InitiatingCoverage |Cement 11 April2019 · units.Under PMAY-U, total sanctioning of houses stood at 1.14 mn units while total houses grounded for construction stood at 5.82 lakh units

Jainam share Consultant Pvt Ltd. Sector : Cement

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NikunjAgarwal - ResearchTrainee- [email protected] , 0261-6725518

Initiating Coverage |Cement

11th April 2019

Investors are advised to refer through important disclosures made at the last page of theResearch Report.Jainam Share Consultant research is available on www.jainam.in

mailto:[email protected]

http://www.motilaloswal.com/Institutional-Equities


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IndexA. About the Company

1. About.………………………………………………………………………….32. Investment Rationale………………………………………………………….43. Risks……………………………………………………………………………5B. Industry1. Outlook of cement industry in India…………………………………………..62. Cement manufacturing process………………………..…………….….……..73. Sector wise demand of cement and demand driver……………….……..…..94. Region wise demand in india…………………………………….…………….125. Concentrated focus on south…………………………………………………166. Raw material and major cost………………………………………….……….197. Types of cement……………………………………………………………….21

C. Business of the Company1. About the company……………………………………………………………………………………222. Product of company………..…………………….…………………………………………………..223. Region wise demand…….………………………………………………………………..…….……234. Plants of company……………………………………………………………………………………..23

D. Financial Information1. Balance Sheet……….……………………………………………………………………………………302. Profit & Loss……….…………………………………………………………………………………..…313. Cash Flow Statement…….……………………………………………………………………………324. Ratio analysis…….……………………………………………………………………………………….32

E. Analysis

1. Peer Analysis………………………………………………………………………………………………362. Valuation……………………………………………………………………………………………………37F. Conclusion

1. Recommendation……………………………………………………………………………………….412. Sources……………………..……………………………………………………………………………….423. Full Form and Glossary…………….…………………………………………………………………394. Report Gallery……………………………………………………………………………………………405. Disclaimer……………………………………………………………………………………..………….41


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Company Overview

About

Latest Date 11th April2019

Latest Price (Rs) 756.35

52 Week High (Rs) 878.95

52 Week Low (Rs) 546.3

Face Value(Rs) 1.00

Industry PE 39.97

TTM PE 39.66

Price/BV(x) 4.14

EV/TTM EBIDTA(x) 18.45

EV/TTM Sales(x) 3.93

Dividend Yield% 0.40

MCap/TTM Sales(x) 3.72

Market Cap (Rs in Cr. ) 17810

EV (Rs) 18871

Latest no. of shares (in Cr.) 23.56

The Ramco CementsLimited

TRCL Cements Limited is the flagshipcompany of the Ramco Group, a well-knownbusiness group of South India.. it wasestablished in 1962. The first plant of RCL atRamasamy Raja Nagar, near Virudhunagar inTamil Nadu, commenced its production witha capacity of 200 tonnes. The main productof the company is Portland cement,manufactured in eight state-of-the artproduction facilities that includes IntegratedCement plants and Grinding units with acurrent total production capacity of 16.45MTPA. The company also produces ReadyMix Concrete and Dry Mortar products, andoperates one of the largest wind farms in thecountry.

The company has currently 55% marketshare in TN & Kerala, 19% in West Bengaland Odisha, 16% in AP & Telangana and 10%Karnataka. Company is expanding in easternregion with plants is Kolaghat ( west bengal)and expansion in odisha district. cementsector is expected to grow by governmentinitiative such as Pradhan Mantri GramSadak Yojana, pradhan, Housing for AllBharatmala projects, metro expansion,Pradhan Mantri Awas Yojna-Gramin, realestate revival and etc.

Exchange: BSE BSE Code: 500260 Current Market Price:756.35 Date: 11-Apr-19


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Investment Rationale

Most efficient:TRCL is the most efficient player among it's peers. It has highest realization per tonne(Rs4769/tonne) and healthy EBITDA/tonne (Rs 1220/tonne)

Reducing dependency:TRCL target market was Southern India. It has been able to capture eastern market too andhas been expanding rapidly in other markets too.

Higher margin:TRCL is having healthy EBITDA Margin (24%) and PAT margins (12%) and operates aboveaverage industry Margin. This is mainly because of lower freight cost and low coalconsumption

Strong balance sheet:TRCL has been able to pay off its debt consistently, paid 1785 crore in last 4 years. They haveexpansion in pipeline, company will be able to borrow debt without deteriorating its capitalstructure ( D/E 0.28).

Demand to pickup in India:Cement sector have been experiencing early uptrend majorly boosted by governmentspending and housing sector. All companies have seen double digit growth(14.4%) in cementafter 8 years.

Gain in Pricing power:In southern markets, cement players have regained pricing power and they are able to chargepremium for the same. Capacity utilization has been expanding because of the same.

Captive power plant:TRCL windmills is wholly owned company of ramco cements. It fulfills almost all major powerrequirement of ramco and also caters fly ash for production of cement.

Jainam Share Consultant Pvt Ltd Sector : Cement

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Risk

1) There is capacity expansion by majorly all players in cement industry which would eventuallyfulfill all the demand created by economy. And it might also create a scenario of oversupply in analready oversupply market.

2) TRCL is working at capacity utilization of ~60% and still it have expansion plans which couldlead to much more fall in capacity utilization of company.

3) TRCL has been getting soft loan and loan on subsidized rate by tamil nadu government, onwhich they have to pay negligible interest. If they are not able to borrow on the rate, it wouldimpact their PAT margins.


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Industry

Outlook of cement industry in IndiaCement industry in India witnessed robust growth of 14.4% during FY19 backed by Governmentspending on infrastructure.

The average cement demand is expected to grow 1.2 times of the GDP growth rate in the countryover the long term.

The growth of industry will be primarily driven by the government spending on big infrastructureprojects and low cost housing, besides uptick in rural housing

The domestic industry has sustained cement consumption growth of 7% in last 17 years and afterprobably 7 years, it has seen growth in double digit.

India is the second largest producer of cement in the world after China, with an installed capacityof approximately 500 mtpa. It accounts near about 8% of total industry in world. Majorly capacityis driven by southern region of 35%, followed by northern region of 20%, eastern, western andcentral of about 18%, 14% and 13% respectively.

India’s current per capita consumption of cement was 220 kg 2017 which is below the globalaverage of 580 kg in 2017. highest per capita cement consumption china of 1680kg.


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CEMENT MANUFACTURING PROCESS:

Quarrying raw material:-The principal raw materialrequired for cementmanufacturing is Limestone.Limestone is mined from themines by blasting explosivesand is transported from themining area to the processplants. Big players have theirintegrated mines and they areusually nearby mines, whicheventually reducestransportation cost.

Raw material processing:-The limestone is fed intoprimary crusher( jaw crusher),where lime stones is crushedinto small pieces of about25mm-45mm.

Then crushed limestone aretransfered into secondarycrusher where it is convertedinto fine particles.

After filling the powderedmaterials from raw mill to acertain level in the blendingsilos, this materials is blendedfor 2 to 3 hours withcompressed air after blending.Sand and other raw materialare added during the process.


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Rotary kiln:The burning process is carried out in the rotary kiln while the raw materials are rotated at 1-2rpmat its longitudinal axis. The rotary kiln is made up of steel tubes having the diameter of 2.5-3.0meter and the length differs from 90-120meter. The inner side of the kiln is lined with refractorybricks.temperature inside kiln is about 1400-1500C

Clinker cooler:The hot clinker from the Kiln is cooled with the help of atmospheric air in the grate cooler.

Clinker grinding:The cooled clinkers are received from the cooling pans and sent into mills. The clinkers are grindedfinely into powder in ball mill or tube mill. Powdered gypsum is added around 2-3% as retardingagent during final grinding. The final obtained product is cement

Packing and dispatch:The grinned cement is stored in silos, from which it is marketed either in container load or 50kgbag.

Difference between Wet process and dry process:

Wet ProcessThe wet process of cement manufacturing involves adding water to finely crushed raw material,such as limestone, clay or iron ore, in a proportion of 35 to 50 percent water to 50 to 65 percentraw material to make a slurry that is fed into a cement kiln. In the wet process, the kiln is a verylong tube in comparison to dry process, and the slurry that is easy to blend. Wet process could beselected as manufacturing technology is when raw materials have natural high moisture content.The crushed materials from different silos and basins are drawn in correct proportions in a channelcalled wet grinding mills. evaporating the water from the slurry uses a large amount of fuel. Thistakes more time because the mix stays in the rotary kiln for two to three hours compared to 20minutes with the more contemporary dry process

Dry ProcessWhen the available raw materials are quite hard, then this process is used. Size of klin is usuallysmall in this process. Air pressure is used to mix the components in this process. No water is usedduring this process and it takes less time. The raw material is dried up during transferring materialfrom silos to klin, as there are air pumps in klin which transfer heat and it goes through preheating process which is about 700-800c.


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SECTOR WISE DEMAND AND DEMAND DRIVER:-

The demand for cement in India can be attributedto three main sectors viz Housing and Real Estate,Public Infrastructure and Industrial Development.

Housing is the major contributor in demand ofcement about 65%. Followed by infrastructurecontribution about 20%.and then commercial andindustrial sector of 15%.

Housing sector:

Housing sector majorly includes real estate industry. Real estate has been in downtrend since2008 in India. Some major reason for it was implication of demonetization, short term headwindby Real estate regulation act(RERA), and lack in investment in real estate. Government iscontinuously trying to revive real estate by budgetary support, softing rules and regulation andproviding support to real estate.

By implementation of RERA, housing sector is expected to get a boost in longer term as it willincrease trasnperancy in whole real estate sector which was unorganized before. It will greatlyattract home buying activity.

some of major demand driver in housing segment are Pradhan mantri awaas yojna, pradhanmantri awaas yojna- gramin, housing for all, national urban housing fund, and many initiative bygovernment:-

Pradhan Mantri Awas Yojana(PMAY):-

By PMAY government is focusing on Housing for all(HFA) scheme, 2022. it focus on proving hometo all.

PMAY Scheme is an initiative provided by the Government of India which aims at providingaffordable housing to the urban poor. The mission of this initiative is to provide housing for all bythe year 2022.

Also, under the Credit Linked Subsidy Scheme, beneficiaries under PM Awas Yojana are eligible forinterest subsidy if they avail a loan to purchase or construct a house.

Till now, the PMAY (U) mission has achieved a significant milestone of approving 73 Lakh housesagainst a demand of about 1 Crore houses in urban areas. Out of these, around 39 Lakh houses areat various stages of construction and around 15 Lakh houses have already been completed. Duringthe period 2014-18, a total number of 1.53 crore houses have been built under the PradhanMantri Awas Yojana (PMAY).


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There is also a credit related subsidy scheme. The benefits under the CLSS can be availed byEconomically Weaker Sections or Low Income Groups who are looking for housing loans fromfinancial institutions and banks that are participating in the Pradhan Mantri Awas Yojana Scheme.Borrowers can Credit Linked Subsidy for new construction or for adding a room to their existinghouse. This scheme will uplift demand as people will be able to afford housing. The council ofhousing sector has recommended that the GST for homes bought under the CLSS (Credit LinkedSubsidy Scheme) for under-construction houses will be reduced to 8%. Previously, the GST forthese kind of homes were 12%.

Infrastructure:

Infrastructure drives demand of cement about 17% in India. It constitutes Roads, irrigation, metrorailway, bridges. Government spending in developing infrastructure has been significant. 100smart cities plays a major role in it.

Bharatmala:

Bharatmala yojana is a centrally-sponsored and funded road and highways project ofthe Government of India. Special emphasis will be given on providing connectivity to far-flungborder and rural areas including the tribal and backward areas. Bharatmala will connect 550district headquarters (from current 300) to minimum 4-lane highway. Bharatmala includeseconomic corridors of around 9,000 km, inter-corridor and feeder routes of around 6,000 km,5,000 km roads under the National Corridors Efficiency Program, border and internationalconnectivity roads of around 2,000 km, coastal and port connectivity roads of around 2,000 km,expressways of around 800 km and 10,000 km of NHDP roads. The total length in phase 1 comesto around 34,800 km


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Sagarmala:

The Sagarmala is a series of projects to leverage the country’s coastline and inland waterways todrive industrial development. It was originally mooted by the Vajpayee government in 2003 as thewaterways equivalent of the Golden Quadrilateral. Sagarmala, integrated with the development ofinland waterways, is expected to reduce cost and time for transporting goods, benefitingindustries and export/import trade.The project is mammoth with 150 initiatives with a total outlay of Rs4 lakh crore, spread acrossfour broad areas. One, modernise port infrastructure, add up to six new ports and enhancecapacity. Two, improve port connectivity through rail corridors, freight-friendly expressways andinland waterways. Three, create 14 coastal economic zones or CEZs and a special economic zoneat Jawaharlal Nehru Port Trust in Mumbai with manufacturing clusters to enable port-ledindustrialisation. Four, develop skills of fishermen and other coastal and island communities.

Smart city project:

Some of the core infrastructure elements in a Smart City would include adequate water supply,assured electricity supply, sanitation, including solid waste management, efficient urban mobilityand public transport, affordable housing, especially for th e poor, robust IT connectivity anddigitalization, good governance, especially e-Governance and citizen participation, sustainableenvironment, safety and security of citizens, particularly women, children and the elderly andhealth and education.

A total investment of Rs.2,01,981 crore has been proposed by the 99 cities under their smart cityplans. Projects focusing on revamping an identified area (Area Based Projects) are estimated tocost Rs. 1,63,138 crore. Smart initiatives across the city (Pan City Initiatives) account for theremaining Rs. 38,841 crore of investments.

A total of 2,342 projects worth Rs 90,929 crore have been tendered under the Smart City proposal.Nearly 72 per cent of these or 1,675 projects worth Rs 51,866 crore are under implementation orhave been completed, as on November 30, 2018. The pace of implementation of projects haspicked up significantly during the last one year. There has been a 290 per cent increase in projectstendered, 332 per cent increase in projects grounded or completed and 479 per cent increase inprojects completed since October 2017.


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REGION WISE DEMAND IN INDIA :-

NORTH:

The government’s focus on infrastructure projects has been driving demand. Rajasthan, which hadbeen under pressure due to the sand mining ban, has now seen a pick-up in demand, mainlybecause of the infra push. however, note that demand in Delhi, NCR and Punjab was impactedby rains in 2QFY19 and in Himachal Pradesh by the transport strike.

Northern region has witnessed the slowest growth in infrastructure investments which stoodat6.7% over FY15-FY19 from INR 342 bn to INR 416 bn. This was primarily because of slowingdown in infrastructure outlay in Rajasthan (accounts for 57.2% of overall infrastructure outlayinNorth), where investments grew from INR 206 bn to INR 238 bn over FY15-FY19BE(~4.8%CAGR)Total urban housing shortage in North stands at 2.81 mn units accounting for 15% ofthe overall shortage. Under PMAY-U, pick-up has been on a lower side with sanctioning of 5.11lakh units(~8.5% of overall sanctioning) while total houses grounded for construction at mere 1.72lakh units (~5.4% of overall houses grounded for construction). Total construction of houses inrural areas has also been muted at 6.25 lakh units, accounting for ~7.9% of the overallconstruction of houses under PMAY-G since 2016 .


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Central:Demand in MP is being driven by rural housing. After being hit by the sand mining ban, demand inUP picked up in 2QFY19, led by infrastructure and PMAY. .The Central Region (comprising of UttarPradesh and Madhya Pradesh) has witnessed the highest growth in infrastructure investments,increasing from INR 385 bn to INR 657 bn overFY15-19 (CAGR of 19.6%); while it accounts for~17.9% of the total investments by Government in infrastructure.

MP alone accounts for 18.8% of overall housing outlay currently,with investments surging fromINR 15 bn to INR 73 bn over FY15-FY19.In terms of housing, the region accounts for ~22.2% oftotal urban housing shortage, equivalent to ~4.17 mn units. Accordingly, out of the total ~6.04 mnhouses sanctioned under PMAY-U yet,total sanctioned houses in the central region stood at ~1.31mn units, out of which ~6.54 lakh units have been grounded for construction while 1.78 lakh unitshave been completed.

Further,total construction of houses under PMAY-G as of now stood at ~2.73 mn units, accountingfor~35% of the total construction. In 2017, National Green Tribunal banned illegal sand miningcreating shortage in availability of sand coupled with surge in sand prices in Uttar Pradesh. Thisresulted into slowing down of construction activity, affecting cement demand.

East:Bihar has staged a strong recovery (after being hurt by sand mining ban) , led by individual housingand PMAY. While infrastructure continues to be a major driver of demand in east too, states likeJharkhand, Orissa and Bihar are also witnessing growth from individual housing and PMAY. ShreeCement and JK Lakshmi are the key beneficiaries of this trend.

The region has witnessed a modest increase of 11% in infrastructure investments byGovernment(from INR 766 bn to INR 1049 bn) over FY15-FY19 and accounts for ~29% of theoverall infrastructure investment. Investments in housing and urban development accountfor28.9%/21.8% of the total outlay respectively and have witnessed a growth of 27.2%/24.7%overFY15-FY19. States of Bihar and Jharkhand have witnessed increase of20.7%/18.2%respectively in infrastructure investments over last four years.

Total urban housing shortage in the East stands at 24.5% of the overall shortage, at ~4.6 mnunits.Under PMAY-U, total sanctioning of houses stood at 1.14 mn units while total housesgrounded for construction stood at 5.82 lakh units. East has witnessed highest traction underPMAY-G,accounting for ~45.5% of the total rural houses constructed, at ~3.6 mn units. WestBengal,Odisha, and Chhattisgarh together observed construction of ~2.6 mn rural houses. Further,the huge mismatch in supply-demand of houses provides a long runway for growth in the region.

West:

Gujarat was impacted by floods and RERA and Maharashtra by sand mining ban and monsoon.Nevertheless, infrastructure-led demand drove a revival in Gujarat and affordable housing-leddemand helped in Maharashtra.Growth of infrastructure investments in West over FY15-FY19 was~11.9% from INR 408 bn to INR 571 bn with subdued growth in infrastructure investments inGujarat (~7% CAGR). Urban development continues to be the key highlight for the region as itaccounts for 26.1% of the overall allocation towards urban development in India, and has grown


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by ~14.2% over the last four years. On the other hand, investments in roads and bridges accountfor ~25% of the total allocation with flattish growth over FY15-FY19

Urban housing shortage in West accounts for ~16% of the total shortage at ~2.93 mnunits.Implementation of PMAY- Urban and Rural, have been off to a slower start in the Westernregion. Under the urban scheme, ~9.64 lakh units have been sanctioned yet, out of which only40%have been grounded for construction. Similarly, rural housing scheme has also not picked up yet,with meagre construction of ~5.27 lakh units under PMAY-G, accounting for ~6.7% of totalconstruction of rural houses since FY16.

Further, both Maharashtra and Gujarat have experienced unsteady patterns of rainfall over thelast four years, significantly affecting cement demand. Recent articles also suggest that 19 out ofthe total 35 districts in Maharashtra’s Vidarbha and Marathwada regions will be facing droughtlike situations due to deficient rainfall.

South:

Tamil Nadu was under pressure because of the sand mining ban in 2QFY18. With the resolution ofthe issue, demand picked up from 22% in 2QFY18 to 27% in 2QFY19. Demand in AP/Telangana hasbeen very strong, mainly led by pre-election projects push. Amravati development, irrigation andinfrastructure projects have been driving growth in the region.

Consequently, south-based companies such as India cement, TRCL enjoyed demand growth ofmore than 10% in 2QFY19.Over FY15-FY19, total investment in infrastructure by the Governmenthas grown by 13.6%from INR 567 bn to INR 831 bn, primarily led by AP and Telangana, whereinvestments grew at a CAGR of ~22.3%/21% respectively over the same period.

Total irrigation investment in Telangana has grown from INR 29 bn to INR 82 bn over FY15-FY19BE(~42% CAGR) and currently accounts for 21% of the total irrigation investment in India. Despitesuch a sharp increase in overall expenditure.

The total urban housing shortage in South stands at 4.08 mn units, accounting for ~22% of theoverall shortage. Under PMAY-U, the Southern region has observed highest sanctioning of housesat ~2.09 mn units with ~66% of houses grounded for construction as well. Again, this has been ledby AP and Telangana which account for ~56% of total houses grounded for constructionin south.However, implementation of PMAY-G has been on a lower side with a meagre construction of 3.92lakh units over last 3 years.

Going ahead, AP & Telangana will continue to lead the southern pack in terms of growth incement demand. Further, pick up of Amaravati project in AP should also boost demandsubstantially. Both these states have witnessed cement demand growing at ~17% over the lasttwo years owing to higher infrastructure activity. We expect the trend to continue and believe thatdemand should grow at ~12% over FY18-FY21


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CONCENTRATED FOCUS ON SOUTH:-

Andra Pradesh:

The state Government of Andhra Pradesh plans to complete infrastructure in three smart cities byFiscal 2021 with the total 210 infrastructure development projects investing approximately Rs5,380 crore during Fiscal 2018 to Fiscal 2023,which includes 71 projects worth Rs1,990 crore inKakinada, 39 projects worth Rs 1,610 crore in Tirupati and 47 projects worth Rs 1,780 crore inVisakhapatnam.

The new capital city of Andhra Pradesh, Amaravati, being built with an area of 217 squarekilometers at an investment of 58,000 crore in Guntur district, is expected to have 51% of greenspaces and 10% of water bodies. The city of Amravati is expected to be fully functional andpopulated by 2024. However, universities, luxury hotels and the central businessdistrict are expected to completed by 2029. Urban planning agency such as Andhra PradeshCapital Region Development Authority and Infrastructure Authority was established by the stategovernment for development of the capital city. This is expected to drive the Andhra Pradesh'scement consumption during Fiscal 2018 and Fiscal 2028.

Telangana:

The state Government has introduced the ‘2BHK housing scheme’ that intends to provide 2.7 lakhhouses by March 2019in phase 1 and three lakh houses by 2024 in rural and urban areas at a costof Rs36,000 crore.

The Telangana State Industrial Infrastructure Corporation has planned to introduce severalindustrial projects by 2020such as Micro, Small and Medium Enterprises - Telangana IndustrialFederation Green Industrial Park at Dandumalkapur,Kakatiya Mega Textiles Park at Warangal,medical devices park at Sultanpur, National Industrial and Manufacturing Zone at Zaheerabad andPharma City at Mucherla.Two major smart cities (Greater Warangal and Karimnagar) are under development in Telanganawith an investment Rs2,700 crore and Rs1,700 crore respectively.

Karnatka:

Karnataka State Highways Improvement Project, KSHIP-III, endeavors to build 419 km of roadsamounting to Approximately Rs 5,300 crore since Fiscal 2018 to improve urban state infrastructureand it is expected to increase the state consumption of cement and construction materials.The state Government allocated Rs5,600 crore for Bangalore Metro Rail Corporation Ltd Phase-IIproject and the Comprehensive Infrastructure Development of Bengaluru was funded with Rs2,500 crore during Fiscal 2019 for road laying and commercial building construction.


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West Bengal:

The state Government has taken up various road development projects such asBarasat-Krishnanagar section, Palsit-Dankuni road project and Panagarh-Palsit road project underPublic-Private Partnerships and allocated Rs 20,150 crore for infrastructure and commercialprojects including bridges, flyovers, roads, water projects and warehouses for storing food grains.At Raghunathpur, three major steel parks are expecting to be established in the future with aninvestment of Rs 39,950crore.

OdishaIn 2018, Odisha state Government has planned an affordable housing project for approximately480 units at Kalinga Nagar Development Authority, comprising 161 revenue villages and spreadover an area of 459 square kms. Bhubaneshwar has been selected by the Ministry of UrbanDevelopment to be developed as a smart city in the state during2016 to 2021 and has received$ 346 million through Public-Private Partnerships funding.


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RAWMATERIAL ANDMAJOR COST:-

Raw material for cement includes limestone, fly ash, gypsum and slag. Most cement companiesare backward integrated and have secured access to limestone and gypsum. Raw materialproportion and cost varies according to the cement types manufactured.Cement plants aregenerally located near limestone quarries to avoid long distance transportation of the key rawmaterial.

Apart from limestone, other key raw materials used are fly ash, slag, and gypsum. Fly ash isobtained as a by-product of thermal power generation while slag is a by-product of steel making.Cement companies also look at establishing their plants closer to the fly-ash and slag sources tobenefit from lower logistics cost for these raw materials. The proportion of clinker,fly ash, gypsumand slag for cement production varies according to the type of cement that is required to beproduced i.e.,OPC, PPC and PSC.

Limestone:

The Indian cement capacity is centered on the areas with abundant availability of key raw materiali.e. limestone. However,in order to reach large end markets with no limestone reserves nearby,split grinding strategy is followed with clinker manufactured in an area close to limestone reservesand cement grinding and packing at end markets, which reduces the transport cost as bulktransport of clinker is possible at a relatively lower cost when compared to cement. Cementcapacity in the country is mostly concentrated near the main raw material source, limestonemines.

Nalgonda region in Telangana has a large concentration of cement plants. It has marketconnectivity to Andhra Pradesh,Telangana, Odisha, and other central and eastern states. Gulbargaregion in Karnataka is mineral rich and has considerable limestone deposits; the plants operatinghere have low mining cost and are highly efficient because of high concentration Deposits

Frieght:

Logistics for cement and its raw materials (limestone, fly ash and slag) are carried out primarilythrough three modes - road,railways, and sea. The cost of transportation is a critical factor in thecement industry which determines landed prices competitiveness. Logistics costs account for 24%to 28% of the overall operating cost for key cement companies. The basic raw materials forcement production such as limestone and coal are low value bulky materials and hencetransporting them over long distances escalates logistics cost considerably. Therefore, majority ofthe cement plants are located closer to limestone mines forming cement industry clusters.Limestone quarried from mines is transported in dumpers or conveyor system to the crushingunits, which are situated at less than 20 kmThe cement plants which are located closer to coal mines have lower inbound logistics costcompared with other plants which are far away. Establishing grinding units closer to port and toraw material sources (fly ash and slag) help in outweighing the cost of transportation of clinker togrinding unit against lower cost of transportation of the other raw materials. Railway


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transportation over longer distance is logical, while using railway transportation for shorterdistances could be in feasible as there is high loading and unloading costsSea-based transportation is emerging as a cost-efficient choice to transport cement especially tolong distances. The gradual shift in focus on the waterway/ seaborne transportation can also bewitnessed with the increase of cargo handling capacity of the major ports. Sea-based cementtransportation is generally done via barge, general cargo ship or special vessel carrying onlycement

Power and Fuel Cost

Pet coke, a derivative of the oil refining industry, and coal are used as fuels, both in kilns andcaptive power plants. Energy is a major component in operating expenses of a cement plant.Generally, cement companies select captive power Plant.In cement kilns, limestone is burnt at over 1500°C to produce clinker, which is then crushed toproduce cement. When petcoke is used as a feedstock, the lime in clinker absorbs the sulphur(both lime and sulphur easily react to each other). The sulphur that is eventually let out of thestack is way below the permissible norms. There is another advantage in using petcoke in cementkilns. As petcoke has zero ash content, cement firms can use low grade limestone. This is a bigadvantage as almost 60% of India’s limestone reserves is low grade in nature and cannot be used ifcoal (that has significant ash content) is used as fuel.An oil refinery by-product, petroleum coke, orpetcoke, is used as a fuel because of its higher energy content than coal. The sulphur emissionsthat are usually given off when petcoke is burned are instead absorbed during the cement-makingprocess. More than half of India`s petcoke demand of 27 million tonnes is imported, mostly fromthe United States, according to industry estimates.


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TYPES OF CEMENT:

Odinary portland cement

Ordinary Portland Cement (OPC) the most widely and commonly used cement in the world. Thistype of cement is manufactured to powder by mixing limestone and other raw materials whichconsist of calcareous and gypsum. It is preferred in places where there is need of fast construction.This cement is available in the market in three grades namely OPC 33, OPC 43 and OPC 53.Thesegrades imply the maximum strength of the particular cement after 28 days.

Portland Pozzolana Cement

Pozzolana is a natural or artificial material which contains silica in the reactive form. PortlandPozzolana Cement is cement manufactured by combining Pozzolanic materials. This cementcomprises of OPC clinker, gypsum and pozzolanic materials in certain proportions. The Pozzolanicmaterials include fly ash, volcanic ash, calcined clay or silica fumes. These materials are addedwithin a range of 15% to 35% by cement weight.


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Business of the Company

About

Products:

1) Cement:

Cement is main product of TRCL. They produce PPC grade cement under name ‘Ramcosupregrade’ .It also produces OPC cement under quality Ramco Cement 43 Grade (OPC 43) &Ramco Cement 53 grade. This cement is used in marine conditions where soil or water containsexcess sulphates. However SRC is weak in resisting chloride attack

2) Drymix Products

Ramco Super Fine – Polymer fortified wall putty. It is pre-blended with Portland cement,fillers and chemical admixtures to give world class finish to walls and ceilings

Ramco Tile Fix - Polymer fortified tile adhesive. It is pre-blended with Portland cement, fineaggregates and chemical admixtures to fix all type of tiles viz. ceramic tiles, porcelain tiles,natural stones ( marble, mosaic , granite), etc. for interior / exterior floor and wallinstallations.

Ramco Super Plaster - Premixed Dry Mortar with graded sand , binders and additives forGeneral Purpose Plaster, Water Repellant Plaster and for Ceiling and brick laying Application

Ramco Super Plaster- Plastering Compound- Non sanded product pre-blended with Portlandcement , hydrated lime and chemical admixtures for plastering and mortar applications

Ramco Super Fine Cement-based Putty:Ramco Super Fine is a perfect match for walls and a better alternative to gypsum or acrylicputty.

3) Ready Mix concrete:

Ready mixed refers to concrete that is batched for delivery from a central plant instead of beingmixed on the job site. Each batch of ready-mixed concrete is tailor-made according to the specificsof the contractor and is delivered to the contractor in a plastic condition.Although both ready mix concrete and dry mix product contribute ~1% od company,s revenue.


11-04-2019 23

REGION WISE DEMAND:TRCL have major presence in south and they have been expanding in eastern marketstoo.Southern market is flooded with many producers as south India is rich with limestone reserves.Company have significant presence in eastern markets and eventually they are setting up units iseastern region too. TRCL is able to charge premium for its product in south as it does have higherrelaisation per tonne. Any natural climatiy or other thing which would happen in south will impactwhole company greatly.

PLANTS OF COMPANY:

TRCL will be expanding its unit by 3.16 MTPA in Andra pradesh, West bengal and Odisha. In a splitgrinding unit, the clinker grinding, cement storage and dispatch operation are carried out at asuitably selected location, away from the clinkerization unit. Split grinding route enables highercustomer reach.In such scenario, it is advantageous if the manufacturing unit is located close tothe limestone deposits and cement grinding/distribution of end product is done from nearer tothe consumption centers. Split grinding strategy involves the manufacturing unit of clinker to beset up close to the limestone reserve and the grinding unit to be set up nearer to the consumptioncenter. The advantage is that transportation of clinker incurs lower cost and is easier compared tocement which has to be bagged or protected (if it is bulk) along with subsequent storage. Once itreaches the grinding unit, it is further ground along with other raw materials such as gypsum,fly-ash or slag


11-04-2019 24


11-04-2019 25

In the above map, we can notice that company has opened all of its grinding unit near sea shore.And company is expanding in all grinding area near sea shore which is beneficial for company inorder to control freight cost of company. Company uses sea route for transportation of clinkerwhich is cheapest mode for transportation.

TRCL is one of the major player in south India and eventually expanding is east India. Companystands at better position on basis of valuation and leverage as compared to its peer in south India.Despite lower capacity utilization in the southern region, TRCL is among the lowest-cost cementproducers in India. TRCL registers higher realization than its peers led by a strong brand image inits prime markets and a major presence in the trade segment which enables it to get higherrealisation versus other players, leading to superior profitability.

Strong balance sheet:

Company have been paying off debt andmaintaing a healthy balance sheet. Companyhas announced expansion plan of ~3500 croreover 2 years. They will fund it throughborrowing and majorly from internal accruals.

Highest realization per tonne:

TRCL is having hishest realisation per tonne ascompared to its peers. This trend has been sameover past 3 years and it commands premiumpricing in south indian markets. South India is oversupplpied capacity in india. TRCL realisation pertonne is higher than PAN India players too.


11-04-2019 26

TRCL is having higher ROE and ROCEcompared to its peer in south India. Thisis due to good margins TRCL have. TRPLis having much lower debt due to whichthey are able to generate higher PAT.Company has been constant ingenerating returns as given data is ofpast 3 years average. ROE is 17.3 andROCE is 16.9

Higher margins:

TRCL is having highest margings amongpeer. Cement is a commodity businessand better the margins, better thecompany holds position holds inindustry. On comnparing to PAN india,still TRCL is one of the most efficentcement player. It is having 24% EBITDAmargin and 12% PAT margin.

Higher return ratio:-


11-04-2019 27

Major cost per tonne:-

TRCL is having least finance cost among its peers. Company has been paying off debt since 2015.From 2016 to 2018, when cement industry was in downtrend, still TRCL was able to pay off itsdebt because of capturing market share of existing player in south and expansion in east India.

TRCL is able to keep minimum freight cost as company uses sea route as mode of transportation.Most of its plants are near port so it is feasible and convenient to go with sea ways. Company alsorelies much on Indian railway for transportation. As both railway and sea way are cheapertherefore TRCL is one of the most efficient in freight. The Company’s cement manufacturing plantsare situated close to limestone mines, thereby reducing the transportation impact of thelimestone. The Company’s cement grinding units are situated close to thermal power plants,thereby reducing the transportation impact of the

TRCL is most efficient in power and fuel expenses as it replace diesel with waste Tyre oil for kilnsduring start up. TRCL gets power through its own capative power plant and its subsidiary TRCLWindfarms Limited. Most of company requirement is met by the same.

TRCL and India cement have higher raw material per tonne as they are large producer and theyhave large Inter unit clinker transfer.

The Cement Manufacturers Association signed a new wage settlement pact with major tradeunions, for increasing the gross monthly payment of employees by 5,000. This settlement is forfour years, from 1 April 2018 to 31 March 2022. Also, it provides for enhanced dearness allowanceand other benefits. cement companies are most likely to pass this burden via price hikes, as theyhave done in the past.


11-04-2019 28

EV/Tonne

TRCL is having highest EV/Tonne as it indicates replacement cost per tonne of cement.

Healthy EBITDA per tonne

EBITDA per tonne of TRCL Is higher than its peer. TRCL is efficient in maintaing freight and othercost related to production.


11-04-2019 29

Capacity utilization:

South usually have low capacity utilization as south region is somehow matured market. Already itis having surplus of supply. TRCL is therefore expanding and concentrating much more towardsEast india.


11-04-2019 30

Financials

Balance Sheet

Particulars (Rs in crore) Mar-18 Mar-17 Mar-16 Mar-15 Mar-14

Equity Share Capital 23.56 23.81 23.81 23.81 23.80

Reserves 4,081.49 3,771.65 3,109.33 2,601.81 2,435.13

Borrowings 1,193.31 1,247.63 1,777.20 2,950.86 2,681.69

Other Liabilities 1859.66 2027.42 2033.95 1429.64 1704.88

Total 7,158.02 7,070.51 6,944.29 7,006.12 6,845.50

Net Block 5,060.54 4,942.38 4,901.16 4,875.52 4,641.48

Capital Work in Progress 150.03 97.42 138.31 257.52 349.52

Investments 371.81 356.21 326.72 357.73 282.69

Other Assets 453.98 426.09 466.19 552.7 537.71

Total 7,158.02 7,070.51 6,944.29 7,006.12 6,845.50

Receivables 442.31 554.90 472.12 380.22 303.96

Inventory 559.94 575.43 549.02 520.58 685.53

Cash & Bank 119.41 118.08 90.77 61.85 44.61

Face value 1 1 1 1 1


11-04-2019 31

Profit and Loss Account

Particulars (Rs incrore) Mar-18 Mar-17 Mar-16 Mar-15 Mar-14

Sales 4,583.75 4,582.02 4,139.41 4,192.36 4,238.19

Excise duty on sales 159.95 614.69 557.65 537.01 554.67

Raw Material Cost 766.68 655.45 578.88 677.33 669.86

Change inInventory

-16.10 14.94 9.94 3.21 19.80

Freight Cost 928.10 738.27 671.90 795.76 825.67

Power and Fuel 729.07 516.41 526.97 704.00 832.40

Other Mfr. Exp 323.21 300.57 262.05 304.01 324.53

Employee Cost 304.85 278.52 259.40 229.29 221.83

Selling and admin 242.48 232.8 177.93 191.94 190.02

Other Expenses 32.59 22.15 17.71 29.18 36.31

Other Income 32.68 39.94 75.47 84.92 63.29

Depreciation 293.51 285.83 305.26 251.24 306.43

Interest 59.99 105.42 184.27 195.87 188.95

Profit before tax 457.13 592.44 422.77 423.62 393.77

Tax 54.7 107 59.71 83.61 86.26

Net profit 402.47 485.61 363.06 340.42 307.14


11-04-2019 32

Cash Flow Statement

Financial Ratios

Particulars (Rs in crore) Mar-18 Mar-17 Mar-16 Mar-15 Mar-14Cash flow from operatingactivity 1,124.38 1,117.41 1,088.78 931.55 508.58

Cash flow from Investingactivity

-489.96 -280.17 -260.59 -477.06 -571.20

Cash flow from finance activity -792.98 -664.96 -949.72 -436.33 53.13

Net cash inflow/outflow -158.56 172.28 -121.53 18.16 -9.49

Report Date Mar-18 Mar-17 Mar-16 Mar-15 Mar-14

Margin Ratios

Core EBITDA Margin(%) 24.99 27.24 27.84 19.21 14.78

EBIT Margin(%) 18.59 21.00 20.47 13.22 7.55

Pre Tax Margin(%) 17.26 18.70 16.01 8.55 3.09

PAT Margin (%) 12.22 14.28 12.83 5.81 2.70

Cash Profit Margin (%) 18.63 20.52 20.21 11.81 9.93

Report Date Mar-18 Mar-17 Mar-16 Mar-15 Mar-14Performance Ratios

ROA (%) 7.87 9.34 7.62 3.52 1.67

ROE (%) 14.18 18.88 18.45 9.59 4.66

ROCE (%) 16.26 18.29 15.92 10.33 5.96

Asset Turnover(x) 0.64 0.65 0.59 0.61 0.62

Inventory Turnover(x) 8.06 8.13 7.72 6.95 6.18

Sales/Fixed Asset(x) 1.87 2.69 1.6 1.04 0.99


11-04-2019 33


Efficiency Ratios

Fixed Capital/Sales(x) 1.77 1.70 1.80 1.66 1.58

Receivable days 39.70 40.91 37.58 29.78 26.18

Inventory Days 45.30 44.88 47.25 52.55 59.04

Payable days 27.44 29.40 30.03 24.05 19.40


Growth Ratio

Net Sales Growth(%) 11.51 10.76 -2.01 -0.76 -3.8

Core EBITDA Growth(%) -8.22 8.30 43.06 28.60 -38.06

EBIT Growth(%) -11.46 13.59 52.84 73.24 -55.28

PAT Growth(%) -14.37 23.14 118.00 112.88 -65.89

EPS Growth(%) -14.03 21.55 121.52 114.78 -65.89


Financial Stability Ratios

Total Debt/Equity(x) 0.28 0.38 0.69 1.04 1.18

Current Ratio(x) 0.70 0.70 0.66 0.78 0.72

Quick Ratio(x) 0.41 0.43 0.40 0.42 0.31

Interest Cover(x) 14.01 9.13 4.60 2.83 1.69


11-04-2019 34

Depreciation Coverage:

TRCL operates in heavy business model. Company’s net block is about 72% of total assets. Theyare required to do continues capex due to brownfield and greenfield expansion. Being in assetheavy business, they need to cover depreciation cost. Although depreciation is non cash expanse,but during replacing its assets, they need to incur more capex. If EBITDA/Depreciation is high, itsgood for company as it can incur more capex and its EBITDA can take more of depreciationexpenses.

Company is constantly increasing its depreciation coverage but still capex will be a concern forcompany. As it’s capacity utilization is not much higher but still company is expanding which wouldhave negative impact on its PAT.

Cash Efficiency:

Converting profit into cash is an important part for the business as it shows that business is notonly showing book profit but it is also realizing it in cash. If company will not convert cashefficiently into business they would require much more short term borrowing and have to parktheir current assets into working capital.


Du Pont

PATM (%) 12.22 14.28 12.83 5.81 2.70

Sales / Total Assets(x) 0.64 0.65 0.59 0.61 0.62

Assets to Equity (x) 1.80 2.02 2.42 2.72 2.78

ROE (%) 14.18 18.88 18.45 9.59 4.66


EBITDA 626 805 1152 1248 1145Depreciation 306 250 305 284 292EBITDA/Dep(x) 2.05 3.22 3.78 4.39 3.92


11-04-2019 35

Company is getting efficient in converting sales into cash. Ideally a healthy company converts 15%of its revenue into cash and TRCL has been able to do much better in the same.

Sales compared with capital employed:

Cement being a cyclical business and TRCL into it, capital employed becomes essential in this. Incyclical business, company do not have pricing power neither do they have sales in their control,only thing which company can do is deploying its capital efficiently into business and earn returnson the same

In TRCL’s case, company is doing extremely well as it is reducing its capital employed since last 4years and still they are able to generate sales on the same. Although sales growth have been innegative in past few years, but capital employed has coped up with it.


Cash flow from operation 509 932 1089 1117 1124Sales 4238 4192 4139 4582 4584Cash as % of sales 12% 22% 26% 24% 25%

Particulars (Rsin crore)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Capitalemployed

3707 4130 4526 4761 5038 5369 5360 5281 5244 5238

%growth 11.41 9.59 5.19 5.82 6.57 -0.17 -1.47 -0.70 -0.11

Sales2,814 3,106 2,969 3,652 4,388 4,238 4,192 4,139 4,582 4,584

%growth 10.37 -4.41 23.03 20.14 -3.41 -1.08 -1.26 10.69 0.04

ROCE 20.85 17.46 10.18 15.43 15.67 5.96 10.33 15.92 18.29 16.26


11-04-2019 36

Analysis

Peer Analysis

Particulars (Rs in crore) Ramcocements India cement Orient

cementSagarcement

Sales 4,583 5340 2461 776

Market cap 17,463 3,322 1,744 1,309EBITDA 1145 712 325.41 139.12

EBITDA % 25 13.34 13.22 18PAT 402 100.62 44.22 49.39PAT % 12.22 1.88 1.80 6.363 years average ROE 17.3 2.8 2.4 5.72

3 years average ROCE 16.9 7 5.5 9.8

Debt/Equity 0.28 0.61 1.29 0.61ROA 7.88 0.94 1.52 3.90EV/Tonne 10575 4000 3855 7043EBITDA/Tonne 1220 459 570 717P/E 31 43 64 38EPS 23.58 3.27 2.16 24.12Realization/tonne 4769 4622 3815 3564Debt 1125 3126 1313 261.47Raw material per tonne 790 806 474 551

Freight cost per tonne 996 1419 1033 779

Power & fuel cost pertonne

783 1108 1010 1168

Depreciation cost pertonne

313 229 219 171

Finance cost per tonne 64 304 224 153

Other cost per tonne 1149 823 972 877

Capacity (MTPA) 16.69 15.55 8.0 5.75

Production (MTPA) 9.3 11.1 5.8 2.67

Capacity utilization(MTPA)

56 71 73 46


11-04-2019 37

Valuation

We have assumed that the production will grow by 8% in FY 19 and FY 20. But in FY21, all the newcapacity addition will be in function and for the same we have assumed that 50% of the additionalcapacity will be utilized, so we have added 0.158 crore of production into FY20 to reach atproduction of FY21. realization/tonne has been constant for FY19 & 20, but in FY21, as newcapacity will come into play, we have added 8% into sales to arrive at realization/tonne of FY21.

EBITDA margins for FY19 will remain in pressure due to rise in price of Pet coke, diesel and otherfuel cost of company. Sand mining was also banned in some state by supreme court, due to whichcement industry was in pressure. In past company has maintained a healthy margins, being onconservatism side, we have taken margins as 25%.

We analyzed that in cyclical companies, during boom cycle, EV/EBITDA falls, and during downturn,it rises. Same happened with TRCL in 2006-2007. EBITDA increased rapidly, but market price wasnot much in movement, and then market price moved up, but EBITDA growth was steady due towhich EV/EBITDA increased. We have taken 3 scenario for EV/EBITDA.

Debt of company will remain constant to some point as company planned out its expansion plan, itstated that it will expand by internal accruals and external borrowings. We have taken debt atcurrent level and assumed it to be constant.

We estimated how much of EBITDA is converted into cash and cash equivalent of company intobalance sheet. From last 2 years, company has maintained 10% of its EBITDA as cash. We havetaken it as 8%, being on conservative side.

Particulars (Rs in crore) Mar-18 Mar-19(E) Mar-20(E) Mar-21(E)

Sales 4584 5030 5433 5867Realization/Tonne ( Rs) 4921 5000 5000 4716Production 0.9316 1.0061 1.0866 1.2446EBITDA( %) 24 20 25 25EBITDA 1145 1006 1358 1467EV/EBITDA 16 18 18 18EV 18330 18108 24448 26401Debt 1171 1000 1000 1000Cash 120 80 109 117Market cap 17278 17188 23557 25519No. Of equity share 23.56 23.56 23.56 23.56Price 733 730 1000 1083


11-04-2019 38

Market cap was calculated by respective Enterprise value of company. In cyclical companies, EVcan be very much misleading as during downturn, EV tends to rise and due to which investor getinto trap but EV increases due to majorly of borrowing.

This is same as above scenario, but we have reduced EV/EBITDA in this one

Particulars (Rs incrore) Mar-18 Mar-19(E) Mar-20(E) Mar-21(E)

Sales 4584 5030 5433 5867Realization/Tonne( Rs) 4921 5000 5000 4716Production 0.9316 1.0061 1.0866 1.2446EBITDA( %) 24 20 25 25EBITDA 1145 1006 1358 1467EV/EBITDA 16 18 17 16EV 18330 18108 23090 23468Debt 1171 1000 1000 1000Cash 120 80 109 117Market cap 17278 17188 22199 22585No. Of equity share 23.56 23.56 23.56 23.56Price 733 730 942 959


11-04-2019 39

Valuation on EV/Tonne and EBITDA/Tonne

While valuating any cement firm, EV/Tonne and EBITDA/Tonne becomes an important aspectfor valuing company. We have assumed EBITDA/Tonne of TRCL to be 1250 in FY 20 and FY 21.we went through past data, on expanding, TRCL do not have much impact on its EBITDAmargins, so FY21 wont have any headwind because of the same. TRCL have operated on 1500EBITDA/Tonne in past years, but being on conservative side, we have assumed 1250. In FY19,it is 1100 because margins were in pressure due to which It will not be able to sustain goodlevel of EBITDA.

Company has constantly increased its EV/Tonne. Sometimes it also rises aggressively. For thesame we have increased it marginally. And with the same, we have arrived to marketcapitalization of the stock.

Report Date Mar-18 Mar-19(E) Mar-20(E) Mar-21(E)

Sales 4584 5030 5433 5976Production 0.9316 1.0061 1.0866 1.2446EBITDA( %) 24 20 25 25EBITDA 1145 1107 1358 1556EV/EBITDA 16 18 18 18EV 18330 18900 19527 24217Debt 1171 1171 1171 1171Cash 120 71 109 120Market cap 17278 17800 20590 25268No. Of equity share 23.56 23.56 23.56 23.56Price 733 756 874 1073EV/Tonne 11116 11200 11700 12200EBITDA/Tonne 1229 1100 1250 1250


11-04-2019 40

Tobin’s Q ratio (Replacement cost):-

Cost of replacement is the cost to replacing assets used by cement company to manufacturecement. Cost of replacement tells us better picture about how the industry and company isgrowing. We would use tobin’s Q ratio for better understanding of the same. If company’s all assetreplacement cost is trading above company’s market cap, means that the cost to replace a firm'sassets is greater than the value of its stock and vice verse. If tobin’s Q ratos is much more higherthan 1, then we expect the market cap to fall and if it is way below 1, then stock is considered asundervalued.

In year 2020, we have assumed tobin’s Q ratio of 1.15 in year 2020, estimating for strong demandof cement. And in boom year cement have traded for 25% premium on their replacement cost.And In 2021, we have assumed to be 1.12. In 2021, new capacity will come into play for the sameratio will fall as market cap will cope with with such aggressive expansion.

Marketcapitalization

Cost ofreplacement per

tonne

Ramco’sreplacement

cost

Tobin’s Qratio

2005 1830 4250 2546 0.40

2006 3158 4500 2695 0.63

2007 3909 4750 2845 1.252008 5601 5000 4895 0.892009 4121 5250 5245 0.472010 5426 5500 6842 0.382011 5167 5750 7153 0.352012 6305 6000 7464 0.342013 8606 6500 10101 0.452014 7980 7000 10878 0.422015 9916 7500 12368 0.582016 11525 8000 13192 0.632017 17387 8600 14181 0.962018 18330 9200 15355 1.10

2019(E) 17800 9800 16356 1.092020(E) 19961 10400 17358 1.152021(E) 24455 11000 21835 1.12


11-04-2019 41

Conclusion

Recommendation

We see upside of ~35% from the current level. Due to past rally in TRCL leads to very less room forfurther upside. Company has seen good growth in FY19, and higher expectation for demand ofcement. Pick in government spending would boost demand further. Delayed capacity expansioncan have negative impact on companies efficiency.

Company have healthy margins and would be biggest beneficiary of cement demand in south andeventually in East India too. Much more emphasis will on be on how company will expand andimplementation of its capturing market share.

We recommend buy on ramco cement with potential of 35% in time horizon of 2 years.


11-04-2019 42

Source pmaymis.gov.in for housing data

Sagarmala.gov.in for sagarmala project

Wikipedia for several resources

India.gov.in for bharatmala project insight.

Ace equity

Sunil singhania presentation on cement sector in flame.

www.cmaindia.org

Penna cement DRHP

Emami cement DRHP

Ramco cement annual report

Ultratech cement annual report

Ultratech cement investors presentation

Dalmia bharat investors presentation

Shree cement investor presentation

India cement conference call

Ultratech cement conference call

Arihant capital report on cement sector

CARE rating sector report on cement

IBEF report on cement industry

Cement sector report by JM financial

Cement industry by axis

HDFC report on cement sector


11-04-2019 43

CLSA report on cement sector

Initiating report on The ramco cements by nirmal bang

Initiating report on The ramco cements by stewart & mackertich

Initiating report on The ramco cements by ICICI direct

Motilal oswal report on cements sector

Morgan stanley report on star cement

Name Designation Email IdTejas Jariwala Research Head [email protected] Zaveri Sr. Research Analyst [email protected] Patel Sr. Research Analyst [email protected] Agarwal Assistant Research Analyst [email protected] Pareek Assistant Research Analyst [email protected] Patel Assistant Research Analyst [email protected] Modi Assistant Research Analyst [email protected] Nalbandh Sr. Research Executive [email protected] Patel Jr. Research Executive [email protected] Bakshi Jr. Research Executive [email protected]

Research Analyst Details:


11-04-2019 44

Full Form and Glossary

Abbreviation Full FormBV Book ValueCAGR Compound Annual Growth RateCAPEX Capital ExpenditureCOGS Cost of Goods SoldDPS Dividend Per ShareEBIT Earnings before interest and taxesEBITDA Earnings before interest, tax, depreciation and amortizationEPS Earning Per ShareEV Enterprise ValueFY Financial YearGP Gross ProfitHY Half YearMCap Market capitalizationNAV Net Asset ValueMTPA Million tonne per annumNOI Net Operating IncomeNOPAT Net Operating Profit after TaxNPV Net Present ValueOCF Operating Cash FlowOI Operating IncomeP&L Profit & LossP/E Price/Earnings RatioPAT Profit After TaxPATM Profit After Tax MarginPBT Profit Before TaxQOQ Quarter on QuarterRE Retained EarningROA Return on AssetsROCE Return on Capital EmployedROE Return on EquityROI Return on InvestmentROIC Return on Invested CapitalRONA Return on Net AssetTTM Trailing Twelve MonthWC Weighted Average Cost of CapitalYOY Year over Year


11-04-2019 45

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11-04-2019 46

DisclaimerResearch Analyst Details

Name: Nikunj Agarwal Email Id: [email protected] Ph: +91 0261-6725518

Analyst ownership of the stock: No

Details of Associates: Not Applicable

Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their)personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is orwill be directly or indirectly related to the specific recommendation(s) or views contained in this research report.

Disclaimer: www.jainam.in is the domain owned by Jainam Share Consultants Pvt. Ltd.

SEBI (Research Analyst) Regulations 2014, Registration No. INH000006448

The views expressed are based solely on information available publicly and believed to be true. Investors are advisedto independently evaluate the market conditions/risks involved before making any investment decision.

This report is for the personal information of the authorized recipient and does not construe to be any investment,legal or taxation advice to you. This report should not be reproduced to any other person in any form. This documentis provided for assistance only and is not intended to be and must not alone be taken as the basis for an investmentdecision. Jainam Share Consultants Pvt. Ltd. or any of its affiliates or employees shall not be in any way responsible forany loss or damage that may arise to any person from any inadvertent error in the information contained in thisreport. Neither Jainam Share Consultants Pvt. Ltd., nor its employees, agents nor representatives shall be liable forany damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits thatmay arise from or in connection with the use of the information. Jainam Share Consultants Pvt. Ltd. or any of itsaffiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matterpertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particularpurpose, and non-infringement.

The recipients of this report should rely on their own investigations. Jainam Share Consultants Pvt. Ltd. and/or itsaffiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in thisreport. Jainam Share Consultants Pvt. Ltd. has incorporated adequate disclosures in this document. This should,however, not be treated as endorsement of the views expressed in the report. We submit that no material disciplinaryaction has been taken on Jainam Share Consultants Pvt. Ltd. by any regulatory authority impacting Equity ResearchAnalysis.


11-04-2019 47

Disclosure (SEBI RA Regulations) Yes / NoWhether the research analyst or research entity or his associate or his relativehas any financial interest in the subject company/companies and the nature ofsuch financial interest

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Whether it or its associates have managed or co-managed public offering ofsecurities for the subject company in the past 12 months

No

Whether it or its associates have received any compensation for investmentbanking or merchant banking or brokerage services from the subject company inthe past 12 months

No

Whether it or its associates have received any compensation for products orservices other than investment banking or merchant banking or brokerageservices from the subject company in the past 12 months

No

Whether the subject company is or was a client during twelve months precedingthe date of distribution of the research report and the types of services provided

No

Whether the research analyst has served as an officer, director or employee ofthe subject company

No

Whether the research analyst or research entity has been engaged in marketmaking activity for the subject company

No

Documents

InitiatingCoverage |Cement 11 April2019 · units.Under PMAY-U, total sanctioning of houses stood at 1.14 mn units while total houses grounded for construction stood at 5.82 lakh units