E

Net Sales 3949.5 4330.4 4875.8 5605.8

EBITDA 1176.4 1171.3 1333.0 1556.7

Net Profit 649.3 621.7 712.3 877.5

EPS (|) 27.3 26.3 30.2 37.2

Valuation summary

(x) FY17 FY18E FY19E FY20E

P/E 26.3 27.3 23.7 19.3

Target P/E 30.2 31.3 27.2 22.1

EV/EBITDA 15.6 15.9 13.8 11.4

EV/Tonne (US$) 185.7 187.8 174.9 152.0

P/BV 4.6 4.2 3.7 3.2

RoNW (%) 17.4 15.3 15.6 16.8

RoCE (%) 12.7 11.1 11.8 13.6

Stock data

Particulars Amount (| crore)

Market Capitalisation 17093.9

Total Debt (FY17) 1424.8

Cash (FY17) 144.6

EV 18374.1

52 week H/L (|) 765/479

Equity Capital 23.6

Face Value (|) 1.0

Price performance

1M 3M 6M 12M

ACC 9.2 4.4 11.2 19.2

Ambuja Cement 5.6 7.0 14.5 17.2

Shree Cement 1.9 1.8 -1.3 12.8

UltraTech Cement 14.2 8.5 3.6 11.0

Ramco Cement 4.1 6.2 4.9 13.6

Research Analyst

Rashesh Shah

[email protected]

Devang Bhatt

[email protected]

mailto:[email protected]


Variance analysis

Q2FY18 Q2FY18E Q2FY17 YoY (%) Q1FY18 QoQ (%) Comments

Net Sales 1,066.4 1,033.7 1,016.3 4.9 1,028.8 3.7 Healthy growth in volumes led to rise in revenues during the quarter.

Other income 7.2 5.4 5.4 34.4 5.2 38.0

Raw Material Expenses 113.5 123.3 118.6 -4.3 118.2 -4.0

The company has reversed | 7.7 crore of provision made towards district mineral

fund in the current quarter which we believe led to decline in RM expenses

Employee Expenses 79.3 75.6 70.0 13.3 74.9 5.9

Power and fuel 172.5 162.6 120.3 43.4 168.1 2.6

Higher pet coke prices and exhaustion of low cost pet coke inventory led to increase

in power and fuel cost

Freight 256.4 242.8 218.2 17.5 240.9 6.5

The rise in freight cost was mainly due to increase in diesel prices and higher lead

distance

Others 143.1 142.8 136.0 5.2 136.3 5.0

EBITDA 301.5 286.6 353.2 -14.6 290.4 3.8

EBITDA Margin (%) 28.3 27.7 34.8 -648 bps 28.2 4 bps The fall in EBITDA margins was mainly due to increase in freight and power cost

Interest 17.3 28.1 28.2 -38.7 15.5 11.8

Depreciation 71.8 71.7 66.7 7.7 72.0 -0.3

PBT 219.7 192.2 263.7 -16.7 208.2 5.5

Total Tax 51.2 48.0 56.7 -9.8 52.4 -2.4

Reported PAT 168.5 144.1 207.0 -18.6 155.8 8.2

Adjusted PAT 168.5 144.1 207.0 -18.6 155.8 8.2 Lower operating profit and higher depreciation expenses led to fall in PAT

Key Metrics

Volume (MT) 2.15 2.11 2.03 6.0 2.15 0.1 Higher sales in the east led to increase in volumes in the quarter

Realisation (|) 4,956 4,896 5,006 -1.0 4,785 3.6 Decline in prices in the south led to lower realisation

EBITDA per Tonne (|) 1,401 1,358 1,740 -19.5 1,351 3.7 The fall in EBITDA/t was mainly led by higher power & fuel cost/t and freight cost/t

Source: Company, ICICIdirect.com Research

Change in estimates

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

Revenue 4,307.1 4,330.4 0.5 4,851.4 4,875.8 0.5 5,574.9 5,605.8 0.6

We expect revenues to increase at a CAGR of 12.4% over FY17-

20E mainly led by capacity expansion and increased penetration in

the east

EBITDA 1,165.1 1,171.3 0.5 1,326.2 1,333.0 0.5 1,548.4 1,556.7 0.5

EBITDA Margin (%) 27.1 27.0 0 bps 27.3 27.3 0 bps 27.8 27.8 0 bps

We expect EBITDA margin to improve led by stabilisation of power

cost and rationalisation of freight cost

PAT 602.3 621.7 3.2 697.6 712.3 2.1 870.3 877.5 0.8

EPS (|) 25.5 26.3 3.2 29.6 30.2 2.1 36.9 37.2 0.9

FY18E FY19E FY20E


Assumptions

Comments

FY16 FY17 FY18E FY19E FY20E FY18E FY19E FY20E

Volume (MT) 7.2 8.3 9.0 9.9 11.2 9.0 9.9 11.1

Higher government spending and revival in rural economy to

drive volumes over the next three years

Realisation (|) 4,940 4,753 4,814 4,903 5,011 4,809 4,900 5,005

EBITDA per Tonne (|) 1,482 1,416 1,302 1,341 1,392 1,301 1,339 1,390

We expect company to maintain EBITDA/t of above | 1300 over

next 3 years

EarlierCurrent



Company Analysis

Operating markets key beneficiary of increased infra spends…

Out of total 1.2 crore affordable houses to be built by Government of India

over FY18E-19E, ~40% of these houses (48 lakh) has been allotted in

Ramco’s operating markets. This, coupled with higher budgetary allocation

towards roads and irrigation by states and central government in which

Ramco has a major presence, is expected to drive cement demand in the

next three years. We expect Ramco’s operating markets to grow at a CAGR

of 7-8% over the next three to four years.

Cement demand in south to outpace capacity expansion…

New capacity expansion in the southern region in FY14-17 slowed down to

10 MT vs. about 27 MT in the preceding four years. Going forward, we

expect capacity expansion to further slow down to ~8 MT in FY17-20E.

Hence, supply pressure from new players/capacity should remain low.

Further, with an improvement in demand led by infra projects and individual

house builders, we expect demand (22 MT) to outpace supply (8 MT)

positively impacting utilisation levels. We expect utilisation to improve from

58% in FY17 to 69% in FY20E thereby positively impacting margins levels.

Ramco enjoys premium positioning in southern markets…


Further, it is one of the oldest cement players in southern India and is

considered a Tier-I cement brand. The company enjoys strong brand

recognition among IHB customers due to its reach in the rural interiors of

Tamil Nadu and Kerala compared to other leading brands. While the

company’s brand is a premium one in Tamil Nadu, Kerala and Karnataka, it

falls in the tier-II bracket in Andhra Pradesh.

Exhibit 1: Capacity of major players in south

20.5

15.514.2 14.2

9.4

0

5

10

15

20

25

Ultratech Ramco India Cement Chettinad Cement ACC

Capacity (in mt)


Operational efficiency enables company to maintain cost discipline

Ramco has been one of the most cost effective players in the industry.

Despite lower capacity utilisation, the company has been able to maintain its

cost at a lower level compared to most of its peers. The company has

gradually shifted from coal usage to pet coke, which avoids uncertainty

about coal availability. Ramco now uses 100% pet coke. As a result, fuel

consumption has reduced gradually. The company has 175 MW of captive

thermal power plants, which makes it self sufficient in terms of power

requirement for its existing capacity. The company’s power requirement per

tonne of cement is as low as ~75 units vis-à-vis industry average of ~80-85

units. Apart from lower power cost compared to industry the company’s

other costs are also lower compared to its peers.


…Capacity expansion from 16.5 MT to 19.5 MT to further boost growth

The company plans to expand its capacity to 19.5 MT from the current 16.5

MT. Of the 3 MT capacity expansion, 2 MT capacity will be in the East (1 MT

each in West Bengal and Odisha) and 1 MT in the south (in Andhra Pradesh).

These projects are expected to be commissioned within 18 months. The

total cost of expansion is expected to be | 1,095 crore.

Commissioning of grinding unit in east to remove capacity constraint and

further rationalise freight cost

Since its West Bengal (WB) capacity is fully utilised, Ramco plans to expand

it further to 2 MT from the current 1 MT. We believe this will help gain further

market share and also consolidate its position in the West Bengal market.

The company will also commission a new grinding unit at Odisha of 1 MT,

which will help rationalise freight cost. Currently, Ramco is supplying cement

to Odisha via the sea route. The commissioning of the new grinding unit will

enable the company to supply clinker to Odisha via the sea route.

Capacity expansion in Andhra Pradesh to help tap growing market

Apart from expansion in the east, the company aims to tap the growing

opportunity in the Andhra Pradesh market (a key growth driver in the

southern market). It will increase its existing grinding unit capacity at Vizag,

Andhra Pradesh from ~1.0 MT to 2.0 MT.

Exhibit 2: Historical capacity addition trend

10.5 10.5 10.5

12.5 12.5 12.5 12.5 12.5

2.0 2.0 2.03.1 3.1

4.0 4.0 4.0

12.4 12.4 12.4

15.5 15.516.5 16.5 16.5

0.0

5.0

10.0

15.0

20.0

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Intergrated unit Grinding unit Total

Source: Company, ICICIdirect.com, Research

Exhibit 3: Future capacity additions

Integrated unit FY17 FY18E FY19E FY20E

RR Nagar, Tamil Nadu 2.0 2.0 2.0 2.0

Alathiyur, Tamil Nadu 3.1 3.1 3.1 3.1

Ariyalur, Tamil Nadu 3.5 3.5 3.5 3.5

Chitradurga, Karnataka 0.3 0.3 0.3 0.3

Jayanthipuram, Andhra Pradesh 3.7 3.7 3.7 3.7

Total [A] 12.5 12.5 12.5 12.5

Grinding Unit

Uthiramerur, Tamil Nadu 0.5 0.5 0.5 0.5

Salem, Tamil Nadu 1.6 1.6 1.6 1.6

Kolaghat, West Bengal 1.0 1.0 1.5 2.0

Vizag, Andhra Pradesh 1.0 1.0 1.5 2.0

Odisha Grinding Unit 1.0

Total [B] 4.0 4.0 5.0 7.1

Total Capacity [A+B] 16.5 16.5 17.5 19.5


Exhibit 4: Pre-expansion capacity mix

Tamil Nadu

64%Karnataka

2%

Andhra Pradesh

28%

West Bengal

6%


Exhibit 5: Post-expansion capacity mix

Tamil Nadu

55%

Karnataka

1%

Andhra Pradesh

29%

West Bengal

10%

Odisha

5%



Expect revenue CAGR of 12.4% during FY17-19E

Ramco’s revenues have grown at a modest pace of CAGR 2.4% in FY14-17

mainly due to weak market condition in the south and lower utilisation in the

east. However, in FY17, revenues increased 10.5% YoY due to a pick-up in

cement demand and increased market share in the eastern region. Going

forward, we expect revenues to increase at a CAGR of 12.4% in FY17-20E

mainly led by capacity expansion, revival in the rural economy and increased

government spending.

Exhibit 6: Revenues to increase 12.2% CAGR over FY17-20E

3949.5

4330.4

4875.8

5605.8

500.0

1500.0

2500.0

3500.0

4500.0

5500.0

6500.0



Exhibit 7: Capacity details

Particulars Year Cement Capacity

Opening FY17 16.5

Addition Q3FY19 1.0

Addition Q1FY20 2.0

Total 19.5


Exhibit 8: Volume to increase at CAGR of 10.4% over FY17-20E

11.2

9.9

9.0

8.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0



Exhibit 9: Realisation to increase at CAGR of 1.8% over FY17-20E

5011

4903

4814

4753

4600

4650

4700

4750

4800

4850

4900

4950

5000

5050



Exhibit 10: Volumes in Q2FY18 increased by 6.0% YoY

2.22.22.3

2.02.02.12.1

1.6

0.0

0.5

1.0

1.5

2.0

2.5

Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18


Exhibit 11: Realisation in Q2FY18 declined by 1.0% YoY

4956

4785

4507

4746

5006

46684649

5016

4200

4300

4400

4500

4600

4700

4800

4900

5000

5100

Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18



Margins to improve from FY18E onwards

A sharp rise in petcoke prices and higher lead distance would impact the

EBITDA margin in FY18E. However, we expect the EBITDA margin to

improve from FY18E onwards mainly led by stabilisation of power costs and

freight costs on commissioning of grinding units.

Exhibit 12: EBITDA margin

29.8

27.027.3

27.8

25.0

26.0

27.0

28.0

29.0

30.0

31.0



Exhibit 13: Quarterly EBITDA margin trend

23.8

30.7

34.8

29.2 28.3

24.6

28.232.5

30.8

33.2

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18


PAT to grow at 10.6% CAGR in FY17-20E…

Going forward, we expect the bottomline to grow at 10.6% CAGR to

| 877.5 crore in FY17-20E on the back of robust topline growth. Further, over

FY18E-20E we expect PAT to increase at a CAGR of 18.8% on the back of an

improving operating performance and lower interest expenses.

Exhibit 14: Profitability trend

649.3621.7

712.3

877.5

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1000.0




Outlook and valuation


The company enjoys strong brand recognition in Tamil Nadu and Kerala

compared to other leading brands. The entire southern region is expected to

grow 8.0% in coming years mainly led by higher government spending on

low cost housing, irrigation and other infra projects. Considering this,

coupled with capacity expansion we expect revenues to grow at a CAGR of

12.4% in FY17-20E. Further, we expect the EBITDA margin to improve from

FY18E onwards mainly led by stabilisation of power costs and freight costs

on commissioning of grinding units. Considering the capacity expansion,

better leverage (D/E: 0.2x) and cost efficiency, Ramco is currently trading at

attractive valuations. Hence we maintain our BUY rating on the stock and an

SOTP based target price of | 822 (i.e. 13x FY20E EV/EBITDA).

Exhibit 15: One year forward EV/tonne

0

1000

2000

3000

4000

5000

Sep-10

Mar-11

Sep-11

Mar-12

Sep-12

Mar-13

Sep-13

Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Million $

EV $240 $200 $175 $125 $80


Exhibit 16: One year forward EV/EBITDA

1000.0

5000.0

9000.0

13000.0

17000.0

21000.0

25000.0

Sep-10

Mar-11

Sep-11

Mar-12

Sep-12

Mar-13

Sep-13

Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

EV 18.0x 15.0x 12.0x 10.0x 8.0x 6.0x


Exhibit 17: Valuation

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

(| cr) (%) (|) (%) (US$) (x) (%) (%)

FY16 3,573.26 -2.0 22.8 127.7 193.1 17.8 17.5 12.2

FY17 3,949.54 10.5 27.3 19.8 185.7 15.6 17.4 12.7

FY18E 4,330.43 9.6 26.3 -3.7 187.8 15.9 15.3 11.1

FY19E 4,875.84 12.6 30.2 15.1 174.9 13.8 15.6 11.8

FY20E 5,605.78 15.0 37.2 23.2 152.0 11.4 16.8 13.6



Recommendation history vs consensus estimate

100

200

300

400

500

600

700

800

900

1,000

Oct-17Aug-17Jun-17Mar-17Jan-17Oct-16Aug-16Jun-16Mar-16Jan-16

(|

)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

(%

)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research, * Initiated coverage on 23 October 2017

Key events

Date Event

May-09 Ramco sets up 1 MT grinding unit in in Kanchipuram district, Tamil Nadu

May-09 The company sets up 1.6 MT grinding unit in Salem, Tamil Nadu

Feb-10 The company commisions 1 MT grinding unit in Kolaghat, West Bengal

Mar-12 Increased the capacity at Ariyalur, Tamil Nadu by 1.5 MT taking the total capacity of the plant to 3.5 MT

Mar-15 1 MT grinding unit started in Vizag, Andhra Pradesh


Top 10 Shareholders Shareholding Pattern

Rank Name Last filing date % O/S Position (m) Change (m)

1 Ramco Group 30-Sep-17 34.9 82.2 0.00

2 Government of Tamil Nadu 30-Sep-17 3.40 8.00 0.00

3 Aberdeen Asset Management (Asia) Ltd. 31-Aug-17 2.74 6.45 0.00

4 Kotak Mahindra Asset Management Company Ltd. 30-Sep-17 2.72 6.41 0.29

5 L&T Investment Management Limited 30-Sep-17 2.36 5.57 0.49

6 Sri Vishnu Shankar Mill Ltd 30-Sep-17 1.65 3.88 0.00

7 Ramaraju Surgical Cotton Mills, Ltd. 30-Sep-17 1.54 3.62 0.00

8 Sundaram Asset Management Company Limited 30-Sep-17 1.52 3.58 (0.00)

9 Shamyak Investment Pvt. Ltd. 30-Jun-17 1.51 3.55 3.55

10 The New India Assurance Co. Ltd. 30-Sep-17 1.46 3.43 0.10

(in %) Sep-16 Dec-16 Mar-17 Jun-17 Sep-17

Promoter 42.30 42.30 42.30 42.67 42.75

FII 15.47 14.44 14.52 14.53 14.83

DII 18.07 18.31 18.88 18.48 18.01

Others 24.16 24.95 24.30 24.32 24.41

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor Name Value Shares Investor Name Value Shares

Shamyak Investment Pvt. Ltd. 38.18 3.55 Tata Asset Management Limited -3.17 -0.30

Invesco Hong Kong Limited 6.02 0.56 J.P. Morgan Asset Management (Hong Kong) Ltd. -1.92 -0.18

Raja (Venketrama P R) 5.37 0.51 Invesco Asset Management (India) Private Limited -1.91 -0.18

Sudarsanam (R) 5.37 0.51 Motilal Oswal Asset Management Company Ltd. -1.17 -0.11

L&T Investment Management Limited 5.22 0.49 Amundi Asset Management Singapore Ltd. -1.07 -0.10

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore

(Year-end March) FY17 FY18E FY19E FY20E

Total operating Income 3,949.5 4,330.4 4,875.8 5,605.8

Growth (%) 10.5 9.6 12.6 15.0

Raw material cost 515.0 523.1 590.9 699.2

Employee Expenses 277.7 303.6 331.0 380.6

Power, Oil & Fuel 518.5 713.9 791.1 894.9

Freight cost 909.9 1031.7 1196.8 1346.3

Other Expenses 552.1 586.8 633.1 728.0

Total Operating Exp. 2,773.1 3,159.2 3,542.8 4,049.1

EBITDA 1,176.4 1,171.3 1,333.0 1,556.7

Growth (%) 9.8 -0.4 13.8 16.8

Depreciation 265.5 286.7 326.3 345.1

Interest 103.5 99.7 97.3 81.9

Other Income 42.8 39.5 40.3 40.3

Exceptional items 0.0 0.0 0.0 0.0

PBT 850.1 824.3 949.7 1,170.0

Total Tax 200.9 202.7 237.4 292.5

PAT 649.3 621.7 712.3 877.5

Adjusted PAT 649.3 621.7 712.3 877.5

Growth (%) 19.8 -4.3 14.6 23.2

EPS (|) 27.3 26.3 30.2 37.2


Cash flow statement | Crore


Profit after Tax 649.3 621.7 712.3 877.5

Add: Depreciation 265.5 286.7 326.3 345.1

(Inc)/dec in Current Assets -58.8 -125.3 -179.6 -240.3

Inc/(dec) in CL and Provisions 146.6 105.6 151.9 203.5

CF from operating activities 1,085.0 1,009.7 1,150.2 1,337.6

(Inc)/dec in investment 25.4 39.5 40.3 40.3

(Inc)/dec in Fixed Assets -280.2 -850.0 -650.0 -500.0

CF from investing activities -254.7 -810.5 -609.7 -459.7

Issue/(Buy back) of Equity -1.2 -167.7 0.0 0.0

Inc/(dec) in loan funds -698.2 196.2 -255.5 -583.0

Dividend paid & dividend tax 0.0 -142.8 -213.0 -212.0

Interest paid -103.5 -99.7 -97.3 -81.9

CF from financing activities -803.0 -214.0 -565.7 -876.9

Net Cash flow 27.3 -14.8 -25.2 0.9

Opening Cash 90.8 118.1 103.2 78.0

Closing Cash 118.1 103.2 78.0 78.9


Balance sheet | Crore


Liabilities

Equity Capital 23.8 23.6 23.6 23.6

Reserve and Surplus 3,717.7 4,029.1 4,528.4 5,193.8

Total Shareholders funds 3,741.5 4,052.6 4,551.9 5,217.4

Total Debt 1,424.8 1,621.0 1,365.6 782.6

Deferred Tax Liability 728.1 801.1 902.0 1,037.1

Non Current Liabilities 15.1 15.8 16.4 17.1

Total Liabilities 5,909.6 6,490.6 6,835.9 7,054.1

Assets

Gross Block 7,802.1 8,172.4 8,672.4 9,922.4

Less: Acc Depreciation 2,859.7 3,146.4 3,472.7 3,817.8

Net Block 4,942.4 5,026.0 5,199.7 6,104.6

Capital WIP 120.3 600.0 750.0 0.0

Total Fixed Assets 5,062.6 5,626.0 5,949.7 6,104.6

Investments 389.0 389.0 389.0 389.0

Inventory 575.4 631.2 710.7 817.1

Debtors 554.9 608.4 685.0 787.6

Loans and Advances 27.3 30.3 34.1 39.2

Other Current Assets 281.6 307.5 346.2 398.0

Cash 118.1 103.2 78.0 78.9

Total Current Assets 1,557.3 1,680.6 1,854.0 2,120.8

Creditors 255.8 280.0 315.3 362.5

Other Current Liability 843.6 924.9 1,041.5 1,197.8

Total Current Liabilities 1,099.4 1,204.9 1,356.8 1,560.2

Net Current Assets 458.0 475.7 497.3 560.6

Application of Funds 5,909.6 6,490.6 6,835.9 7,054.1


Key ratios


Per share data (|)

Adjusted EPS 27.3 26.3 30.2 37.2

Cash EPS 38.4 38.4 44.1 51.9

BV 157.2 171.3 193.2 221.4

DPS 0.0 6.0 9.0 9.0

Cash Per Share 5.0 4.4 3.3 3.3

Operating Ratios (%)

EBITDA Margin 29.8 27.0 27.3 27.8

PAT Margin 16.4 14.4 14.6 15.7

Inventory days 53.2 53.2 53.2 53.2

Debtor days 51.3 51.3 51.3 51.3

Creditor days 23.6 23.6 23.6 23.6

Return Ratios (%)

RoE 17.4 15.3 15.6 16.8

RoCE 12.7 11.1 11.8 13.6

RoIC 12.6 11.8 12.9 13.2

Valuation Ratios (x)

P/E 26.3 27.3 23.7 19.3

EV / EBITDA 15.6 15.9 13.8 11.4

EV / Net Sales 4.7 4.3 3.8 3.2

Market Cap / Sales 4.3 3.9 3.5 3.0

Price to Book Value 4.6 4.2 3.7 3.2

Solvency Ratios

Debt/EBITDA 1.2 1.4 1.0 0.5

Debt / Equity 0.4 0.4 0.3 0.2

Current Ratio 1.3 1.3 1.3 1.3

Quick Ratio 0.8 0.8 0.8 0.8



ICICIdirect.com coverage universe (Cement)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

ACC* 1,799 2100 Buy 33,810 40.2 60.3 71.1 24.3 18.0 15.1 174 151 150 11.3 16.1 17.2 8.7 12.0 12.9

Ambuja Cement* 280 315 Buy 55,598 5.0 6.3 7.2 23.5 18.8 15.9 197 183 182 4.0 7.0 8.1 5.2 6.4 7.0

UltraTech Cem 4,372 4750 Buy 119,968 96.3 97.0 136.0 23.9 21.9 16.0 276 241 231 12.4 10.2 13.4 11.1 10.4 13.2

Shree Cement 19,128 19700 Hold 66,565 384.8 442.6 576.3 27.1 23.7 17.7 388 374 300 12.3 14.1 16.9 17.4 16.9 18.4

Heidelberg Cem 154 165 Hold 3,490 3.4 5.2 7.2 17.4 13.7 11.4 134 129 125 8.2 11.5 14.7 7.9 11.4 14.9

India Cement 189 232 Buy 5,806 5.4 7.8 10.1 10.1 8.9 8.4 94 91 88 7.5 8.3 8.7 3.3 4.5 5.6

JK Cement 1,007 1265 Buy 7,028 37.1 44.7 53.3 14.4 12.3 10.6 128 118 116 12.6 13.9 15.7 14.5 14.4 15.1

JK Lakshmi Cem 440 495 Hold 5,179 7.0 9.6 20.0 18.5 14.5 10.2 97 87 80 7.5 9.5 14.1 5.9 7.7 13.8

Mangalam Cem 393 425 Buy 1,049 12.9 11.7 38.2 12.4 11.4 6.0 59 55 53 10.2 10.3 20.0 6.8 5.9 16.3

Star Cement 117 135 Hold 5,393 4.1 6.2 5.7 14.8 11.1 11.1 234 228 212 13.8 18.3 16.8 14.0 18.1 14.8

Ramco Cement718 822 Buy 17,094 27.3 26.3 30.2 15.6 15.9 13.8 185.7 187.8 174.9 12.7 11.1 11.8 17.4 15.3 15.6

RoCE (%) RoE (%)

Company

EV/Tonne ($)EV/EBITDA (x)EPS (|)

*CY16, CY17E CY18E



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