UltraTech Cement (ULTCEM) | 4,408

January 19, 2018

ICICI Securities Ltd | Retail Equity Research

Result Update

One offs in Jaypee, petcoke dent margins…

UltraTech Cement’s results were below our estimates. Revenues

increased 35.3% YoY to | 7,589.9 crore (vs. I-direct estimate of | 7,057.3

crore) mainly led by 33.2% YoY increase in volumes to 15.1 MT (above

I-direct estimate of 14.1 MT) and 1.6% YoY increase in realisation to

| 5,026/t (vs. I-direct estimate of | 4,994/t)

Jaypee’s assets in Q3FY18 operated at 51% utilisation (exit utilisation

was at 60%) implying the company’s organic volume growth would

have been ~14% due to low base last year and improving demand

EBITDA margin declined 313 bps YoY to 16.7% (below I-direct estimate

of 20.6%) mainly due to higher power & fuel cost (up 55.8% YoY) and

freight expenses (up 37.0% YoY). EBITDA/t declined 14.4% YoY to

| 840/t (vs. I-direct estimate of | 1,029/t)

Capacity expansion to keep UltraTech ahead of its peers…

Considering the government’s focus on infrastructure development and the

impending election we expect budgetary allocation to infra projects to

increase in the coming year. Further, a pick-up in housing on the back of

healthy demand from first home buyers, better monsoons and a revival in

rural economy are expected to play a key role in driving cement demand in

the next few years. As a result, we expect cement demand to reach 306 MT

by FY19E (i.e. at CAGR of 7.5%) vs. (CAGR of 4.4% over the last five years)

resulting in improving utilisation to 71% by FY19E from 63% in FY17. Out of

total 35 MT capacity expansions by cement industry by FY19, 11 MT will be

added by UltraTech. Hence, UltraTech will continue to have a substantial

market share in the industry. This will enable it to not only capture the rising

demand but also help maintain its market leadership.

Despite cost pressures, operating efficiencies to drive margins

Over the past year, power cost has increased more than 30%. However,

UltraTech has been able to mitigate the rising power cost by increasing the

share of waste heat recovery (WHR) plant (8% of total capacity) with a

reduction in power consumption on a per tonne basis. Going forward, the

company is planning to further increase its WHR capacity by 26 MW and

increase the use of alternative fuel to 5% from 3%. Apart from this,

UltraTech has set up various grinding units, which will help reduce freight

cost. Further, improving realisation (led by improving capacity utilisation) is

expected to drive EBITDA margins in coming years.

Synergy benefits from Jaypee acquisition to materialise in long term

The consolidation of 21.2 MT cement assets of Jaiprakash Associates

(Jaypee) will take the company’s total capacity to ~96 MT. This will enable

the company to further strengthen its leadership in India, going forward, with

a market share of over ~22% and become the fourth largest player globally.

We believe the transaction will be cash break even by Q1FY19 and will be

EPS accretive by Q1FY20E.

Key beneficiary of cyclical upturn in cement demand; maintain BUY!

We believe the industry’s capacity utilisation has bottomed at ~63% in FY17.

Going forward, with the government taking measures to boost infrastructure

development, slowdown in capacity addition and consolidation in the

industry we expect utilisation to improve significantly (71% by FY19E). In

addition, with rising utilisation we expect pricing to improve in coming years.

We believe UltraTech being a pan-India player will be a key beneficiary of the

same. Further, cost rationalisation is expected to keep UltraTech ahead of its

peers in terms of profitability. Hence, we maintain our BUY rating on the

stock with a target price of | 5,000/share (i.e. at 18.0x FY19E EV/EBITDA).

UltraTech Cement (ULTCEM) | 4,408

Rating matrix

Rating : Buy

Target : | 5000

Target Period : 9-12 months

Potential Upside : 13%

What’s changed?

Target Price Changed from |4,750 to |5,000

EPS FY18E Changed from | 97.0 to 93.9

EPS FY19E Changed from | 136 to |142.1

Rating Unchanged

Quarterly performance

Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)

Revenue 7,589.9 5,609.1 35.3 6,571.3 15.5

EBITDA 1,269.1 1,113.5 14.0 1,351.3 -6.1

EBITDA (%) 16.7 19.9 -313 bps 20.6 -384 bps

PAT 421.5 563.4 -25.2 431.2 -2.3

Key financials

| Crore FY16 FY17 FY18E FY19E

Net Sales 23708.8 23891.4 29755.6 36634.6

EBITDA 4626.6 4969.0 5837.3 8427.5

Net Profit 2370.2 2627.7 2577.6 3900.0

EPS (|) 86.4 95.8 93.9 142.1

Valuation summary

FY16 FY17 FY18E FY19E

PE (x) 51.0 46.0 46.9 31.0

EV to EBITDA (x) 26.9 24.1 23.2 15.9

EV/Tonne(US$) 306 279 243 233

Price to book (x) 5.8 5.1 4.8 4.3

RoNW (%) 11.3 11.1 10.1 13.7

RoCE (%) 11.7 12.4 9.5 14.1

Stock data

Amount

Mcap | 120956 crore

Consolidated Debt (FY17) | 20470 crore

Cash & Invest (FY17) | 8345 crore

EV | 133081 crore

52 week H/L | 4594 / | 3335

Equity cap | 274.2 crore

Face value | 10

Particular

Price performance

1M 3M 6M 12M

ACC 9.1 3.4 5.4 39.0

UltraTech Cement 5.4 13.5 7.6 36.1

Ramco Cement 11.3 14.3 10.6 30.0

Research Analyst

Rashesh Shah

[email protected]

Devang Bhatt

[email protected]

mailto:[email protected]


g with a target price of | 4,750/share (i.e. at 17.5x FY19E EV/EBITDA).

Variance analysis

Q3FY18 Q3FY18E Q3FY17 YoY (%) Q2FY18 QoQ (%) Comments

Net Sales 7,589.9 7,057.3 5,609.1 35.3 6,571.3 15.5 Increase in volumes (up 33% YoY) led to 35% YoY rise in revenues

Other Incomes 155.6 106.7 97.0 60.4 168.0 -7.4 Reversal of District Mineral Fund of | 103 crore led to higher other income

Raw Material Expenses 1,331.0 984.9 923.6 44.1 915.3 45.4 The rise in RM cost was mainly led by higher slag prices and higher additive usage

Employee Expenses 462.8 443.7 364.7 26.9 444.0 4.3

Power and fuel 1,509.3 1,506.1 968.9 55.8 1,334.8 13.1

The increase in power & fuel cost was mainly due to higher pet coke prices (up 33%

YoY to US$104/t driven by pet coke ban and hike in import duty on pet coke) and

substitution of pet coke with imported coal

Freight 1,863.4 1,697.7 1,360.6 37.0 1,555.3 19.8

Rise in diesel prices (up 5% YoY) and changes in sales pattern (from ex-works to

FOR post-GST) led to higher freight cost during the quarter

Others 1,154.1 970.8 877.9 31.5 970.7 18.9

EBITDA 1,269.1 1,454.1 1,113.5 14.0 1,351.3 -6.1

EBITDA Margin (%) 16.7 20.6 19.9 -313 bps 20.6 -384 bps Increase in operating expenses dented margins

Depreciation 474.4 389.9 315.6 50.3 498.8 -4.9

Interest 347.2 375.9 129.3 168.5 375.9 -7.6

PBT 603.1 795.0 765.5 -21.2 644.7 -6.5

Total Tax 181.6 263.3 202.1 -10.1 213.5 -14.9

PAT 421.5 531.8 563.4 -25.2 431.2 -2.3 Rise in interest and depreciation expenses led to a decline in PAT

Key Metrics

Volume (MT) 15.10 14.13 11.34 33.2 13.14 14.9

Consolidation of Jaypee and 14% YoY increase in organic growth (due to low base

last year) led to higher volumes during the quarter

Realisation (|) 5,026 4,994 4,946 1.6 5,001 0.5 Healthy pricing in company's key markets helped in registering better realisation

EBITDA per Tonne (|) 840 1,029 982 -14.4 1,028 -18.3 EBITDA/t declined 14.4% YoY mainly led by higher power cost/t

Source: Company, ICICIdirect.com Research

Change in estimates

FY19E

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

Revenue 28,952.5 29,755.6 2.8 35,651.7 36,634.6 2.8

Improving macro demand and acquisition of Jaypee will drive

revenues over the next two years

EBITDA 6,148.4 5,837.3 -5.1 8,301.2 8,427.5 1.5

EBITDA Margin (%) 21.2 19.6 -162 bps 23.3 23.0 -28 bps

We believe operational efficiency and ramp up in Jaypee assets

will boost margins

PAT 2,660.7 2,577.6 -3.1 3,732.5 3,900.0 4.5

EPS (|) 97.0 93.9 -3.2 136.0 142.1 4.5

FY18E

Source: Company, ICICIdirect.com Research, * We have incorporated financials of Jaypee hence previous estimates are not comparable

Assumptions

Comments

FY14 FY15 FY16 FY17 FY18E FY19E FY18E FY19E

Volume (MT) 42.6 45.3 48.4 48.9 59.1 70.5 57.6 68.6

We expect volumes to increase at a CAGR of 20% over FY17-19E

led by Jaypee acquisition and higher infra spend

Realisation (|) 4,713 4,995 4,894 4,883 5,035 5,200 5,024 5,198

EBITDA per Tonne (|) 849 863 952 1,015 988 1,196 1,067 1,210

We expect EBITDA/t to improve to | 1,196/t in FY19E from |

1,015/t in FY17 mainly led by cost rationalisation

EarlierCurrent



Annual Report Analysis

The company’s domestic cement capacity during the year increased 2%

YoY to 66.3 MT. However, capacity utilisation declined from 76% to

72% mainly led by a miniscule increase in volumes (from 47.6 MT in

FY16 to 47.9 MT in FY17) and a higher capacity base

Going forward, the company intends to set up 3.5 MT capacity in Dhar,

Madhya Pradesh at a cost of | 2600 crore. The capacity is expected to

be operational by Q4FY19. Apart from organic growth, acquisition of

21.2 MT capacity of Jaiprakash Associate will take total domestic

capacity to ~93 MT enabling UltraTech to maintain its leadership

position

In FY17, the company undertook various cost saving measures that led

to 1.9% YoY decline in cost/tonne. In terms of power & fuel cost, the

company reported a decline of 8.3% YoY mainly due to an increase in

usage of petcoke (from 70% in FY16 to 74% in FY17), industrial waste,

and efficiency improvements. Besides petcoke, increase in share of

waste heat recovery to 7% of total power requirement of the company

led to reduced consumption of coal and petcoke (by ~0.25 MT). In

addition, logistic cost/t declined 2.5% YoY mainly led by a reduction in

the average lead distance, improved utilisation of new cement grinding

capacity, rationalisation of road freight rates and increased coastal

movement. However, employee cost increased 5.2% YoY due to annual

increments and commissioning of new plants

Finance cost during the year increased by | 59 crore to | 571 crore

mainly led by provision for interest on entry tax pertaining to earlier

years and lower benefit of interest subsidy due to the completion of the

government grant period

Cash from operations of the company increased 11.5% YoY mainly led

by higher margins and reduction in working capital requirement.

Inventory days of the company declined from 40 days to 36 days mainly

due to a reduction in inventory of stores and spares

During the year, the company incurred a capex of ~| 1,200 crore for

completion of new grinding capacity commissioned during the year and

meeting regulatory requirements, plant upkeep & improving efficiencies.

For FY18E, the company plans to incur capex of | 2,200 crore for

capacity expansion projects, regulatory requirements and plant

infrastructure

Exhibit 1: Fuel mix trend

Fuel mix FY12 FY13 FY14 FY15 FY16 FY17

Petcoke (%) 26 38 48 52 70 74

Imported coal (%) 44 35 26 26 20 14

Indigenous coal and others (%) 30 27 26 22 10 12

Total 100 100 100 100 100 100


Exhibit 2: Transport mix trend

Transport mix FY12 FY13 FY14 FY15 FY16 FY17

Rail (%) 36 34 34 29 28 25

Road (%) 61 63 63 67 69 72

Sea (%) 3 3 3 4 3 4

Total 100 100 100 100 100 100


WHRMS capacity and share

10.5

33.2

59 59

0

20

40

60

80

FY14 FY15 FY16 FY17

0

2

4

6

8

WHRMS capacity WHRMS share


Improving industry dynamics indicate long term up cycle in cement

Over FY08-17, utilisation in the cement sector witnessed a decline from 83%

in FY08 to 63% in FY17 mainly due to capacity addition (incremental supply

of 222 MT) outpacing demand (incremental demand of 101 MT). As a result,

industry capacity doubled from 198 MT in FY08 to 420 MT in FY17 vs.

demand, which increased from 164 MT in FY08 to 265 MT in FY17. However,

we expect the demand-supply balance to improve in the next few years with

slower pace of capacity addition and likely improvement in demand

positively impacting utilisation levels. Cement sector utilisation is expected

to improve from 63% in FY17 to 71% in FY19E leading to higher margins for

cement players (driven by operating leverage benefits).

Exhibit 3: Demand supply scenario

198216

276304

319

357 368392

409 420 424 430

306

164178

203214

229241

247255

264 265 284

0

100

200

300

400

500

FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18E FY19E

0

20

40

60

80

100

Capacity Demand Utilisation (%)

Source: ICICIdirect.com Research

Demand expected to register strong growth in FY17-19E

The company has indicated that demand will improve in the south mainly

led by an improvement in infrastructure, irrigation, especially in Andhra

Pradesh, Telangana and Amaravati. Further, western region is expected to

witness healthy growth led by a pick-up in demand from Mumbai (mainly led

by metro projects and coastal roads). In addition, demand in the north is

expected to be driven by higher infra spend. However, demand in the urban

region is expected to remain subdued due to RERA compliance and high

unsold inventory.

Key takeaways in Q3FY18 from the conference call:

Demand in North and East have improved significantly due to higher

infra spend while demand in Bihar and Tamil Nadu was impacted by

sand mining issue

Capacity utilisation region wise was: North 80%, West 70%, East

80%, South 53% and Central 60%

During Q3FY18, average utilisation of Jaypee assets was 51% while

exit utilisation was 60%. During the quarter, the company had one

offs in terms of maintenance shutdown and other expenses

amounting to | 200/t

Pet coke prices have increased 33% to US$104/t Q3FY18. The

company has switched to imported coal during the quarter. The

usage of pet coke is completely banned in CPP while petcoke is

allowed to be used in cement kiln

The company is aiming to increase its WHRMS capacity by 26 MW

from the current 58 MW. Further, it is aiming to increase its industrial

waste usage from 3% to 5%


In terms of transport mix, 73% was through road, 24% was via rail

while the rest was through sea

In terms of fuel mix, pet coke accounts for 70% of overall fuel mix

while industrial waste is 3%, imported coal is 17% and others is 9%

The company will add 11 MT of capacity vis-à-vis 35 MT of capacity

addition of the Industry

Q4FY18 is expected to witness healthy growth

Exhibit 4: Region-wise demand trend


Operate at healthy EBITDA/tonne vis-à-vis industry

Exhibit 5: Gradual reduction in power requirement

Power mix FY12 FY13 FY14 FY15 FY16 FY17

TPP 78.0 79.0 81.0 82.0 82.0 80.0

WHRS 0.4 0.3 0.3 2.0 5.0 7.0

Others 22.0 21.0 19.0 16.0 13.0 13.0

Total 100.4 100.3 100.3 100.0 100.0 100.0

Source: Company, ICICIdirect.com Research,*FY14,FY16 figures provisional

Exhibit 6: Higher EBITDA/tonne vis-à-vis peer group

832

894 1,0

12

1,0

78

1,0

33

982

931

1,1

82

1,0

28

738

711 835 9

85

928

786

747

1,0

08

886

-

200

400

600

800

1,000

1,200

1,400

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

EB

ITD

A/tonne (

|)

Ultratech Industry


Peer set includes ACC, Ambuja, Shree cement and India cement


Expect revenue CAGR of 23.8% during FY17-19E

Revenues have grown at a CAGR of 5.6% in FY12-17 mainly led by moderate

volume growth at 3.3% CAGR and realisation growth at 2.2% CAGR in FY12-

17. However, in FY17-19E, we expect volume CAGR of 20% in FY17-19E

mainly led by higher infra spend by the government and acquisition of

Jaypee’s assets. Further, we expect realisation to increase at 3.2% CAGR in

FY17-19E led by a pick-up in demand. Consequently, revenues are expected

to grow at 23.8% CAGR in the next two years.

Exhibit 7: Expect volume led revenue CAGR of 23.8% in FY17-19E

20021 20078

2265223709 23891

29756

36635

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Sales (| crore)


Exhibit 8: Capacity addition plans (standalone)

Unit Grey Cement

Opening FY17 66.3

Additions Q1FY18 Bihar 1.6

Q2FY18 Jaypee 21.2

Q4FY19 Dhar, MP 3.5

Q1FY20 Pali, Rajasthan 3.5

Closing FY20 96.1


Exhibit 9: Volume to grow at 20% CAGR in FY17-19E

42.645.3

48.4 48.9

59.1

70.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

FY14 FY15 FY16 FY17 FY18E FY19E

Sales Volumes


Exhibit 10: Realisation to pick up led by uptick in demand

4713

4995

4894 4883

5035

5200

4400

4500

4600

4700

4800

4900

5000

5100

5200

5300

FY14 FY15 FY16 FY17 FY18E FY19E

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

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


Exhibit 11: Volume flat in Q3FY18…

11.111.6

13.613.2

11.2 11.3

13.713.2 13.1

15.1

0

2

4

6

8

10

12

14

16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Million T

onne

Sales Volume


Exhibit 12: Quarterly realisation trend

4872

4708

4719

4882

4946

4801 5020

5001

5026

4000

4250

4500

4750

5000

5250

5500

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

(|

)

Realisation



Margins to improve led by operating efficiency

Going forward, cost per tonne is expected to increase led by acquisition of

Jaypee Cement. However, the pick-up in demand, improving utilisation and

EBITDA/t at Jaypee in coming quarters are expected to lead to an

improvement in margins in FY19E.

Exhibit 13: Expect EBITDA/tonne of | 1,196 in FY19E

1084

849 863

9521015 988

1196

0

200

400

600

800

1000

1200

1400


EBITDA/Tonne


Exhibit 14: Margins to improve led by improvement in realisations

22.6

18.017.3

19.5

20.8

19.6

23.0

10.0

15.0

20.0

25.0

30.0


EBITDA Margin (%)


Exhibit 15: Q3FY18 EBITDA per tonne at | 840/t

894

10121078

1033982

931

1182

1028

840

0

200

400

600

800

1000

1200

1400

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

| p

er t

onne


Exhibit 16: Quarterly margin trend

18.3

21.5

22.821.2 19.9

19.4

23.5

20.616.7

0

5

10

15

20

25Q

3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

(%

)

EBITDA Margin


Expect net profit CAGR of 18.1% during FY17-19E

In FY18E we expect a dip in net margins mainly due to higher interest and

depreciation expenses (mainly led by acquisition of Jaypee). However, we

expect margins to improve in FY19E led by higher utilisation at Jaypee and a

better operational performance.

Exhibit 17: Profitability trend

2370.22655.62144.5

2014.7

2627.72577.6

3900.0

13.3

10.7

8.9 10.0

11.0

8.7

10.6

0

1000

2000

3000

4000

5000

FY13 FY14 FY15 FY16 FY17E FY18E FY19E

| c

rore

0.0

5.0

10.0

15.0

(%

)

Net profit - LS Net profit margin -RS



Outlook and valuation

We believe the industry’s capacity utilisation bottomed at ~64% in FY17.

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 FY17-19E to reach 306 MT by

FY19E i.e. at 7.5% CAGR vs. 4.7% CAGR over the last five years). The

company expects government infra spends to gain momentum, especially

on construction of concrete roads and creation of new capital city of

Amaravati 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 maintain our BUY rating on the stock with a target price of

| 5,000/share (i.e. at 18.0x FY19E EV/EBITDA

Exhibit 18: Key assumptions

| per tonne FY15 FY16 FY17 FY18E FY19E

Sales Volume* 45 48 49 59 70

Net Realisation* 4995 4894 4883 5035 5200

Total Expenditure 4132 3939 3867 4047 4003

Raw material 785 820 822 805 720

Power & Fuel 1046 875 802 986 1030

Freight 1190 1225 1195 1216 1216

Employees 269 277 289 307 307

Others 842 741 759 733 730

EBITDA per Tonne 863 952 1015 988 1196

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


Exhibit 19: One year forward EV/EBITDA

10000

30000

50000

70000

90000

110000

130000

150000

170000

190000

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

(|

Crore)

EV 21.5x 18.5x 16.5x 14.5x 10.5x


Exhibit 20: One year forward EV/Tonne

0

5000

10000

15000

20000

25000

30000

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

Million $

EV $270 $225 $175 $125 $80


Exhibit 21: Valuation

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

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

FY15 22651.5 12.8 73.4 -6.1 60.0 331 32.1 10.7 10.6

FY16 23708.8 4.7 86.4 17.6 51.0 306 26.9 11.3 11.7

FY17 23891.4 0.8 96.3 11.4 46.0 279 24.1 11.1 12.4

FY18E 29755.6 25.5 93.9 -2.4 46.9 243 23.2 10.1 9.5

FY19E 36634.6 53.3 142.1 51.3 31.0 233 15.9 13.7 14.1



Recommendation History vs. Consensus Estimates

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan-18Nov-17Aug-17Jun-17Mar-17Jan-17Nov-16Aug-16Jun-16Mar-16Jan-16Oct-15Aug-15Jun-15Mar-15Jan-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, ICICIdirect.com Research

Key events

Date Event

Sep-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 MTPA

Jun-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

Feb-16 The company signs binding MoU with Jaiprakash Associate to acquire 22.4 MT cement capacity

Apr-16 Commissions a cement grinding unit with a capacity of 1.6 MT at Patliputra, Bihar.

Jan-17 The board approves setting up of 3.5 mt integrated plant at Dhar, Madhya Pradesh and is expected to be operational by Q4FY19

Jun-17 Completion of acquisition of Jaypee assets (~21.2 MT)


Top 10 Shareholders Shareholding Pattern

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

1 Aditya Birla Group 30-Sep-17 60.2 165.3 0.00

2 Life Insurance Corporation of India 30-Sep-17 2.20 6.04 0.00

3 OppenheimerFunds, Inc. 30-Nov-17 1.62 4.45 0.00

4 Aberdeen Asset Management (Asia) Ltd. 30-Nov-17 1.57 4.31 0.00

5 Aberdeen Asset Managers Ltd. 30-Nov-17 1.18 3.25 0.00

6 The Vanguard Group, Inc. 31-Dec-17 1.05 2.88 0.01

7 Capital World Investors 30-Sep-17 1.03 2.84 (0.91)

8 Capital Research Global Investors 30-Sep-17 1.03 2.84 (0.91)

9 Franklin Advisers, Inc. 31-Dec-17 0.96 2.64 0.00

10 BlackRock Institutional Trust Company, N.A. 31-Dec-17 0.96 2.64 0.00

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

Promoter 62.26 62.16 62.14 62.13 62.05

FII 20.83 21.87 21.89 22.14 22.20

DII 6.27 5.51 5.53 5.55 5.67

Others 10.64 10.36 10.44 10.18 10.08

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor Name Value Shares Investor Name Value Shares

DSP BlackRock Investment Managers Pvt. Ltd. 6.68 0.10 Capital Research Global Investors -53.80 -0.91

Nomura Asset Management Singapore Ltd. 2.59 0.04 Capital World Investors -53.80 -0.91

SBI Funds Management Pvt. Ltd. 1.48 0.02 BNP Paribas Asset Management Asia Limited -7.99 -0.12

Fidelity Management & Research Company 0.95 0.01 Invesco Hong Kong Limited -4.09 -0.07

Aletti Gestielle SGR S.p.A. 0.94 0.01 Grantham Mayo Van Otterloo & Co LLC -3.36 -0.05

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17 FY18E FY19E

Total operating Income 23,708.8 23,891.4 29,755.6 36,634.6

Growth (%) 4.7 0.8 24.5 23.1

Raw material cost 3972.8 4024.5 4757.7 5072.9

Power & Fuel cost 4240.8 3926.6 5826.7 7257.1

Freight cost 5934.9 5845.2 7185.8 8567.6

Employees cost 1343.0 1413.4 1816.8 2166.0

Others 3590.7 3712.8 4331.3 5143.4

Total Operating Exp. 19,082.2 18,922.5 23,918.3 28,207.1

EBITDA 4,626.6 4,969.0 5,837.3 8,427.5

Growth (%) 18.2 7.4 17.5 44.4

Depreciation 1,297.0 1,267.9 1,663.0 2,022.2

Interest 511.7 571.4 1,198.7 1,377.1

Other Income 480.7 660.0 752.9 741.0

PBT 3,298.6 3,789.6 3,728.4 5,769.2

Total Tax 928.4 1148.2 1150.9 1869.2

PAT 2,370.2 2,641.4 2,577.6 3,900.0

Growth (%) 17.6 11.4 -2.4 51.3

Adjusted EPS (|) 86.4 96.3 93.9 142.1


Cash flow statement | Crore


Profit after Tax 2,370.2 2,627.7 2,577.6 3,900.0

Add: Depreciation 1,297.0 1,267.9 1,663.0 2,022.2

(Inc)/dec in Current Assets 224.0 1,016.0 -2,521.1 -185.7

Inc/(dec) in CL and Provisions 70.6 -490.8 3,064.0 -711.4

CF from operating activities 3,961.8 4,420.7 4,783.5 5,025.0

(Inc)/dec in Investments 495.4 -3,378.3 2,500.0 0.0

(Inc)/dec in Fixed Assets -2,379.0 -1,274.9 -19,663.0 -2,621.6

Others 435.4 111.2 0.0 0.0

CF from investing activities -1,448.3 -4,542.0 -17,163.0 -2,621.6

Issue/(Buy back) of Equity 0.0 0.1 0.0 0.0

Inc/(dec) in loan funds 252.7 -1,396.3 12,230.0 -1,500.0

Dividend paid & dividend tax -313.8 -320.9 -802.6 -866.8

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

Others -23.1 422.2 0.0 0.0

CF from financing activities -84.1 -1,294.9 11,427.4 -2,366.8

Net Cash flow 2,034.7 -338.4 -952.1 36.6

Opening Cash 200.5 2,235.2 1,896.8 944.7

Closing Cash 2,235.2 1,896.8 944.7 981.3


Balance sheet | Crore


Liabilities

Equity Capital 274.4 274.5 274.5 274.5

Reserve and Surplus 20,616.5 23,345.5 25,120.5 28,153.6

Total Shareholders funds 20,890.9 23,620.1 25,395.0 28,428.1

Total Debt 7,667.9 6,271.6 18,501.6 17,001.6

Deferred Tax Liability 3,227.4 3,338.6 3,338.6 3,338.6

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 31,786.2 33,230.3 47,235.2 48,768.3

Assets

Gross Block 34,551.9 36,364.0 56,027.0 59,527.0

Less: Acc Depreciation 11,864.4 13,132.3 14,795.3 16,817.5

Net Block 22,687.6 23,231.7 41,231.7 42,709.5

Capital WIP 1,415.6 878.4 878.4 0.0

Total Fixed Assets 24,103.1 24,110.1 42,110.1 42,709.5

Investments 5,108.1 7,408.7 4,908.7 4,908.7

Inventory 2,426.1 2,225.0 3,563.1 3,563.1

Debtors 1,414.9 1,276.2 2,082.5 2,052.6

Loans and Advances 2,676.0 643.9 843.9 914.6

Other Current Assets 43.5 1,399.5 1,576.1 1,721.0

Cash 2,235.2 1,896.8 944.7 981.3

Total Current Assets 8,795.7 7,441.3 9,010.3 9,232.6

Creditors 5,094.1 1,713.8 6,764.5 3,673.8

Provisions 1,126.7 4,016.1 2,029.4 4,408.6

Total Current Liabilities 6,220.7 5,729.9 8,793.9 8,082.4

Net Current Assets 2,574.9 1,711.5 216.4 1,150.2

Others Assets 0.0 0.0 0.0 0.0

Application of Funds 31,786.2 33,230.2 47,235.2 48,768.3


Key ratios


Per share data (|)

EPS 86.4 96.3 93.9 142.1

Cash EPS 133.6 142.0 154.5 215.8

BV 761.3 860.8 925.5 1,036.0

DPS 9.5 10.0 25.0 27.0

Cash Per Share 81.5 69.1 34.4 35.8

Operating Ratios (%)

EBITDA Margin 19.5 20.8 19.6 23.0

PBT / Total Operating income 13.9 15.8 12.5 15.7

PAT Margin 10.0 11.0 8.7 10.6

Inventory days 39.9 35.5 35.5 35.5

Debtor days 20.2 20.6 20.6 20.6

Creditor days 76.5 52.0 52.0 52.0

Return Ratios (%)

RoE 11.3 11.1 10.1 13.7

RoCE 11.7 12.4 9.5 14.1

RoIC 12.8 14.8 9.8 14.3

Valuation Ratios (x)

P/E 51.0 46.0 46.9 31.0

EV / EBITDA 26.9 24.1 23.2 15.9

EV / Net Sales 5.2 5.0 4.6 3.7

Market Cap / Sales 5.1 5.1 4.1 3.3

Price to Book Value 5.8 5.1 4.8 4.3

Solvency Ratios

Debt/EBITDA 1.7 1.3 3.2 2.0

Debt / Equity 0.4 0.3 0.7 0.6

Current Ratio 1.4 1.3 1.0 1.1

Quick Ratio 1.1 1.0 0.9 1.0



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* 1,837 2100 Buy 34,525 40.2 48.4 66.0 24.8 21.4 16.6 177 156 155 11.3 14.0 16.5 8.7 9.9 12.3

Ambuja Cement* 276 315 Buy 54,804 5.0 5.8 7.2 23.1 20.9 16.1 194 180 180 4.0 6.1 8.1 5.2 5.9 7.0

UltraTech Cem 4,408 5000 Buy 120,956 96.3 93.9 142.1 24.1 23.2 15.9 279 243 233 12.4 9.5 14.1 11.1 10.1 13.7

Shree Cement 18,450 20500 Hold 64,206 384.8 399.2 499.1 25.4 24.0 18.2 374 360 292 13.0 15.3 16.5 17.4 15.5 16.6

Heidelberg Cem 163 165 Hold 3,694 3.4 4.8 7.8 18.2 13.8 11.1 140 135 130 8.2 12.0 15.9 7.9 10.7 16.1

India Cement 183 215 Buy 5,622 5.4 3.6 8.6 9.9 11.4 8.8 92 91 89 7.5 6.1 8.4 3.3 2.1 4.9

JK Cement 1,147 1235 Buy 8,021 37.1 52.6 57.9 15.9 12.2 11.0 142 131 127 12.6 15.2 16.3 14.5 16.9 15.8

JK Lakshmi Cem 441 470 Buy 5,191 7.0 11.3 21.5 18.6 13.5 9.7 97 86 79 7.5 10.9 15.1 5.9 8.8 14.5

Mangalam Cem 421 415 Buy 1,124 12.9 19.3 34.2 13.0 9.7 7.2 62 59 55 10.2 13.6 17.8 6.8 9.3 14.3

Star Cement 134 120 Hold 5,393 4.1 6.2 5.7 14.8 11.1 11.1 264 254 239 13.8 18.3 16.8 14.0 18.1 14.8

Ramco Cement787 822 Buy 18,737 27.3 25.3 29.2 17.0 17.7 15.4 202.3 204.7 191.0 12.7 10.8 11.6 17.4 14.9 15.3

RoCE (%) RoE (%)

Company

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

*CY16, CY17E CY18E



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