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Cement Industry Final
Cement Industry Final
The Indian cement industry with a total capacity of about 190 m tonnes in financial year-2008 is the second largest market after China. Despite the fact that the Indian cement industry has clocked production of more than 100 m tonnes for the last five years, registering an average growth of nearly 9%, the per capita consumption of around 150 kgs compares poorly with the world average of over 260 kgs and more than 450 kgs in China. This, more than anything underlines the tremendous scope for growth in the Indian cement industry in the long term .Although consolidation has taken place in the Indian cement industry with the top five players controlling almost 50% of the capacity, the balance capacity still remains pretty fragmented. Cement, being a bulk commodity, is a freight intensive industry and transporting cement over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region. While the southern region always had excess capacity in the past owing to abundant availability of limestone, the western and northern region are the most lucrative markets on account of higher income levels. However, with capacity addition taking place at a slower rate as compared to
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growth in demand, the demand supply parity has been restored to some extent in the Southern region for the medium term. Considering the pace at which infrastructural activity is taking place in different regions, the players have lined up expansion plans accordingly. Despite the growth of the Indian cement industry, Indias per capita production of 115 kilograms per year lags the world average of over 250 kgs and Chinas production of more than 450 kgs per person. Clearly there remains room for tremendous growth in the industry in India. But if India is to reach its potential, the free hand of the market must be left unfettered. For this to happen, the Indian government must make sure that foreign companies that have a history of price fixing and market collusion receive appropriate regulation. If market shares get fixed, India will be the loser and the gap between India and China will only grow in the race to become the next economic superpower.
Ambuja Cements:-HSBC value Ambuja Cements at a target 2010e EV/EBITDA of 5.5x, which is at a discount to its historical trading range of 7-10x and in line with its industry peers. We value Ambuja Cements in line with ACC, which we believe is its closest comparable. Our target price is Rs 50 and we have an Underweight rating on the stock,
Madras Cements: HSBC value Madras Cements at 4x EV/EBITDA. HSBC is underweight on the stock with a target price of Rs 60.
India Cements:-With a worsening macro outlook and likely oversupply in 2009, HSBC value India Cements at 4.5x 2010e EV/EBITDA, which is at a discount to its historical trading range of 5.5x-8.5x. HSBC gave the target price of Rs 80, with an Underweight rating on the stock. Shree Cements:-The stock has traded in a narrow EV/EBITDA band of 4-6x in the last two years. A concentration of the companys operations in northern India could make it more vulnerable to potential oversupply in 2009; We therefore value it at the lower band of its EV/EBITDA range, i.e.3.5x.
o ACC contributed 11.8% to the sector o L&T 11.3% o Grasim 9.6% o Gujarat Ambuja 7.6% o India Cement 6.9% o Madras 3.3% And others 49.5% to the sector . So, ACC being the sector leader contributing a major part of supplies.
Continuous technological upgrading and assimilation of latest technology has been going on in the cement industry. Presently, 93 per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology and only 7 per cent of the capacity is based on old wet and semi-dry process technology. There is tremendous scope for waste heat recovery in cement plants and thereby reduction in emission level. New Investments
Shree Cements will invest almost US$ 244.12 million this year, of which half will be invested towards setting up two grinding units at Rajasthan and Uttarakhand to augment its capacity. The other half will be towards the two power plants in Bangur.
ACC Ltd will spend US$ 575 million on capacity expansion in 2009 and 2010. ACC is expanding capacity by a third to 30 MT by 2010.
Binani Cement has signed a memorandum of understanding with the Gujarat government to set up a 2.5 MTPA greenfield cement plant in Gujarat at a cost of US$ 169.40 million. Binani Cement has also initiated talks with a few foreign institutional investors (FIIs) to raise US$ 307.99 million for its new projects.
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Bheema Cements Ltd is planning to invest US$ 116.42 million in setting up a new manufacturing line of 1.5 MT capacity at its plant in Andhra Pradesh.
Mergers and Acquistions (M&As) A growing and robust economy was noteworthy in terms of the total number of mergers and acquisitions (M&A) in India 2007, with the cement sector contributing to 7 per cent to the total deal value.
Holcim strengthened its position in India by increasing its holding in Ambuja Cement from 22 per cent to 56 per cent through various open market transactions with an open offer for a total investment of US$ 1.8 billion. Moreover, it also increased its stake in ACC Cement with US$ 486 million, being the single largest acquirer in the cement sector.
Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund and Emerging Market Fund have together bought around 7.5 per cent in India's third-largest cement firm, India Cements (ICL), for US$ 124.91 million.
Cimpor, the Portugese cement maker, paid US$ 68.10 million for Grasim Industries' 53.63 per cent stake in Shree Digvijay Cement.
CRH Plc, the world's second biggest maker and distributor of building materials, acquired a 50 per cent stake in My Home Industries Ltd for almost US$ 372.64 million.
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Vicat SA, a French cement maker acquired a 6.67 per cent stake in Hyderabadbased Sagar Cement for US$ 14.35 million. Government Initiatives
Government initiatives in the infrastructure sector, coupled with the housing sector boom and urban development, continue being the main drivers of growth for the Indian cement industry.
Increased infrastructure spending has been a key focus area over the last five years indicating good times ahead for cement manufacturers.
The government has increased budgetary allocation for roads under National Highways Development Project (NHDP).
Appointing a coal regulator is looked upon as a positive move as it will facilitate timely and proper allocation of coal (a key raw material) blocks to the core sectors, cement being one of them.
Keeping in mind the global meltdown which is impacting the cement companies in India, the government reimposed the counter-veiling duty (CVD) and special CVD on imported cement in January. This is likely to provide a level playing field to domestic companies.
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The company has a manufacturing capacity of around 21mtpa and hopes to expand it to 27mtpa by 2009.
Period One Two One Three Six One Week Week Month Month Month Year Period 1334 1170 1124 1219 999.6 975.3 Old Price Price 21.15 185.1 230.9 136.8 355.8 380.1 Gain Gain in 1.59 15.82 20.53 11.22 35.59 38.97 %
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Period One Two One Three Six One Week Week Month Month Month Year Period 180.6 160.6 151.5 163.3 131.2 116.5 Old Price Price -10.65 9.35 18.4 6.6 38.7 53.45 Gain Gain in -5.9 5.82 12.15 4.04 29.5 45.9 %
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Period One Week Period 1363.75 Old Price Price 32.75 Gain Gain in 2.4 %
One Three Six One Month Month Month Year 1164.5 1176.4 1020 915
206.5 17.35
232.05 19.93
220.1 18.71
376.6 36.92
482 52.7
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India Cements
The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar in Tamilnadu in 1949. Since then it has grown in stature to seven plants spread over Tamilnadu and Andhra Pradesh. The capacities as on March 2010 have reached 14.05 mtpa. The Company is the largest producer of cement in South India. The Company's plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to all major markets in South India and Maharashtra. The Company is the market leader with a market share of 28% in the South. It aims to achieve a 35% market share in the near future. India Cements Ltd. also owns Indian Premier League's Chennai franchise, Chennai Super Kings.
Period One Two One Three Six One Week Week Month Month Month Year Period 94 93.85 72.2 67.65 68.1 93.3 Old Price Price 9.85 10 31.65 36.20 35.75 10.55 Gain Gain in 10.48 10.66 43.84 53.51 52.50 11.31 %
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ACHEIVEMENTS
2006 Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement Limited and Tarmac (India) Limited merged with ACC ACC announces new Workplace policy for HIV/AIDS Change of name to ACC Limited with effect from September 1, 2006 from The Associated Cement Companies Limited ACC receives Good Corporate Citizen Award 2005-06 from Bombay Chamber of Commerce and Industry New corporate brand identity and logo adopted from October 15, 2006 ACC establishes Anti Retroviral Treatment Centre for HIV/AIDS patients at Wadi in Karnataka the first ever such project by a private sector company in India. ACC partners with Christian Medical College for treatment of HIV/AIDS in Tamil Nadu Sumant Moolgaokar Technical Institute completes 50 years and reopens with new curriculum ACC commissions Wind energy farm in Tamil nadu Ready mixed concrete business hived off to a new subsidiary called ACC Concrete Limited ACC Cement Technology Institute formally inaugurated at Jamul on July 7 First Sustainable Development Report released on June 5. ACC wins CNBC-TV18 India Business Leader Award in the category India Corporate Citizen of the year 2008
2006 2006
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TECHNICAL ANALYSIS
Stock has jumped by more than 10% in last two weeks. Stock has jumped by more than 15% in last One Month. Share has hit 52 week high on 10/02/2012 ACC Ltd. has broken resistance, with good volume on 08/02/2012. This could mean a good up move is imminent. This stock is in short term up trend. ACC Ltd. share price and volume is rising for last five days observed on 08/02/2012 . This normally happens after some news affecting stock is out. Traders can use the momentum to gain some quick returns provided other indicator are supportive This stock is in short term up trend.
Name
Two Week Old Price/Gain in % 1173.8/ 18.36% 161.3/ 10.48% 81.35/ 18.01% 1239.7/ 12.98%
ACC Ltd. 1248.85/ 11.25% Ambuja 169.95/ Cements 4.85% Ltd. India 87.95/ Cements 9.15% Ltd. Ultra 1263.25/ Tech 10.88% Cement Ltd.
One Month Old Price/Gain in % 1099.65/ 26.34% 152.15/ 17.12% 69.5/ 38.13% 1151.75/ 12.98%
Three Month Old Price/Gain in % 1207.55/ 15.05% 160.95/ 10.72% 77.8/ 23.39% 1164/ 20.33%
Six Month Old Price/Gain in % 995.85/ 39.51% 127.95/ 39.27% 65.65/ 46.23 987.45/ 41.85%
One Year Old Price/Gai n in % 938.9/ 47.97% 119.1/ 49.62% 87.15/ 10.15% 897.25/ 56.10%
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SWOT ANALYSIS
Strengths
Availability of raw material Export Market Cement Industries operating at max capacity Growing housing demand Rise in govt. developmental spending Low labor cost
Weaknesses
Highly leveraged sector High Transportation Cost High oil prices Lack of coal supply. Weather Conditions.
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Opportunities
Availability of capacity Foreign direct investment in infrastructure sector going to increase in coming years, which will increase the demand of cement. Taping new geographical areas in foreign market Declining Interest Scenario.
Threats
Depriciation Of Rupee. Law & order situation Power availability Increase in production cost Low Domestic Demand Few small factories may shut their plants in the wake of severe losses.
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CONCLUSION
Cement production: too early to say worst is over
The shares of cement companies have been moving up again, on the back of a decent rise in January dispatches for some companies. Industry data show that cement production and despatches increased by 12.6% and 12.7% year-onyear (y-o-y) in December, after growing by 9.8% and 12% y-o-y in November. The governments numbers show that all-India growth in cement production was 8.7% in November and 11.6% in December. The momentum is likely to be kept up in Januarythe Aditya Birla group has said that cement production and despatches are up 9.76% and 7.35%, respectively, ACC Ltds production and despatches for January are up 12% and 12.5%, respectively. The numbers have sparked some hope among analysts that demand for cement has picked up. The reasons for the higher demand include pre-poll spending and strong rural demand. A research report by broking firm Sharekhan.com says, With the revival of infrastructure and private house building activity, the cement industry has given an impressive performance in the last two consecutive months. But sustaining such growth is uncertain, as the real estate segment, which consumes about 55% of the total cement produced, has still not revived due to
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overall economic slowdown. However, we expect that the overall volume growth in FY2009 will be certainly ahead of street expectations. Further, cement companies are also expected to benefit from softening coal and crude prices. There is, however, also a base effect at work here. According to analysts at Morgan Stanley, the y-o-y growth in the three-month moving average of cement dispatches was at a low of 4.9% in January 2008, which is why they expect high growth of 11.4% in the three-month moving average of cement despatches for January 2009. In February 2008, however, the three-month moving average went up to 8%, which means that itll be difficult to show high growth in February 2009. But perhaps the biggest reason not to set too much store by the rebound in cement despatches is the opinion of the cement producers themselves. The Grasim management, for example, points out that although cement demand can be expected to grow in line with the gross domestic product growth, prices and margins will come under pressure in FY10 as more capacities come on stream.
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Presented By :-
Sr. No 1 2 3 4 5
Name Jaymit Goyani Kunit Jain Mihir Shah Devang Shah Yash Shah
Roll No 12 15 46 47 49
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Bibliography
www.topstockresearch.com www.scribd.com www.moneycontrol.com www.nseindia.com
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