India Cement (INDCEM) : Higher Prices Lead To Margin Expansion

Result Update
November 3, 2015
India Cement (INDCEM)
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Hold
| 90
12-15 months
8%
Higher prices lead to margin expansion
Whats changed?
Target
EPS FY16E
EPS FY17E
Rating
Changed from | 75 to | 90
Changed from |4.9 to |5.0
Changed from | 5.6 to |5.7
Unchanged
Quarterly performance
Revenue
EBITDA
EBITDA (%)
PAT
Q2FY16
1,079.1
228.6
21.2
45.0
Q2FY15 YoY (%)

1,131.7
-4.6
179.1
27.6
15.8 536 bps
7.5
500.9
| 84
Q1FY16 QoQ (%)

1,071.0
0.7
195.0
17.3
18.2 298 bps
50.8
-11.4
India Cements (ICL) Q2FY16 revenues declined 4.6% YoY (up 0.7%
QoQ) to | 1,079 crore (below I-direct estimate of | 1,115 crore) due to
transfer of the IPL division to a trust. The cement division reported 3.2%
YoY drop in revenues led by 8.1% YoY fall in volumes and 5.3% YoY
rise in realisations
EBITDA margin improved 536 bps YoY to 21.2% (above I-direct
estimate of 18.4%). Cement EBITDA/tonne were at | 994/tonne vs.
| 618/tonne in Q2FY15 (up 60.9%YoY) led by a decline in RM cost
(down 11.8% YoY due to | 20 crore reversal in DMF provision) and
power & fuel cost (down 16.4% YoY led by a decline in coal cost)
Net profit came in at | 45 crore due to higher operating profit and 16.7%
YoY decline in depreciation expenses
Fifth largest player in India with strong presence in south (AP, Karnataka)
Key financials
| Crore
FY14
FY15
FY16E*
FY17E*
Net Sales
4,440.9
4,418.8
4,278.3
4,730.8
EBITDA
Net Profit
537.1
677.8
806.5
877.9
(35.9)
29.4
152.1
174.8
EPS (|)
(1.2)
* excludes revenues from IPL
1.0
5.0
5.7
FY15
FY16E*
FY17E*
Valuation summary
FY14
P/E
NA
87.3
16.9
14.7
Target P/E
NA
94.0
18.2
15.8
EV/EBITDA
9.9
7.8
6.2
5.5
EV/Tonne($)
63
57
54
52
RoNW (%)
0.7
(0.9)
0.7
0.8
0.7
4.1
0.7
4.6
RoCE (%)
3.9
6.7
9.4
10.6
P/BV
Stock data
Particular
Mcap
Amount
| 2568 crore
Debt (FY15)
| 2691 crore
Cash & Invest (FY15)
| 3.88 crore
EV
| 5255 crore
| 117 / 64
52 week H/L
Equity cap
| 307.2 crore
Face value
| 10
ICL is the fifth-largest cement player in India and the largest player in South
India. Due to excess capacity in the southern region, particularly Andhra
Pradesh (AP) where the company has over 49% of its total capacity, it
reported muted revenue growth i.e. at a CAGR of 3.2% in FY10-15. Further,
with power problems in AP and low capacity utilisation (~60-62%), its
operating margins have come down sharply from 21.9% in FY10 to 15.3% in
FY15. With the Telangana issue now resolved, overall utilisation in the
southern region is expected to improve over the next two or three years.
The management indicated that demand is expected to improve post
Q3FY16E led by a revival of infrastructure spending resulting from
bifurcation of Andhra Pradesh. While bottoming out of demand in South
India is a key positive for ICL, the utilisation level is unlikely to exceed ~6768% till FY17-18E, which will limit volume growth for the company.
Operationally inefficient; captive power plants to help, going forward
The company is one of the least efficient players in the industry. Its power
cost per tonne remained higher at | 1247/tonne in FY15 (i.e. 25% higher than
average industry cost).The company currently has 50 MW of power capacity
at Sankarnagar to cater to the energy needs of cement plants in Tamil Nadu.
Another captive power plant of 50 MW at Vishnupuram in Andhra Pradesh
(AP) has been installed and is expected to stabilise from H2FY16. The plant
will cater to the requirement of cement plants in AP.
Investment in unrelated businesses keeps debt at elevated levels
1M
3M
6M
12M
2.6
3.1
7.3
-15.8
India Cement
0.4
-9.1
-13.6
-28.8
ICL has investments worth ~| 2,300 crore in non-cement assets, which are
low RoE businesses. Further, lower utilisation in cement has kept ICLs OCF
under pressure. As a result, the debt has remained at high levels. Going
forward, we expect debt levels to remain elevated led by an increase in
working capital requirement and capex plans of | 300 crore in FY16E-17E for
refurbishment of old cement capacity.
JK Cement
4.9
9.9
6.2
20.3
JK Lakshmi Cem
0.4
13.0
4.0
4.1
Ongoing litigation, investment in low RoE business remain concerns
Price performance
Heildelberg Cem
Research Analyst
Rashesh Shah
rashes.shah@icicisecurities.com
Devang Bhatt
devang.bhatt@icicisecurities.com
ICICI Securities Ltd | Retail Equity Research
With higher realisations in the south and an improved outlook on the

demand side on the verge of formation of a new state, we expect utilisation
to improve from here on. However, unrelated investments and ongoing
litigations pertaining to the same remain key concerns on the companys
long-term growth prospect. Hence, despite the attractive valuations, we
continue to maintain HOLD rating on the stock with a revised target price of
| 90 (i.e. valuing at $55/tonne on FY17E capacity and 6x FY17E EV/EBITDA).
Variance analysis
Q2FY16 Q2FY16E
Total Operating Income

Other Income
Raw Material Expenses
Employee Expenses
Stock Adjustment
Q2FY15
YoY (%) Q1FY16
1079.1
3.3
153.2
82.3
-14.5
1115.7
4.4
166.0
91.6
0.0
1131.7
4.2
173.6
76.8
-15.9
247.6
220.2
161.7
228.6
272.2
233.5
147.2
205.3
296.3
265.1
156.6
179.1
EBITDA Margin (%)

Interest
Depreciation
PBT
Total Tax
21.2
95.4
55.2
77.3
36.3
18.4
96.2
56.2
57.3
12.7
PAT
45.0
44.6
7.5
500.9
50.8
-11.4
2.16
4,904
2.21
4,960
2.35
4,655
-8.1
5.3
2.10
5,041
3.1
-2.7
994
846
618
60.9
885
12.3
Power & Fuel

Freight cost
Others
EBITDA
Key Metrics
Volume (MT)
Realisation (|)
Cement EBITDA per Tonne
(|)
-4.6 1,071.0
-20.9
4.4
-11.8
171.0
7.1
91.0
NA
13.3
0.7
-25.2
-10.4
-9.6
N.A
-16.4
-16.9
3.3
27.6
5.2
-0.4
11.9
17.3
15.8 536 bps

109.5
-12.9
66.3
-16.7
7.5
932.4
0.0
NA
Comments
QoQ (%)
235.2
221.0
144.5
195.0
Revenue during the quarter declined 4.6% due to transfer of IPL to trust while cement
revenues during the quarter declined 3.2% YoY to | 1,059 crore led by 8.1% YoY declin
in volumes
The decline in RM cost was due to | 20 crore reversal of DMF provision
The decline in power & fuel cost on a YoY basis was due to a sharp fall in imported coa
prices and higher pet coke usage (coal:pet coke mix 85:15)
Increase in other expenses was due to higher advertisement spend
Higher realisations and decline in operating cost led to an improvement in margins
during the quarter
18.2 298 bps

93.2
2.4
55.4
-0.3
40.1
92.8
0.0
NA
Fall in depreciation charge was due to a change in rate of depreciation
Higher operating profit and lower depreciation expenses led to higher PAT during the
quarter
The decline in sales volume was due to monsoon and poor demand
Better realisation and lower freight & power cost helped to improve EBITDA/tonne for
the quarter
Source: Company, ICICIdirect.com Research
Change in estimates
Old
FY16E*
New
% Change
Old
FY17E*
New
% Change
4,380.3
803.7
4,294.3
806.5
-2.0
0.4
4,769.4
865.5
4,730.8
877.9
-0.8
1.4
18.3
150.3
4.9
18.8
152.1
5.0
43 bps
1.2
1.2
18.1
172.6
5.6
18.6
174.8
5.7
41 bps
1.3
1.3
(| Crore)
Revenue*
EBITDA
EBITDA Margin (%)
PAT
EPS (|)
Comments
We expect FY16E to be a challenging year in terms of
volume growth amid excess capacity in the southern
region and low government spending.
Margins are expected to improve led by higher
realisation
Source: Company, ICICIdirect.com Research *Revised estimates are excluding revenue from IPL business which has been transferred to Trust.
Assumptions
Volume (MT)
Cement Realisation (|)
Cement EBITDA per Tonne (|)
FY13
FY14
FY15
Current
FY16E
FY17E
FY15
Earlier
FY16E
10.1
4,362
783
10.0
4,183
289
9.1
4,605
500
8.6
4,883
851
9.3
5,026
871
9.1
4,605
500
8.7
4,945
854
Comments
FY17E
We remain conservative on the volume growth front with a visible
9.3 recovery from Q3FY16E onwards
5,063 We expect the pricing environment to remain strong
853 Expect EBITDA/tonne to improve due to high cement prices
Page 2
Company Analysis
Capacity spread
Largest manufacturer of cement in South India

India Cement is the largest cement manufacturer in the southern region with
an installed capacity of 13.1 MTPA in the southern region. While 1.1 MTPA of
capacity is in Maharashtra, 1.5 MTPA of capacity is in Banswara, Rajasthan.
Out of total revenue, ~85-90% of sales come from the southern region for
the company. Due to excess capacity in the southern region, the company is
vulnerable to the demand supply mismatch of the southern region. Going
ahead, after the resolution of Telangana issue in the region, we expect
demand to improve from here on. However, given the additional capacity,
the utilisation level is unlikely to exceed ~67-68% till FY17-18E, which will
limit the volume growth for the company.
Rajasthan
10%
Maharastra
7%
Tamilnadu
38%
Andhra
Pradesh
45%
Exhibit 1: Demand supply dynamics of South India
Sales mix
East
4%
West
17%
Million tonnes
FY09
67.0
FY10
83.0
101.5
FY12
110.0
FY13
119.0
FY14P
123
FY15E
Effective Capacity
Production
59.7
63.0
66.0
67.2
68.3
69
73.0
Capacity Utilisation (%)
89.1
75.9
65.0
61.1
57.4
56
57.0
Consumption
59.7
62.9
66.0
67.2
68.3
69
71.5
Consumption Growth(%)
10.4
5.4
4.9
1.8
1.6
3.9
7.3
20.1
35.5
42.8
50.7
54
56.5
Surplus/Deficit
Tamil Nadu
and Andhra
prdesh
57%
Operationally inefficient; captive power plants to help, going forward

The company is one of the least efficient players in the industry. Its power
cost per tonne remained higher at | 1247/tonne in FY15 (i.e. 25% higher than
average industry cost).The company currently has 50 MW of power capacity
at Sankarnagar to cater to the energy needs of cement plants in Tamil Nadu.
Another captive power plant of 50 MW at Vishnupuram in Andhra Pradesh
has been installed and is expected to stabilise from H2FY16. The plant will
cater to the requirement of cement plants in Andhra Pradesh.
724
500
693
962
783
887
879
693
289
412
200
India Cement
FY 15
FY14
FY13
FY12
FY11
0
FY10
11
FY09
FY14
FY13
FY12
FY11
FY10
FY09
Industry
600
400
18
12
India Cement
800
FY08
21
16
(|)
23
16
FY 15
19
25
22
754
1,000
21
1,017
28
931
940
Exhibit 3: EBITDA/tonne compared to industry

1,200
27
34
FY08
(%)
Exhibit 2: EBITDA margin compared to industry
1,117
1,063
Kerala
10%
32
128.0
Source: ICICIdirect.com Research
Telengana
12%
40
35
30
25
20
15
10
5
0
FY11
Industry
Huge investments in unrelated non-cement business remain key concern

The company has invested a large sum of money in non-core businesses
and other group companies/associates. As of FY15, the company has total
loans and advances of | 2001 crore and other investments of | 1,585 crore,
which contributes only ~15% in total EBITDA of the company for FY15.
Loans and advances include advances to other body corporate like ICL
Financial Services, ICL Securities, Trishul Concrete (RMC business), etc,
which have led to low RoEs. The company has iterated a lot of times its
intentions to restructure its non-core businesses. However, till that time, this
remains an overhang for the company.
Page 3
Expect revenue CAGR of 3.5% during FY15-17E

The revenue has grown at a CAGR of 6.0% in FY11-15 while in FY12-14,
growth was lower at 2.8% led by a slowdown in AP coupled with higher
cement capacity. Going forward, with the resolution of the Telangana issue
and a strong focus towards infrastructure development by the government,
we expect revenue CAGR of 3.5% in FY15-17E on account of an
improvement in capacity utilisation.
Exhibit 4: Expect revenue CAGR of 3.5% during FY15-17E
3771
4203
4441
4419
4278
4731
3501
3000
State
1000
0
FY10
FY11
FY12
FY13
FY14
FY15
FY16E* FY17E*
*Ex-IPL revenues
South
Andhra Pradesh
South
Yerraguntla, Kadapa
Vishnupuram, Nalgonda
Andhra Pradesh
South
Andhra Pradesh
South
Malkapur, Ranga Reddy

Parli Vaijnath, Beed
Andhra Pradesh
South
Maharashtra
West
Rajasthan
North
10.02
9.11
8.61
9.00
9.27
6.00
(|/tonne)
10.05
9.53
1.1
1.5
0.7
2.5
2.4
1.1
1.5
15.7
Exhibit 7: Realisation to grow at CAGR of 4.5% during FY15-17E

6000
9.97
0.9
1.9
Tamilnadu
15.00
10.96
South
South
Exhibit 6: Volume to grow at CAGR of 0.9% during FY15-17E
4000
3266 3375
4883 5026
4215 4362 4183 4605
FY12
FY13
FY14
FY15
FY15
FY14
FY16E FY17E
Cement Realisation (|/tonne) -LS
FY17E
FY11
FY16E
FY10
FY13
-10
FY10
0.00
20
0
3.00
30
10
2000
FY12
12.00
Tamilnadu
Tamilnadu
Sankari, Salem
Dalavoi, Ariyalur
banswara
Total
Net Sales (| crore)
MT
2.1
Tamilnadu
Vallur Village, Tiruvallur

Chilamakur, Kadapa
2000
Region
South
Sankarnagar, Tirunelveli
FY11
4000
4597
(%)
5000
Exhibit 5: Capacity addition plans
Growth (%) -RS
Sales volumes (In MT) -LHS
Growth (%) -RHS
4904
Q2FY16
4799
Q4FY15
5041
4795
Q3FY15
Q1FY16
4655
4244
Q2FY15
4429
4027
4116
4221
4189
4373
4411
Realisation-LHS
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
`
Q4FY13
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
0.00
Q3FY13
0.50
5500
5000
4500
4000
3500
3000
2500
2000
Q2FY13
1.50
1.00
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
|/tonne
2.16
2.10
2.00
2.09
2.35
2.11
2.56
2.64
2.44
2.50
2.29
3.00
2.65
Exhibit 9: but realisations up 5.3% YoY to |4,904/tonne
2.78
Exhibit 8: Q2FY16 volumes decline 8.1% YoY due to lower demand

2.48
2.42
50
40
30
20
10
0
-10
Growth (%) -RHS
Page 4
(%)
Sales Volumes (In mn)
Margins to improve gradually, going forward

We expect margins to improve gradually during our forecast period of FY1517E led by healthy realisations.
Exhibit 10: Expect EBITDA/tonne of |871 in FY17E
800
887
754
500
412
289
400
200
0
FY10
FY11
FY12
FY13
FY14
21.9
21.5
FY10
FY15 FY16E*FY17E*
FY11
FY12
FY13
Exhibit 12: Q2FY16 cement EBITDA improves due to higher cement prices
Exhibit 13: Margin trend (%)
1200
778 792
755
408
388
400
18.6
FY15 FY16E* FY17E*
23.1
20
18.3 17.8
15
(%)
600
825
885
25
994
618
592
569 572
FY14
18.9
EBITDA Margin (%)
448
14.1
15.4
11.7
10
13.9
200
12.9
15.8 15.3
17.8 18.2
21.2
6.9
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q3FY13
Q1FY13
Q2FY13
800
15.3
12.1
Cement EBITDA/Tonne
1000
18.3
12.4
Q4FY14
600
35
30
25
20
15
10
5
0
871
851
783
(%)
1000
Exhibit 11: Margins to improve gradually
EBITDA Margin (%)
Expect net margins to improve during FY15-17E

After reporting a loss in FY14, we expect net margins to improve to 3.7% in
FY17E from 0.7% in FY15. Overall, we expect the company to report a net
profit of | 174.8 crore during FY17E from a loss of | 35.9 crore in FY14.
Exhibit 14: Profitability trend
20
310.8
296.0
300
| crore
9.4
200
7.0
176.3
3.6
65.7
1.9
100
15
-0.8
0
-100
FY10
FY11
FY12
Net profit - LS
FY13
FY14
-35.9
166.8
174.8
3.6
3.7
29.4
0.7
FY15
10
5
(%)
400
0
FY16E* FY17E*
-5
Net profit margin -RS
Page 5
Outlook and valuation

With higher realisations in the south and an improved outlook on the
demand side on the verge of formation of a new state, we expect utilisation
to improve from here on. However, unrelated investments and ongoing
litigation pertaining to the same remain key concerns on the companys
long-term growth prospect. Hence, despite attractive valuations, we
continue to maintain HOLD rating on the stock with a revised target price of
| 90 (i.e. valuing at $55/tonne on FY17E capacity and 6x FY17E EV/EBITDA).
Exhibit 15: Key assumptions
| per tonne (Blended)
FY12
FY13
FY14
FY15
FY16E
Capacity Utilisation (%)
67.4
71.5
64.7
58.8
59.8
60.4
Realisation
4215
4362
4183
4605
4883
5026
Total Expenditure
3328
3579
3894
4106
4032
4155
-19
-31
38
-1
Raw material
568
575
604
685
781
735
Power & fuel
1290
Stock Adj
FY17E
1149
1249
1273
1247
1140
Employee
312
332
350
349
394
380
Freight
793
954
1007
1046
1028
1080
Others
503
489
691
741
690
670
EBITDA per Tonne
887
783
289
500
851
871
Source: ICICIdirect.com Research
Exhibit 16: Valuations
FY14
FY15
FY16E
FY17E
Sales Growth
(| cr)
(%)
4440.9
-3.4
4418.8
-0.5
4278.3
-3.2
4730.8
10.6
EPS
(|)
-1.2
1.0
5.0
5.7
Growth
(%)
-121.9
-182.1
417.0
14.9
PE
(x)
0.0
87.3
16.9
14.7
EV/EBITDA
(x)
9.9
7.8
6.2
5.5
EV/Tonne
(x)
63
57
54
52
RoNW
(%)
-0.9
0.8
4.1
4.6
Page 6
RoCE
(%)
3.9
6.7
9.4
10.6
Company snapshot
200
180
160
140
120
Target price: |90
100
80
60
40
20
Nov-16
Aug-16
May-16
Feb-16
Nov-15
Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
May-10
Feb-10
Nov-09
Aug-09
May-09
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Mar-08
Feb-09
Apr-09
Event
The company revives its shipping business with the purchase of two ships (dry bulk carriers) with a total capacity of 79,843 DWT. Commences commercial
production of 1 MT grinding plant at Chennai. Also, the company successfully bids for the Chennai franchise of the DLF-IPL 20/20 Cricket Tournament - 'Chennai
Super Kings'
Completes and commences commercial production of 1 MT grinding plant at Parli (Maharashtra). The company's subsidiary, namely, Trishul Concrete Products Ltd
gets completed and commences commercial production of 1 lakh cubic metre ready mix concrete plant at Hyderabad (Andhra Pradesh)
The company upgrades capacity of kiln I to 3000 TPD (1700 TPD) at Vishnupuram
Sep-09
Announces plans to set up two 50 MW power plant in Shankar Nagar, Tamil Nadu and Andhra Pradesh with total capex of | 500 crore
Jan-10
Jun-10
ICL Financial Services (ICLFSL), the company's wholly-owned subsidiary, acquires 60.89% (including shares acquired under open offer) equity share capital in Indo
Zinc (IZL). Consequently, IZL became a subsidiary of ICLFSL and ultimate subsidiary of the company. The company set up PT. Coromandel Minerals Resources as
subsidiary in Indonesia for acquiring coal concessions
Completes upgradation of capacity at Chilamakur to 4500 tonnes per day
Jun-12
CCI fines company with penalty of | 187.5 crore on alleged cartelisation
Sep-12
COMPAT serves notice to CCI in cement cartelisation case
May-13
Oct-13
COMPAT directs cement companies to pay 10% penalty

Supreme Court bars company promoter N Srinivasan from taking charge as BCCI President till investigation gets completed in IPL probe
Feb-15
Company transfers IPL division into separate subsidiary company Chennai Super Kings Cricket (CSKC)
Feb-15
Trinetra Cement and Trishul Concrete Products amalgamated with India Cements
May-15
CARE downgrades India Cements' long term bank facilities from 'CARE A' to 'CARE A-' and short-term facilities from 'CARE A1' to 'CARE A2+'
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Name
BNY Mellon Asset Management
EWS Finance & Investments Ltd.
Prince Holdings Madras Pvt. Ltd.
Subramanian (Vidya)
Life Insurance Corporation of India
Trishul Investments Pvt. Ltd.
The Boston Company Asset Management, LLC
AfrAsia Capital Management Ltd
Anna Investments Pvt. Ltd.
The Dreyfus Corporation
Shareholding Pattern
Latest Filing Date % O/S Position (m) Change (m)
30-Jun-15 10.55
32.4
4.1
30-Jun-15 9.00
27.6
0.0
30-Jun-15 8.30
25.5
0.0
30-Jun-15 6.50
20.0
0.0
30-Jun-15 6.06
18.6
0.0
30-Jun-15 5.71
17.5
0.0
1-Jul-14 5.24
16.1
-6.2
30-Jun-15 5.00
15.4
1.4
30-Jun-15 4.24
13.0
0.0
26-Mar-15 2.86
8.8
-6.6
(in %)
Promoter
FII
DII
Others
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

28.23 28.23 28.23 28.23 28.23
34.45 32.63 31.80 27.65 21.91
13.67 12.75 13.55 13.47 14.82
23.65 26.39 26.42 30.65 35.04
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
BNY Mellon Asset Management
Hasham Investment & Trading Company Pvt. Ltd.
AfrAsia Capital Management Ltd
UTI Asset Management Co. Ltd.
Emerging Global Advisors, LLC
Value
6.13m
5.38m
1.99m
0.33m
0.27m
Shares
4.13m
3.63m
1.35m
0.28m
0.23m
Sells
Investor name
The Dreyfus Corporation
The Boston Company Asset Management, LLC
Sundaram Asset Management Company Limited
Dimensional Fund Advisors, L.P.
Artisan Partners Limited Partnership
Value
-10.50m
-9.41m
-5.66m
-5.35m
-2.14m
Shares
-6.59m
-6.15m
-3.82m
-3.61m
-2.11m
Page 7
Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
| Crore
FY14
FY15
FY16E
FY17E
4,440.9
4,418.8
4,278.3
4,730.8
-3.4
-0.5
-3.2
10.6
Growth (%)
Cash flow statement

(Year-end March)
| Crore
FY14
FY15
FY16E
FY17E
Profit after Tax
-35.9
29.4
152.1
174.8
Add: Depreciation
276.4
257.9
227.8
237.1
Raw material cost
574.4
658.7
671.5
681.6
(Inc)/dec in Current Assets
-166.7
478.4
231.0
167.8
Employee Expenses
351.3
318.2
339.2
352.4
Inc/(dec) in CL and Provisions
270.2
-79.1
-111.2
-117.4
Power, Oil & Fuel
1276.2
1136.4
982.0
1196.2
CF from operating activities
344.0
686.6
499.8
462.3
Freight cost
1009.1
953.1
885.2
1001.5
(Inc)/dec in Investments
12.3
-639.6
0.0
0.0
692.7
674.8
593.8
621.3
(Inc)/dec in Fixed Assets
-57.6
329.8
-200.0
-200.0
3,903.7
3,741.1
3,471.7
3,852.9
537.1
677.8
806.5
877.9
Other Expenses
Total Operating Exp.
EBITDA
Others
CF from investing activities
0.0
0.0
0.0
-88.2
-200.0
-200.0
Dividend paid & dividend tax
0.0
0.0
-71.9
-71.9
Inc/(dec) in Sec. premium
0.0
0.0
0.0
0.0
Others
-202.5
-287.8
0.0
0.0
CF from financing activities
-300.4
-375.9
-271.9
-271.9
19.0
8.8
257.9
227.8
237.1
Inc/(dec) in loan funds
Interest
353.7
419.6
366.7
406.7
57.1
29.1
17.7
20.0
0.0
0.0
14.7
0.0
-35.9
29.4
215.0
254.0
Total Tax
PAT
Adjusted PAT
Growth (%)
0.0
-200.0
0.0
26.2
276.4
PBT
0.0
-200.0
-97.9
-36.3
Depreciation
Exceptional items
0.0
-309.8
Issue/(Buy back) of Equity
Growth (%)
Other Income
0.0
-45.3
0.0
0.0
61.7
81.3
Net Cash flow
-1.6
0.8
27.9
-9.6
-35.9
29.4
153.4
172.7
Opening Cash
4.7
3.1
3.9
31.8
Closing Cash
3.1
3.9
31.8
22.2
FY14
FY15
FY16E
FY17E
-1.2
1.0
5.0
5.7
-35.9
29.4
166.8
174.8
-120.3
-182.1
466.9
4.8
-1.2
1.0
5.0
5.7
FY14
FY15
FY16E
EPS (|)
Balance sheet
(Year-end March)
| Crore
FY17E
Liabilities
Equity Capital
Key ratios
(Year-end March)
Per share data (|)
307.2
307.2
307.2
307.2
Reserve and Surplus
3,544.1
3,285.7
3,366.0
3,468.8
Cash EPS
Total Shareholders funds
3,851.3
3,592.9
3,673.1
3,776.0
BV
Total Debt
2,779.7
2,691.5
2,491.5
2,291.5
329.7
329.7
329.7
329.7
Deferred Tax Liability

Minority Interest / Others
Total Liabilities
0.0
0.0
0.0
0.0
6,960.7
6,614.1
6,494.3
6,397.2
Assets
Adjusted EPS
7.8
9.4
12.4
13.4
125.4
117.0
119.6
122.9
DPS
0.0
0.0
2.0
2.0
Cash Per Share
0.1
0.1
1.0
0.7
EBITDA Margin
12.1
15.3
18.9
18.6
PAT Margin
-0.8
0.7
3.6
3.7
43.0
47.8
50.0
40.0
Operating Ratios (%)
Gross Block
6,863.5
6,533.8
6,868.8
7,078.8
Inventory days
Less: Acc Depreciation
2,901.0
3,158.9
3,386.8
3,623.9
Debtor days
34.7
38.5
32.0
28.0
Net Block
3,962.5
3,374.9
3,482.0
3,454.9
Creditor days
141.1
135.3
123.0
103.0
300.0
300.0
165.0
155.0
Capital WIP
Total Fixed Assets
Investments
Return Ratios (%)
4,262.5
3,674.9
3,647.0
3,609.9
RoE
-0.9
0.8
4.5
4.6
943.5
1,585.1
1,585.1
1,585.1
RoCE
3.9
6.8
9.2
10.4
3.9
6.7
9.2
10.3
P/E
NM
87.3
16.9
14.7
EV / EBITDA
9.9
7.8
6.2
5.5
EV / Net Sales
1.2
1.2
1.2
1.0
Inventory
550.9
606.9
565.2
471.6
RoIC
Debtors
422.5
466.1
375.1
362.9
Valuation Ratios (x)
Loans and Advances
2,552.3
1,974.4
1,876.0
1,814.0
Other Current Assets
2.1
0.0
0.0
0.0
Cash
3.1
3.9
31.8
22.2
Total Current Assets
3,530.9
3,051.3
2,848.1
2,670.7
Market Cap / Sales
0.6
0.6
0.6
0.5
Creditors
1,716.8
1,638.3
1,441.7
1,335.0
Price to Book Value
0.7
0.7
0.7
0.7
59.4
58.8
144.2
133.5
1,776.2
1,697.1
1,585.9
1,468.5
Debt/EBITDA
5.2
4.0
3.1
2.6
0.6
Provisions
Total Current Liabilities
Solvency Ratios
Net Current Assets
1,754.7
1,354.2
1,262.3
1,202.2
Debt / Equity
0.7
0.7
0.7
Application of Funds
6,960.7
6,614.2
6,494.4
6,397.3
Current Ratio
2.0
1.8
1.8
1.8
Quick Ratio
2.0
1.8
1.8
1.8
Page 8
ICICIdirect.com coverage universe (Cement)

Company
ACC*
Ambuja Cement*
UltraTech Cem
Shree Cement^
Heidelberg Cem
India Cement
JK Cement
JK Lakshmi Cem
Mangalam Cem
SFCL
CMP
(|)
TP(|)
1397
1475
210
225
2921
3600
12340 12,500
74
81
84
90
663
710
371
373
225
212
135
266
Rating
Hold
Hold
Buy
Hold
Buy
Hold
Hold
Hold
Hold
Buy
M Cap
(| Cr) FY15
25,367 61.8
32,235
9.7
76,036 73.4
43,674 122.5
1,836
2.6
2,568
1.0
4,965 22.4
4,390
8.1
566
8.9
5,905
4.1
EPS (|)
FY16E FY17E
47.2 69.6
7.7
9.3
103.8 143.4
118.7 240.8
1.4
2.9
5.0
5.7
12.2 22.7
-0.2
7.4
-17.3 17.6
9.0 15.2
EV/EBITDA (x)
FY15 FY16E FY17E
19.0
15.2
11.6
14.2
15.7
13.2
20.3
14.6
11.1
33.2
29.3
20.7
9.7
12.5
9.9
7.8
6.2
5.5
15.5
14.5
12.2
16.9
21.0
15.8
12.2
59.8
8.2
8.2
5.7
3.7
EV/Tonne ($)
FY15 FY16E FY17E
133
119
117
164
146
140
221
188
180
297
247
227
86
87
86
57
54
52
91
89
96
143
102
93
45
46
48
169
163
111
RoCE (%)
FY15 FY16E FY17E
13.7 15.3 18.4
17.8 15.9 17.9
12.1 14.7 18.1
8.3
9.4 14.8
9.2
7.6 10.0
6.8
9.2 10.4
8.5
8.6 10.2
8.3
5.0
8.2
7.2
-0.9 10.4
12.8 21.3 31.6
RoE (%)
FY15 FY16E FY17E
14.1
12.2
14.1
14.4
11.2
12.8
10.6
13.3
15.7
8.8
7.4
13.1
-0.1
3.5
6.8
0.8
4.5
4.6
9.5
5.0
8.6
12.0
0.2
6.6
5.3
-9.7
9.1
13.3
21.7
27.3
*CY14E, CY15E, CY16E ; ^JY15E,JY16E,JY17E

Page 9
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
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com
Page 10
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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
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Page 11

India Cement (INDCEM) : Higher Prices Lead To Margin Expansion

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India Cement (INDCEM)

Higher prices lead to margin expansion

Q2FY15 YoY (%)

Q1FY16 QoQ (%)

Cash & Invest (FY15)

Ongoing litigation, investment in low RoE business remain concerns

ICICI Securities Ltd | Retail Equity Research

With higher realisations in the south and an improved outlook on the

Total Operating Income

YoY (%) Q1FY16

EBITDA Margin (%)

Power & Fuel

15.8 536 bps

18.2 298 bps

Fall in depreciation charge was due to a change in rate of depreciation

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Largest manufacturer of cement in South India

Exhibit 1: Demand supply dynamics of South India

Capacity Utilisation (%)

Operationally inefficient; captive power plants to help, going forward

Source: Company, ICICIdirect.com Research

Exhibit 3: EBITDA/tonne compared to industry

Exhibit 2: EBITDA margin compared to industry

Source: ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Huge investments in unrelated non-cement business remain key concern

ICICI Securities Ltd | Retail Equity Research

Expect revenue CAGR of 3.5% during FY15-17E

Source: Company, ICICIdirect.com Research

Malkapur, Ranga Reddy

Exhibit 7: Realisation to grow at CAGR of 4.5% during FY15-17E

Source: Company, ICICIdirect.com Research

Exhibit 6: Volume to grow at CAGR of 0.9% during FY15-17E

Net Sales (| crore)

Vallur Village, Tiruvallur

Exhibit 5: Capacity addition plans

Growth (%) -RS

Sales volumes (In MT) -LHS

Growth (%) -RHS

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 9: but realisations up 5.3% YoY to |4,904/tonne

Exhibit 8: Q2FY16 volumes decline 8.1% YoY due to lower demand

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Growth (%) -RHS

Source: Company, ICICIdirect.com Research

Sales Volumes (In mn)

Margins to improve gradually, going forward

Source: Company, ICICIdirect.com Research

Exhibit 13: Margin trend (%)

FY15 FY16E* FY17E*

EBITDA Margin (%)

Source: Company, ICICIdirect.com Research

Exhibit 11: Margins to improve gradually

EBITDA Margin (%)

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Expect net margins to improve during FY15-17E