Upload
others
View
7
Download
0
Embed Size (px)
Citation preview
February 18, 2015
ICICI Securities Ltd | Retail Equity Research
Result Update
Operational performance improves… • Revenues during Q3FY15 increased 17% YoY to | 410.3 crore led by
19% YoY volume growth (32% YoY on a like-to-like basis, i.e. excluding sales from Raigad unit) to 1.1 MT while realisations declined 1.7% YoY to | 3730/tonne. This was in line with the industry trend
• The EBITDA margin increased to 12.9%, which was in line with our estimates. The EBITDA/tonne came in at | 482/tonne (vs. I-direct estimate: | 491/tonne)
• At the PBT level, the company reported a net profit of | 7.0 crore. However, due to tax implications pertaining to the sale of the Raigad unit, Heidelberg’s net loss came in at | 9.9 crore for the quarter. Operationally, the result reflects the company’s efforts are on the right path to become operationally efficient, which would yield results over the next two or three years
Doubling of capacity during slowdown takes toll on profitability…
Heidelberg Cement is a central regional player that contributes over ~94% of its total revenues. The company recently doubled its cement capacity to 6 MT from 3 MT in CY13 at a total capex of | 1570 crore. However, due to subdued demand, these major expansions took a heavy toll on its profitability with the company reporting a net loss of | 41 crore in CY13 (vs. net profit of | 31 crore in CY12) led by high interest and depreciation. It has operated at low margins of 6.3% in CY13 vs. industry average of 18-20% due to lower cement realisation in the central region and high operational costs due to capacity expansions.
…but operating leverage benefit, cost efficiency initiatives to lead to healthy margin expansion, going ahead
To bring down freight costs, Heidelberg installed a conveyor belt between its limestone reserves and clinker units, which are 20 km away (at a cost of | 200 crore) to transport lime stones to its clinkerisation unit, which are currently being transported by trucks. This would help the company to achieve cost savings of about ~| 45-50/tonne. Further, to reduce its power costs, Heidelberg is currently setting up a 13 MW waste heat recovery plant (capex of ~| 180 crore), which will be commissioned by early 2016E. Considering these benefits, we expect operating margins to improve to 13.5% in FY16E and 14.3% in FY17E from 6.3% in CY13.
Improving cash flows, strong promoter back-up allay concern on high debt; repayment to start from FY16E onwards
The debt at the end of FY15E is expected at ~| 1057 crore with net D-E ratio of 1.2x. However, the operational turnaround as witnessed in the last two quarters coupled with a strong promoter back-up (Heidelberg AG) allay our concerns with regard to its debt servicing ability. Growth visibility in sight; maintain BUY We expect the company to report a net profit of | 77 crore in FY17E. We expect an EBITDA/tonne of | 585/tonne in FY17E from | 260/tonne in CY13. On an EV/tonne basis, the stock is trading at $94/tonne (on capacity of 5.4 MT). Given the scope for growth along with margin expansion at expanded capacity, we remain positive on the stock with a BUY and recommendation. We maintain our target price of | 105/share (i.e. valuing at 12.0x FY17E EV/EBITDA, $110/tonne on capacity of 5.4 MT.
Rating matrix
Rating : BuyTarget : | 105Target Period : 15-18 monthsPotential Upside : 28%
What’s Changed? Target UnchangedEPS FY15E Changed from |2.9 to |1.9EPS FY16E Changed from |2.9 to |1.9EPS FY17E Introduced at |3.4Rating Unchanged
Quarterly Performance
Q4FY15 Q4CY13 YoY (%) Q3FY15 QoQ (%)Revenue 410.3 350.3 17.1 400.0 2.6EBITDA 53.0 18.9 181.1 50.2 5.6EBITDA (%) 12.9 5.4 754 bps 12.6 37 bpsPAT -9.9 -6.6 49.2 1.6 -725.9
Key Financials
CY13 FY15E# FY16E FY17E
Net Sales 1364.8 1999.9 1794.8 2060.8
EBITDA 86.4 273.3 242.5 293.8
Net Profit -40.7 43.0 43.0 77.1EPS (|) -1.8 1.9 1.9 3.4
*CY14 includes profit of | 60.3 crore on sale of Raigarh unit# 15 montths period due to change in financial year
Valuation summary
CY13 FY15E FY16E FY17E
PE (x) NA 43.2 43.3 24.1
Target PE (x) NA 55.3 55.4 30.8
EV to EBITDA (x) 35.9 11.2 12.6 10.4
EV/Tonne(US$) 96 94 94 94
Price to book (x) 2.2 2.2 2.1 1.9
RoNW (%) -4.9 5.1 4.9 8.1
RoCE (%) -0.5 6.2 6.1 8.0 Stock data
Amount
Mcap | 1859 crore
Debt (FY15E) | 1356 crore
Cash & Invest (FY15E) | 37 crore
EV | 3178 crore
52 week H/L | 104 / 32
Equity cap | 226.6 crore
Face value | 10
Particular
Price performance (%)
1M 3M 6M 12M
Heildelberg Cem. 8.2 0.4 40.9 126.3
India Cement 34.2 -3.1 5.6 99.4
JK Cement 11.9 26.1 84.6 293.2
JK Lakshmi Cem. 1.9 15.9 82.6 458.6
Heidelberg Cement (MYSCEM) | 82
Research Analyst
Rashesh Shah [email protected]
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis Q4FY15 Q4CY14E Q4CY13 YoY (%) Q3FY15 QoQ (%) Comments
Net Sales 410.3 394.2 350.3 17.1 400.0 2.6Revenue growth mainly led by better sales volumes (up 32.2% YoY) while realisation declined 1.7% YoY
Other Incomes 11.4 8.8 11.2 8.8 8.8 28.8Raw Material Expenses 92.5 88.4 93.5 -1.1 89.2 221.6Employee Expenses 28.8 25.9 25.8 11.5 25.8 11.6Change in stock -0.7 0.0 5.5 -112.0 -0.3 100.0Power and fuel 115.6 109.2 94.0 22.9 112.0 3.2
Freight 49.5 52.0 52.3 -5.3 53.2 -6.9Freight cost remained lower than our estimates due to the company's focus on nearby regions for the sale of the product coupled with the benefit of lower fuel prices
Others 71.5 67.6 60.3 18.5 69.9 2.4EBITDA 53.0 37.0 18.9 181.1 50.2 5.6EBITDA Margin (%) 12.9 9.4 5.4 754 bps 12.6 37 bps Higher sales volume supported by fall in costs led to margin expansionInterest 28.8 28.8 35.9 -19.8 28.8 0.2Depreciation 28.6 28.5 26.6 7.6 27.8 2.9PBT 7.0 -7.7 -32.4 -121.5 2.5 178.8Total Tax 16.9 0.0 -25.8 -165.4 0.9 1,732.6
PAT -9.9 -7.7 -6.6 49.2 1.6 -725.9Higher taxes pertaining to sale of Raigarh unit led to a net loss of | 9.9 crore for the quarter
Key Metrics
Volume (MT) 1.10 1.00 0.92 19.2 1.04 5.6Capacity expansion along with better demand environment led to over 19% YoY jump in sales volumes. On a like to like basis, it grew over 32% YoY (ex-Raigad unit)
Realisation (|) 3,730 3,790 3,796 -1.7 3,840 -2.9EBITDA per Tonne (|) 482 491 204 135.9 482 0.0 Lower cost led to higher EBITDA/tonne for the company
Source: Company, ICICIdirect.com Research Change in estimates
(| Crore) Old New % Change Old New % Change Old New % Change Comments
Revenue 1,674.0 2,049.9 22.5 1,938.0 1,837.1 -5.2 NA 2,105.2 NAFigures for FY15 would include five quarters due to a change in the financial year.
EBITDA 234.5 273.3 16.6 281.2 242.5 -13.8 NA 293.8 NA
EBITDA Margin (%) 14.0 13.7 -34 bps 14.5 13.5 -100 bps NA 14.0 NA
We marginally revise our EBITDA margins guidance downward taking into account lower realisations. The recent reduction in diesel prices should help in margin expansion, going forward
PAT 65.5 43.0 -34.4 65.3 43.0 -34.2 NA 77.1 NAEPS (|) 2.9 1.9 -34.6 2.9 1.9 -34.6 NA 3.4 NA
FY15E* FY16E FY17E
Source: Company, ICICIdirect.com Research Assumptions
Comments0 FY15E FY16E FY17E CY14E FY16E FY17E
Volume (MT) 3.6 5.2 4.6 5.0 4.2 4.6 NA UnchangedRealisation (|) 3,800 3,836 3,910 4,104 3,976 4,269 NA We expect realisation growth to remain better, going forward
EBITDA per Tonne (|) 260 524 528 585 592 726 NA
However, cost pressure will stay, which should lead to a gradual rise in margins. Low fuel cost will play a vital role in margin expansion, going forward
EarlierCurrent
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis Central focused player with revenue contribution of over 94%
Heidelberg Cement India sells ~94% of total cement volumes in the central region, a favourable region in India considering the demand-supply scenario. The company sells the rest of the volume in the western and southern regions. Its share in the central region has gone up from 75% to over 94% led by the recent capacity expansion. With no major capacity addition on the cards, we believe it will likely remain a central regional player over the next two or three years.
Doubling of capacity during slowdown takes toll on profitability…
The company recently doubled its cement capacity to 6 MT from 3 MT in CY13 at a total capex of | 1570 crore. However, due to subdued demand, these major expansions took a heavy toll on its profitability with the company reporting a net loss of | 41 crore in CY13 (vs. net profit of | 31 crore in CY12) led by high interest and depreciation. It has operated at low margins in the industry (average of 6.5% in the last three years CY11-13). However, with a revival in demand along with stabilisation of new capacity, we expect its margin to climb over 15% by CY16E with capacity utilisation of over 85% during the same period.
Exhibit 1: Cement capacity doubles in CY12 leading to sharp fall in capacity utilisation
3.10 3.10 3.10 3.10
6.005.40 5.40 5.40
82.487.8 88.0
94.7
48.4
66.1
78.085.0
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
CY08 CY09 CY10 CY11 CY12 CY13 CY14E CY15E
40
50
60
70
80
90
100
Capacity (In MT) - LHS Capacity utilisation (%) - RHS
Source: Company, ICICIdirect.com Research
Focus now on margin expansion after scaling up capacity…
To bring down freight costs, Heidelberg has installed a conveyor belt between its limestone reserves and clinker units, which are 20 km away (at | 200 crore) to transport limestone to its clinkerisation unit, which is currently being transported by trucks. This would help the company in achieving cost savings of about ~| 45-50/tonne. Further, to reduce its power costs, the company is currently setting up a 13 MW waste heat recovery plant (capex of | 150 crore), which will be commissioned by early 2016E. Considering the benefit of conveyor belt, economies of scale coupled with better utilisations, we expect operating margins to improve to 14.8% in CY15E and 15.4% in CY16E from 6.3% in CY13.
Large global promoter
Heidelberg’s Indian operations have the support of the rich experience of the German promoter (Heidelberg AG), a Germany-based company, which is one of the world’s largest cement manufacturers with consolidated revenue of €14 billion in 2013. This, we believe, would provide a huge potential to grow inorganically over the longer run.
Regional presence
Others6%
Central94%
Margin trend
11.7 11.4
17.1
6.2 6.8 6.3
15.414.814.3
0
5
10
15
20
CY08
CY09
CY10
CY11
CY12
CY13
CY14
E
CY15
E
CY16
E
(%)
EBITDA Margin
ICICI Securities Ltd | Retail Equity Research Page 4
Expect revenue CAGR of 14.5% during CY13-FY17E
Revenues have grown at a CAGR of 16.6% in FY10-13 led by volume CAGR of 9.9% supported by realisation CAGR of 6.1% during the same period. For CY13-FY17E, we expect sales CAGR of 14.5% led by volume CAGR of 11.6% and realisation CAGR of 2.6% during the same period. The company has completed its expansion plans along with divesting of assets, like the Raigad unit, which were not fit strategically. The current cement capacity of the company stands at 5.4 MTPA.
Exhibit 2: Expect expansion led revenue CAGR of 14.5% during CY13-17E
983 11011372
20001795
2061
-
500
1,000
1,500
2,000
2,500
CY11 CY12 CY13 FY15E* FY16E FY17E
Source: Company, ICICIdirect.com Research *15 months
Exhibit 3: Cement capacity Current Post expansion Current
ClinkerAmmasandra Karnataka 0.4 0.4 0.4Damoh MP 1.2 3.1 3.1Total 1.6 3.5 3.5CementAmmasandra Karnataka 0.6 0.6 0.6Damoh MP 1.0 2.1 2.1Jhansi UP 0.8 2.7 2.7Raigarh Maharastra 0.6 0.6 0.0Total 3.0 6.0 5.4
Source: Company, ICICIdirect.com Research
Exhibit 4: Volume to grow at 11.6% CAGR during CY13-FY17E
2.94 2.913.61
5.214.59
5.02
0.00
1.00
2.00
3.00
4.00
5.00
6.00
CY11 CY12 CY13 FY15E* FY16E FY17E
Milli
on T
onne
s
Sales Volumes
Source: Company, ICICIdirect.com Research
Exhibit 5: Realisation to improve at CAGR of 2.6% during CY13-FY17E
33443790 3800 3836 3910 4104
0
1000
2000
3000
4000
5000
CY11 CY12 CY13 FY15E* FY16E FY17E
(|/to
nne)
-5
0
5
10
15
(%)
Realisation (|/tonne) -LS Growth (%) -RS
bb
Source: Company, ICICIdirect.com Research
Exhibit 6: Q4FY15 volume up 19.2% YoY (32% YoY on like to like basis, i.e. ex- Raigad unit)
0.95 0.950.79
0.92 1.02 1.03 1.04 1.10
0.0
0.5
1.0
1.5
Q1CY
13
Q2CY
13
Q3CY
13
Q4CY
13
Q1CY
14
Q2CY
14
Q3CY
14
Q4FY
15
Milli
on T
onne
-10
0
10
20
30
(%)
Sales volumes -LHS Growth (%) -RHS
Source: Company, ICICIdirect.com Research
Exhibit 7: Q4FY15 realisation declines 1.7% YoY
3887
3775
3732
3796
3873
3913
3840
3730
2000
3000
4000
5000
Q1CY
13
Q2CY
13
Q3CY
13
Q4CY
13
Q1CY
14
Q2CY
14
Q3CY
14
Q4FY
15
|/to
nne
-10-50510152025
(%)
Realisation-LHS Growth (%) -RHS
`
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 5
Margins to improve, going forward, on economies of scale
With all capacity concentrated in the central region and steps like overhead belt conveyor to transport lime stones to clinkerisation unit, going forward, we expect margins to improve and expect them to reach 14.3% by FY17E.
Exhibit 8: Expect EBITDA/tonne of | 585 in FY17E
206256 260
524 528585
0100200300400500600700
CY11 CY12 CY13 FY15E* FY16E FY17E
|
EBITDA/Tonne
Source: Company, ICICIdirect.com Research
Exhibit 9: Margins to improve led by improvement in utilisation
11.4
6.2 6.8 6.3
13.7 13.5 14.3
0.0
5.0
10.0
15.0
CY10 CY11 CY12 CY13 FY15E* FY16E FY17E
(%)
EBITDA Margin (%)
Source: Company, ICICIdirect.com Research
Exhibit 10: Q4FY15 EBITDA per tonne improves due to cost efficiency
382 334
90204
587 613
482 482
0100200300400500600700
Q1CY
13
Q2CY
13
Q3CY
13
Q4CY
13
Q1CY
14
Q2CY
14
Q3CY
14
Q4FY
14
EBITDA/tonne
Source: Company, ICICIdirect.com Research
Exhibit 11: Pick-up in margins expected, going forward, led by improvement in capacity utilisation
9.8 8.9
2.45.4
15.2 15.712.6 12.9
0
5
10
15
20
Q1CY
13
Q2CY
13
Q3CY
13
Q4CY
13
Q1CY
14
Q2CY
14
Q3CY
14
Q4FY
14
EBITDA Margin (%)
Source: Company, ICICIdirect.com Research
Expect sharp rebound in net profit growth by FY17E
After witnessing a loss in CY13, mainly due to higher interest cost on debt due to expansion, we expect the company to report healthy profitability growth over CY13-FY17E.
Exhibit 12: Profitability trend
63
29 3143
77
-41
437
2.43.7
2.1
3 3
-3-60-40
-200
20
4060
80100
CY10 CY11 CY12 CY13 FY15E* FY16E FY17E
| cr
ore
-5
-3
-1
1
3
5
7
9
(%)
Net profit - LS Net profit margin -RS
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 6
Outlook and valuations We expect the company to report a net profit of | 77 crore in FY17E. We expect EBITDA/tonne of | 585/tonne in FY17E from | 260/tonne in CY13. On an EV/tonne basis, the stock is trading at $94/tonne (on capacity of 5.4 MT). Given the scope for growth along with margin expansion with expanded capacity, we remain positive on the stock with a BUY and maintain our target price of | 105/share (i.e. valuing at 12.0x FY17E EV/EBITDA, $110/tonne on capacity of 5.4 MT).
Exhibit 13: Assumptions | per tonne CY11 CY12 CY13 FY15E* FY16E FY17E
Sales Volume (mtpa) 2.9 2.9 3.6 5.2 4.6 5.0
Net Realisation 3344 3790 3800 3836 3910 4104
Total Expenditure 3138 3534 3540 3311 3382 3519
Stock Adjustment 11 -88 -77 -29 0 0
Raw material 786 1078 1043 854 870 885
Power & Fuel 882 1055 1077 1064 1045 1070
Employees 267 318 288 252 275 284
Freight 468 526 580 525 535 570
Others 724 645 630 644 657 710
EBITDA per Tonne 206 256 260 524 528 585 Source: Company, ICICIdirect.com Research * 15 months
ICICI Securities Ltd | Retail Equity Research Page 7
Exhibit 14: One year forward EV/EBITDA
-1000
0
1000
2000
3000
4000
5000
Feb-
07
Aug-
07
Feb-
08
Aug-
08
Feb-
09
Aug-
09
Feb-
10
Aug-
10
Feb-
11
Aug-
11
Feb-
12
Aug-
12
Feb-
13
Aug-
13
Feb-
14
Aug-
14
Feb-
15
(| c
rore
)EV 30.0x 25.0x 20.0x 15.0x 5.0x
Source: Company, ICICIdirect.com Research
Exhibit 15: One year forward EV/tonne
-1000
100200300400500600700800
Feb-
07
Aug-
07
Feb-
08
Aug-
08
Feb-
09
Aug-
09
Feb-
10
Aug-
10
Feb-
11
Aug-
11
Feb-
12
Aug-
12
Feb-
13
Aug-
13
Feb-
14
Aug-
14
Feb-
15
Milli
on $
EV $115 $100 $85 $70 $55 $40
Source: Company, ICICIdirect.com Research
Exhibit 16: Valuation Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) ($) (x) (%) (%)CY12 1101.2 12.1 1.4 5.7 60.3 139 37.8 3.6 2.3CY13 1364.8 23.9 -1.8 NA 0.0 96 35.9 -4.9 -0.5FY15E 1999.9 46.5 1.9 NA 43.2 94 11.2 5.1 6.2FY16E 1794.8 -10.3 1.9 -0.1 43.3 94 12.6 4.9 6.1FY17E 2060.8 14.8 3.4 79.6 24.1 94 10.4 8.1 8.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
Company snapshot
Target Price:| 105
0
20
40
60
80
100
120
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
Jan-
16
Source: Bloomberg, Company, ICICIdirect.com Research
Key events Date EventMay-08 Board approves amalgamation of Indorama Cement and Heidelberg Cement India with Mysore Cements. Total capacity of the merged entity stands at 3.07 MTPA
Jul-08 The Securities and Appellate Tribunal (SAT) dismisses the Securities and Exchange Board of India's (Sebi) directive on the structure of Heidelberg's open offer for Mysore Cement shares, which involved a non-compete fee for promoters. Thus, it clears the way for an open offer
Oct-09 The board of HeidelbergCement India approves setting up of an expansion project at its plants at Damoh (Madhya Pradesh) and Jhansi (Uttar Pradesh) to increase cement production capacity from the existing 1.8 MTPA to 4.7 MTPA
Jun-10 The board of HeidelbergCement India approves increasing the cement production at Raigad unit of the company in Maharashtra by 0.625 MTPAFeb-13 HeidelbergCement India successfully completes and commissions the expansion project at Damoh (MP). This comprises increase of clinker manufacturing capacity
at its unit Narsingarh, district Damoh from 1.2 to 3.1 MTPA and increase of cement capacity at Imlai, district Damoh from 1.0 to 2.0 MTPA
Feb-13 Board approves setting up of a waste heat recover based power generation plant at its clinkerisation unit at Narsingarh, district Damoh (MP). The proposed plant will produce approximately 12.15 MW of power
Oct-13 JSW Steel acquires HeidelbergCement India's 0.6 MTPA cement- grinding facility in Raigad, Maharashtra, as a going concern on a slump sale basis for an undisclosed sum
Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Heidelbergcement AG 31-Dec-14 69.39 157.2 0.02 HDFC Standard Life Insurance Company Limited 31-Dec-14 4.61 10.5 0.13 Jupiter Asset Management Ltd. 30-Nov-14 2.81 6.4 -2.04 Ashoka Pte. Ltd. 31-Dec-14 1.99 4.5 4.55 Life Insurance Corporation of India 31-Dec-14 1.59 3.6 0.06 J.P. Morgan Asset Management (Hong Kong) Ltd. 31-Dec-14 1.08 2.4 1.37 Sundaram Asset Management Company Limited 31-Dec-14 0.76 1.7 0.08 Dimensional Fund Advisors, L.P. 31-Dec-14 0.61 1.4 0.19 UBS Global Asset Management (Americas), Inc. 30-Sep-14 0.16 0.4 0.410 ING Investment Management India Private Ltd. 31-Oct-14 0.04 0.1 0.0
(in %) Dec-13 Mar-14 Jun-14 Sep-14 Dec-14Promoter 68.91 69.39 69.39 69.39 69.39FII 4.89 4.78 4.78 5.16 7.27DII 6.75 6.60 6.60 8.50 7.06Others 19.45 19.23 19.23 16.95 16.28
Source: Reuters, ICICIdirect.com Research Recent Activity
Investor name Value Shares Investor name Value SharesAshoka Pte. Ltd. 5.83m 4.52m Jupiter Asset Management Ltd. -2.79m -2.00m J.P. Morgan Asset Management (Hong Kong) Ltd. 1.61m 1.25m Fidelity Worldwide Investment (UK) Ltd. -1.92m -1.37m UBS Global Asset Management (Americas), Inc. 0.50m 0.36m IDFC Asset Management Company Private Limited -0.71m -0.55m Dimensional Fund Advisors, L.P. 0.13m 0.10m Morgan Stanley Investment Management (India) Pvt. Ltd. -0.22m -0.41m HDFC Standard Life Insurance Company Limited 0.12m 0.09m Nomura Asset Management Taiwan Limited -0.11m -0.18m
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
Financial summary
Profit and loss statement | Crore (Year-end March) CY13 FY15E* FY16E FY17E
Total operating Income 1,364.8 1,999.9 1,794.8 2,060.8
Growth (%) 23.9 46.5 -10.3 14.8
Raw material 348.7 430.6 399.3 444.4
Power & Fuel 388.8 555.0 479.7 537.2
Employees 104.1 131.5 126.1 142.6
Freight 209.3 273.5 245.6 286.2
Others 227.5 336.0 301.7 356.5
Total Operating Exp. 1,278.4 1,726.6 1,552.3 1,766.9
EBITDA 86.4 273.3 242.5 293.8
Growth (%) 16.0 216.5 -11.3 21.2
Depreciation 97.0 136.7 105.3 107.8
Interest 105.9 140.8 115.3 115.3
Other Income 35.8 49.9 42.3 44.4
Exceptional items 0.0 -60.3 0.0 0.0
PBT -80.7 106.1 64.1 115.1
Total Tax -39.9 63.1 21.2 38.0
PAT -40.7 43.0 43.0 77.1
Growth (%) -232.2 NA -0.1 79.6
EPS (|) -1.8 1.9 1.9 3.4
Source: ICICIdirect.com Research * 15months
Cash flow statement | Crore (Year-end March) CY13 FY15E* FY16E FY17E
Profit after Tax -40.7 43.0 43.0 77.1
Add: Depreciation 97.0 136.7 105.3 107.8
(Inc)/dec in Current Assets -199.5 -35.1 40.9 -24.5
Inc/(dec) in CL and Provisions 23.9 13.4 -31.5 -1.3
CF from operating activities -119.3 158.0 157.7 159.1
(Inc)/dec in Investments 0.0 0.0 0.0 0.0
(Inc)/dec in Fixed Assets -160.2 -80.0 -150.0 -150.0
Others -32.7 0.0 0.0 0.0
CF from investing activities -192.9 -80.0 -150.0 -150.0
Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Inc/(dec) in loan funds 326.0 0.0 0.0 0.0
Dividend paid & dividend tax 0.0 0.0 -5.3 -5.3
Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0
Others 27.4 -30.8 0.0 0.0
CF from financing activities 353.5 -30.8 -5.3 -5.3
Net Cash flow 41.2 47.2 2.4 3.8
Opening Cash 73.2 114.1 161.3 163.7
Closing Cash 114.5 161.3 163.7 167.5 Source: Company, ICICIdirect.com Research
Balance sheet | Crore (Year-end March) CY13 FY15E* FY16E FY17E
Liabilities
Equity Capital 226.6 226.6 226.6 226.6
Reserve and Surplus 606.7 618.9 656.5 728.4
Total Shareholders funds 833.3 845.5 883.1 955.0
Total Debt 1,361.5 1,361.5 1,361.5 1,361.5
Deferred Tax Liability 5.0 5.0 5.0 5.0
Minority Interest / Others 0.0 0.0 0.0 0.0
Total Liabilities 2,199.8 2,211.9 2,249.6 2,321.4
Assets
Gross Block 1,490.9 1,570.9 1,720.9 1,870.9
Less: Acc Depreciation 741.9 878.6 983.9 1,091.7
Net Block 749.0 692.3 737.0 779.2
Capital WIP 1,205.3 1,205.3 1,205.3 1,205.3
Total Fixed Assets 1,954.3 1,897.6 1,942.3 1,984.5
Investments 0.0 0.0 0.0 0.0
Inventory 198.9 203.5 239.1 156.2
Debtors 30.6 31.3 37.5 52.8
Loans and Advances 460.2 490.0 407.4 499.3
Other Current Assets 0.5 0.5 0.4 0.6
Cash 114.1 161.3 163.7 167.5
Total Current Assets 804.3 886.6 848.0 876.3
Creditors 392.4 401.8 365.3 402.5
Provisions 166.4 170.4 175.4 136.9
Total Current Liabilities 558.8 572.2 540.7 539.4
Net Current Assets 245.5 314.4 307.3 336.9
Application of Funds 2,199.8 2,211.9 2,249.6 2,321.4 Source: Company, ICICIdirect.com Research
Key ratios (Year-end March) CY13 FY15E* FY16E FY17E
Per share data (|)
EPS -1.8 1.9 1.9 3.4
Cash EPS 2.5 7.9 6.5 8.2
BV 37 37 39 42
DPS 0.0 0.0 0.2 0.2
Cash Per Share 5.0 7.1 7.2 7.4
Operating Ratios (%)
EBITDA Margin 6.3 13.7 13.5 14.3
PAT Margin -3.0 2.1 2.4 3.7
Inventory days 48.7 36.7 45.0 35.0
Debtor days 7.0 5.6 7.0 8.0
Creditor days 105.2 72.5 78.0 68.0
Return Ratios (%)
RoE -4.9 5.1 4.9 8.1
RoCE -0.5 6.2 6.1 8.0
RoIC -1.2 16.2 15.6 19.6
Valuation Ratios (x)
P/E 0.0 43.2 43.3 24.1
EV / EBITDA 35.9 11.2 12.6 10.4
EV / Net Sales 2.3 1.5 1.7 1.5
Market Cap / Sales 1.4 0.9 1.0 0.9
Price to Book Value 2.2 2.2 2.1 1.9
Solvency Ratios
Debt/EBITDA 15.7 5.0 5.6 4.6
Debt / Equity 1.6 1.6 1.5 1.4
Current Ratio 1.4 1.5 1.6 1.6
Quick Ratio 1.2351152 1.2674906 1.26575464 1.31420671 Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
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* 1551 1,635 HOLD 28,392 19.0 21.4 16.1 14.4 141 146 134 134 9.9 8.3 10.2 10.5 14.0 14.1 11.9 12.4Ambuja Cement* 250 241 HOLD 35,091 19.7 15.5 14.6 12.3 164 165 163 149 11.4 8.3 8.1 8.7 13.6 9.2 9.1 9.7UltraTech Cem 3008 3,240 HOLD 85,550 23.8 21.6 16.5 12.6 253 227 199 181 11.9 10.8 12.7 15.9 12.5 11.9 13.1 15.7Shree Cement^ 11084 11,200 HOLD 37,236 27.4 25.2 20.4 17.0 300 248 225 225 13.0 11.0 12.8 14.1 16.7 13.5 15.3 15.9Heidelberg Cem* 82 105 BUY 1,858 35.9 11.2 12.6 10.4 96 94 94 94 -0.5 6.2 6.1 8.0 -4.9 5.1 4.9 8.1India Cement 103 127 BUY 3,226 11.2 8.3 6.6 5.6 71 68 66 65 3.9 7.1 9.0 10.6 -0.9 2.0 4.1 6.2JK Cement 707 718 HOLD 4,944 5.5 5.9 8.8 12.9 142 100 103 96 5.2 5.9 6.6 12.5 5.2 5.9 6.6 12.5JK Lakshmi Cem 379 458 BUY 4,449 18.3 15.9 11.7 8.4 139 106 99 89 6.1 7.7 9.6 13.5 7.1 9.4 12.6 15.7Mangalam Cem 281 322 BUY 750 22.8 12.1 7.3 5.6 54 54 56 55 2.1 6.2 12.1 15.4 5.8 4.4 10.8 13.9
RoE (%)RoCE (%)EV/Tonne ($)EV/EBITDA (x)Company
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 12
ANALYST CERTIFICATION We /I, Rashesh Shah, CA, 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 views about 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 view(s) in this report.
Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. 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. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this 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 in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Rashesh Shah, CA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Rashesh Shah, CA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.