Result Update

August 17, 2016

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Shree Cement (SHRCEM)

Hold
| 18650
9-12 months
8%

Realisation, power cost drives margins

Whats Changed?
Target
EPS FY17E
EPS FY18E
Rating

Changed from | 14,800 to | 18,650

Changed from | 292.9 to | 356.0
Changed from | 512.7 to | 535.2
Changed from Buy to Hold

Quarterly Performance
Revenue
EBITDA
EBITDA (%)
PAT

Q1FY17
2,198.7
730.8
33.2
507.7

Q1FY16
1,719.4
351.6
20.4
127.4

YoY (%)
27.9
113.5
916 bps
298.6

Q4FY16 QoQ (%)

2,017.4
9.0
505.0
44.7
25.0 458 bps
223.4
127.2

FY15^

FY16*

FY17E#

FY18E#
12385.1

Key Financials
| Crore
Net Sales

6448.4

5567.8

10213.1

EBITDA

1338.7

1320.3

2558.8

3613.5

464.1

457.2

1238.8

1862.4

133.3

131.4

356.0

535.2

Adjusted PAT
Adjusted EPS (|)

^June year ending, *9 months year ending, # as per IND AS

Valuation summary
FY15^

FY16*

FY17E#

PE (x)

141.5

132.6

48.7

32.4

Target PE (x)

139.9

141.9

52.4

34.8

EV to EBITDA (x)

45.8

46.7

24.0

16.8

EV/Tonne(US$)**

492

376

348

343

Price to book (x)

11.4

9.8

8.3

6.7

RoNW (%)

8.1

7.4

16.9

20.6

RoCE (%)

6.1

5.3

14.5

21.5

FY18E#

Stock data
Amount

Particular
Mcap

| 60340 crore

Debt (FY16)

| 1632 crore

Cash & Invest (FY16)

| 363 crore

EV

| 61608 crore
| 17,650 / 9,350

52 week H/L

| 17,339

Equity cap

| 34.8 crore

Face value

| 10

Price performance (%)

1M

3M

6M

12M

ACC

2.0

13.0

35.3

21.0

Ambuja Cement

1.4

19.7

35.9

18.5

Shree Cement

6.0

26.2

62.0

55.1

UltraTech Cement

67

15 3

34 5

21 5

Research Analyst
Rashesh Shah
rashes.shah@icicisecurities.com
Devang Bhatt
devang.bhatt@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Shree Cements results are not directly comparable due to adoption

of IND AS. As per the new accounting standard, sales were reported
to be inclusive of excise duty. Further, the company has also
reported subsidy income of ~| 63 crore (| 26 crore in other income
and | 36 crore in revenues), which was earlier passed through the
balance sheet. Adjusting for excise duty, sales rose 27.9% YoY to
| 2,198.7 crore (marginally above I-direct estimate of | 2,095.8 crore)
Cement revenues increased 33.2% YoY to | 2,018.8 crore (vs. I-direct
estimate of | 1,931) led by 18.7% YoY increase in volumes to 5.1 MT
(vs. I-direct estimate of 5.2 MT) and 12.2% YoY increase in realisation
to | 3,906 (vs. I-direct estimate of | 3,688)
Cement EBITDA/tonne increased 87.6% YoY to | 1,262/tonne led by
29.4% YoY decline in power cost/tonne. Further, 23.4% rise in power
EBITDA to | 78.4 crore led to 75.1% YoY rise in blended
EBITDA/tonne to | 1,414/tonne
On growth trajectory led by 50% expansion in capacity
Continuous capacity expansion and operating efficiency has enabled
Shree Cement to remain ahead of its peers in terms of volume growth
and profitability. As of Q1FY17E, the companys total capacity was at 27.2
MT and is planning to further increase its capacity by 50% to 40 MT by
2020. The company aims to add 2.8 MT clinker capacity in Raipur by
March 2018, 2.5-3 MT in West Bengal & Odisha each. It has also proposed
to add 4 MT capacity in Karnataka taking the total capacity to 40 MT by
2020. We think the managements proactive approach in cost saving
initiatives and significant expansion plans will help it to join the large
capacity league sooner than later.
Demand revival coupled with strong presence in north to drive growth
The companys key markets have witnessed robust volume growth led by
an increase in infrastructure spend by the government. This has enabled
Shree to maintain healthy utilisation. Going forward, we expect utilisation
to remain healthy led by the governments thrust on infrastructure
development, better monsoon and Seventh Pay Commission.
Considering this, coupled with capacity expansion, we expect sales
volume to grow at a CAGR of 36.0% in FY16-18E.
Balance sheet to remain healthy despite capacity expansion
While the debt-equity ratio was at 2.2x in FY08, at the end of FY16, it has
reduced to 0.3x and is expected to remain at this level in coming years.
Operating cash flow has also remained healthy for the company with
FY16 (nine months) operating cash flow of | 900 crore. With the lower D/E
ratio and healthy operating cash flow, going forward, a further expansion
will not create any balance sheet burden.
Positives factored in; downgrade to HOLD from BUY on rich valuations
Apart from demand revival, capacity expansion at 10.0% CAGR and
sustained improvement of pricing in the northern region is expected to
result in a robust financial performance in FY16-18E. Further, cost
efficiencies, lower capital cost for expansions, and a strong balance sheet
remains a key positive for the company. Hence, we remain positive on the
stock from a long term perspective. However, the recent run up in the
stock prompts us to downgrade the stock from BUY to HOLD with a
revised target price of | 18,650 (i.e. at 18x FY18E EV/EBITDA).

Variance analysis

Total Operating Income*

2198.7

2,095.8

1,719.4

Other Income
Raw Material Consumed
Stock Adjustment
Employee Expense
Power, Oil & Fuel
Freight cost

97.9
161.2
17.0
133.1
327.9
440.2

40.0
183.3
0.0
132.6
378.1
432.0

44.4
162.8
-38.9
119.0
415.7
401.1

120.5
-0.9
NA
11.8
-21.1
9.7

75.5
168.5
-7.5
121.6
379.7
428.3

Comments
Revenues increased 27.9% YoY mainly led by 33.2% YoY increase in cement revenues.
The increase in cement revenues was due to 18.7% YoY increase in volumes and
9.0 12.2% YoY increase in realisation led by a pick-up in demand
The increase in other income was due to addition of | 26.0 crore of subsidy income,
29.6 which was earlier passed through the balance sheet
-4.3
NA
9.4
-13.6 Decline in pet coke prices led to lower power & fuel costs
2.8

Other Expenses
EBITDA

657.7
730.8

432.0
537.9

308.1
351.6

113.5
107.8

421.8
505.0

55.9 Inclusion of excise duty in operating cost (as per IND AS) led to rise in other expenses
44.7

EBITDA Margin (%)

Interest
Depreciation
PBT
Total Tax

33.2
27.6
154.0
647.1
139.4

25.7
23.2
324.8
229.9
23.0

20.4 916 bps

26.4
4.7
238.3
-35.3
107.4
502.5
3.3
NA

Adjusted PAT

507.7

206.9

127.4

298.6

Key Metrics
Volume (MT)
Net Realisation/tonne (|)

5.17
3,906

5.24
3,688

4.35
3,480

18.7
12.2

5.36
3,767

1,414
1,027
808
75.1
Blended EBITDA per Tonne (|)
Source: Company, ICICIdirect.com Research, * Adjusted for excise duty

943

Q1FY17 Q1FY17E

Q1FY16

YoY (%) Q4FY16 QoQ (%)

27.9 2,017.4

25.0 458 bps The improvement in EBITDA margin was mainly due to lower power expenses
28.6
-3.5
333.8
-53.8
218.1
196.7
-5.3
NA
Lower depreciation expenses and higher other income led to increase in PAT during
223.4
127.2 the quarter

-3.5 Volume growth was led by capacity expansion and pick-up in demand
3.7 Better pricing scenario in north led to higher realisation
50.0 The increase in blended EBITDA/tonne was led by an improvement in cement EBITDA

Change in estimates
FY17E
(| Crore)
Gross revenues
Excise duty

OLD estimate as
per Ind AS
9,982.6
1,089.1

Net revenue

8,893.5

FY18E

New % Change
10,213.1
2.3
1,114.2
-

9,098.8

OLD estimate as per

Ind AS
11,891.8
1,297.4

2.3

10,594.4

New % Change
12,385.1
4.1
1,351.2
-

11,033.9

4.1

Comments

We expect revenues to improve over FY16-18E led by better

realisation due to a pick-up in rural and government demand

EBITDA
2,425.8
2,558.8
5.5
3,477.3
3,613.5
3.9
Margins are expected to stabilise at 29.2%
EBITDA Margin (%)
24.3
25.1
75 bps
29.2
29.2
-7 bps
Adjusted PAT
1,019.3
1,238.8
21.5
1,784.1
1,862.4
4.4
Adjusted EPS (|)
292.9
356.0
21.5
512.7
535.2
4.4
Source: Company, ICICIdirect.com Research, FY17E and FY18E revenues has been adjusted to factor in impact of IND AS

Assumptions

Volume (MT)
Realisation^ (|)

FY13

FY14

FY15

Current
FY16*

FY17E

FY18E

Earlier
FY17E FY18E

12.4
3,675

14.2
3,696

16.1
3,572

14.2
3,491

22.1
4,323

26.4
4,427

22.7
3,626

26.4
3,763

Comments
We expect volumes to increase at a CAGR of 36.0% in FY16-18E mainly led
by increased infra spending and capacity addition

We expect the company to report EBITDA/tonne of over | 1300/tonne by

EBITDA per Tonne (|)
1,253
979
832
927
1,155
1,371
1,068
1,317 FY18E
Source: Company, ICICIdirect.com Research, *9M period due to change in financial year, ^For current estimates, we have reported gross realisation for FY17E and FY18E

ICICI Securities Ltd | Retail Equity Research

Page 2

Company Analysis
Strong presence in northern region

Revenue share in northern region

Others
(Delhi, Bihar,
J&K)
14%

Rajasthan
22%

UP
10%

The company is one of the major players in the northern region with a
market share of ~20%. Rajasthan is the highest revenue generator state
for the company followed by Haryana and Punjab. The company has a
total capacity of 27.2 MTPA most of which is located in Rajasthan except
capacity of 1.2 MTPA in Roorkee, Uttarakhand, 1.5 MTPA in Panipat,
Haryana (acquisition completed on April 27, 2015), 2.6 MT in Chhattisgarh
2.0 MTPA in UP and 3.6 MTPA in Bihar. Shree Cement distributes cement
under different brand names - Shree Ultra, Bangur and Rockstrong. In
FY09-16, sales have grown at a CAGR of 11%.
Power business: Not just another segment

Haryana
20%

Uttranchal
17%
Punjab
17%

The company is among the first companies in the cement industry to

have entered the power business. It has evolved from a mere captive
power producer to a major merchant power player and is also a Category
I power trading licensee. The company has increased its capacity from
560 MW in FY12 to 612 MW in FY16. The power business contributes
more than 10% to total revenues of the company. Moreover, it is also one
of the most efficient users of fuel in the industry. Captive capacity along
with better efficiency results in lower P&F cost per tonne for the company.
It is the first company in the world to utilise 100% pet coke in all its
operations for both cement and power plants.
Exhibit 1: Lower power cost per tonne vs. industry
1200
1000
| / tonne

800

807
683

908
759

693

544

600

1015

634

986

561

1000

950

565

886
623

517

400
200
0
FY09

FY10

FY11

FY12
Shree Cement

FY13

FY14

FY15

FY16

Industry

Source: Company, ICICIdirect.com Research

Aiming to achieve 50% increase in capacity to 40 MT by 2020

Continuous capacity expansion and operating efficiency has enabled
Shree Cement to remain ahead of its peers in terms of volume growth
and profitability. As of Q1FY17E, the companys total capacity was at 27.2
MT and is planning to further increase its capacity by 50% to 40 MT by
2020. The company aims to add 2.8 MT clinker capacity in Raipur by
March 2018, 2.5-3 MT in West Bengal and Odisha each. It has also
proposed to add 4 MT capacity in Karnataka taking the total capacity to 40
MT by 2020. We think the managements proactive approach in costsaving initiatives and significant expansion plans will help it to join the
large capacity league sooner than later.

ICICI Securities Ltd | Retail Equity Research

Page 3

Comfortable D/E along with healthy operating cash flows

While the debt-equity ratio was at 2.2x in FY08, at the end of FY16, it has
reduced to 0.3x and is expected to remain at this level in the coming
years. Operating cash flow has also remained healthy for the company
with FY16 (nine months) operating cash flow of | 900 crore. With the
lower D/E ratio and healthy operating cash flow, going forward, a further
expansion will not create any balance sheet burden.
Exhibit 2: D/E ratio trend
1.5
1.3
1.1

2.2

1.0

0.9
0.7

1.3

0.5

1.1

0.5

0.4

0.4

0.3

0.3

0.3

0.2

0.1
-0.1

0.2
FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16*

FY17E

FY18E

D/E

Source: Company, ICICIdirect.com Research, *9M period due to change in financial year

Exhibit 3: Cash flow from operations

3500
2592

(| crore)

3000

2282

2500
1122

2000
1500
1000

734

1420

1191

1351
918

776

500

2734

143

0
FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16* FY17E FY18E

Source: Company, ICICIdirect.com Research, *9M period due to change in financial year

ICICI Securities Ltd | Retail Equity Research

Page 4

Expect revenue CAGR of 49.1% during FY16-18E

Revenues have grown at ~9.7% CAGR in FY11-16 mainly led by robust
growth in the power segment due to commissioning of the 300 MW
power capacity at Beawar in FY12 while the cement segment revenue
grew at a CAGR of 9.2% during the same period. Due to moderate growth
in the power segment, we expect capacity expansion in cement to drive
revenue CAGR of ~49.1% in FY16-18E. Shree Cement is venturing into
the eastern region where cement prices have been higher than the
northern region historically. This is expected to lead to an improvement in
realisation for the company.
Exhibit 4: Expect expansion led revenue CAGR of 49.1% during FY16-18E

Exhibit 5: Capacity addition plans

(| Crore)

Region

14000
12000
10000
8000
6000
4000
2000
0

719

583

1046

5317

4571
FY13

643

698

5244

5750

FY14

595

11666

9545

FY15

FY16*

FY17E

FY18E

Power Sales (| crore)

Exhibit 6: Volume to grow at CAGR of 36.0% during FY16-18E

26.4

12.4

14.2

0.3
27.5

North

2.8

East

3.0

West bengal
Odhisa
Karnataka

East

3.0

South

4.0

Total by FY20E

40.3

Source: Company, ICICIdirect.com Research, * proposed 4 MTPA capacity in Karnataka

(timeline is not finalised)

5000

22.1
16.1

North

Total by FY17E

Exhibit 7: Realisation to grow at CAGR of 12.6% during FY16-18E

30.0
25.0

Expansion of clinker

Raipur

Source: Company, ICICIdirect.com Research,*9M period due to change in financial year

15.0

Additions :

Over the next three years capacity expansion

4973

Cement Sales (| crore)

14.9

27.2

668

FY12*

20.0

MT

Current Capacity

4323

4000

4427

3579

3675

3696

3572

3491

FY12*

FY13

FY14

FY15

FY16* FY17E^ FY18E^

30
25
20
15
10
5
0
-5
-10

3000

14.2

2000

10.0

1000

5.0
0.0

FY12*

FY13

FY14

FY15

FY16*

FY17E

FY18E

Cement Realisation (|/tonne) -LS

Cement Sales Volumes (In MT)

Growth (%) -RS

Source: Company, ICICIdirect.com Research,* 9M period due to change in financial year

Source: Company, ICICIdirect.com Research, ^ FY17E and FY18E are gross realisation

Exhibit 8: Merchant power sales growth

Exhibit 9: Realisation trend in merchant power segment

2505

2610
1860

1885

2258

2430

4.36

1737

(|)

3000
2500
2000
1500
1000
500
0

4.01

3.46

3.72

20
3.43

2.96

2.96

-10

1
FY12*

FY13

FY14

FY15

FY16*

FY17E

FY18E

Power Sale volume (In lac units)

10

-20

0
FY12*

FY13

FY14

FY15

Power Realisation (per unit) - LS

FY16* FY17E FY18E

Growth (%) -RS

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research, *9M period due to change in financial year

ICICI Securities Ltd | Retail Equity Research

Page 5

2050

1050

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

Sales volumes -LHS

Growth (%) -RHS

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

2.96

1.41

0.91

1.08

0.31

Jun-16

Mar-16

Dec-15

Sep-15

Mar-15

3480

3646

3500

3906
3363

50
-950

Cement Realisation (|/tonne) -LS

Source: Company, ICICIdirect.com Research

Page 6

Jun-16

-10

0.0

3537

Mar-16

1.0

10

3551

Dec-15

2.0

3050

3736

Sep-15

3.0

20

4009

Jun-15

4.70

4050

Mar-15

4.19

30

Dec-14

4.35

5.17

Sep-14

4.0

4.14

5.36

Exhibit 13: Cement realisations rises 12.2% YoY in June 2016

Jun-14

Million Tonnes

6.0
3.81

Power EBITDA (|/unit)

Source: Company, ICICIdirect.com Research

Exhibit 12: Cement volume grows 18.7% YoY in June 2016

3.80

0.60

Power Realisation (|/unit)

Source: Company, ICICIdirect.com Research

3.72

Dec-14

-1.00

Sep-14

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

0.00

Power Sales Volume

5.0

0.43

1.00

-0.03

2.00

200

1.11

3.00

334

400

4.00

1.29

608

3.27

539

3.37

537

3.65

572

491

Jun-15

488

3.36

498

Jun-14

Million Units

600

661

3.89

5.00

800

3.35

1000

3.68

Exhibit 11: Quarterly power realisations

3.89

Exhibit 10: Power volume increases 6.2% YoY in June 2016 quarter

Margins to improve led by stabilisation in cost structure

We expect operating margins to improve driven by an improvement in
prices coupled with operating leverage benefits.
Exhibit 14: Expect cement EBITDA/tonne of | 1,283 in FY18E

60

1283
1092

1050

1047

933

45

787

757

(%)

1500
1300
1100
900
700
500
300
100
-100

Exhibit 15: Margins to remain healthy due to cost efficiencies

30

27.9

23.6

27.7

15

29.2

25.1

23.9

20.8

0
FY12*

FY12*

FY13

FY14

FY15

FY16*

FY17E

FY13

FY14

FY15

FY16*

FY17E

FY18E

FY18E
Total EBITDA Margin (%)

Cement EBITDA/Tonne

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research,*9M period due to change in financial year

Exhibit 16: Quarterly trend in cement EBITDA/tonne

Exhibit 17: Quarterly realisation trend

35

842

800

726

795

673

793

802

33.2

30

769

(%)

26.5

25

21.2

20

400

21.6

19.8

20.4

22.6

23.3

25.0

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

Mar-15

Jun-14

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

Dec-14

15

Sep-14

| per tonne

1200

1262

1185

Total EBITDA Margin

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Expect net profit margin to improve to 15.0% in FY 18E

We expect net margins to improve from 8.2% in FY16 to 15.0% in FY18E
led by better performance at operating level.
Exhibit 18: Profitability trend
1862

| crore

1500
1000

15.0

1239
1005

865

631

500

20.0

10.0
464

457

FY15

FY16*

5.0
0.0

0
FY12*

FY13

FY14

Net profit - LS

FY17E

FY18E

Net profit margin -RS

Source: Company, ICICIdirect.com Research,* 9M period due to change in financial year

ICICI Securities Ltd | Retail Equity Research

Page 7

(%)

2000

Outlook and valuation

Apart from demand revival, capacity expansion of 10.0% CAGR and
sustained improvement of pricing in the northern region is expected to
result in a robust financial performance in FY16-18E. Further, cost
efficiencies, lower capital cost for expansions and a strong balance sheet
remain key positives for the company. Hence, we remain positive on the
stock from a long term perspective. However, the recent run up in the
stock prompts us to downgrade it from BUY to HOLD with a revised
target price of | 18,650 (i.e. at 18x FY18E EV/EBITDA).
Exhibit 19: Key assumptions
| per tonne

FY13^

FY14^

FY15^

FY16*

FY17E

Sales Volume

12.4

14.2

16.1

14.2

22.1

FY18E
26.4

Realisation

3675

3696

3572

3491

4323

4427

Total Expenditure

3144

2625

2763

2809

2705

3275

Stock Adj

-12

-12

-56

12

Raw material

377

327

360

330

353

325

Employee

263

279

283

256

240

221

Power & fuel

561

565

623

517

499

502

Freight

736

839

867

801

852

800

Others

700

765

732

798

1320

1296

EBITDA per Tonne

1050

933

763

787

1047

1283

Power Volumes (million units)

Realisation (|/unit)

2610

1860

1885

1737

2258

2430

4.0

3.5

3.7

3.4

3.0

3.0

1.0

0.4

0.7

1.2

1.0

1.0

EBITDA (|/unit)

Source: ICICIdirect.com Research, ^ June year ending, ,* 9M period due to change in financial year

EV

30.0x

22.0x

15.0x

8.0x

Aug-16

Feb-16

Aug-15

Feb-15

Aug-14

Feb-14

Aug-13

Feb-13

Aug-12

Feb-12

Aug-11

Feb-11

Aug-10

Feb-10

Aug-09

Feb-09

50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
Aug-08

(| crore)

Exhibit 20: One year forward EV/EBITDA

5.0x

Source: ICICIdirect.com Research,

Exhibit 21: Key valuation summary

FY15
FY16
FY17E
FY18E

Sales
(| cr)
6448.4
5567.8
10213.1
12385.1

Growth
(%)
5.3
-13.7
83.4
21.3

EPS
(|)
122.5
130.7
356.0
535.2

Growth
(%)
-21.6
6.7
172.3
50.3

PE EV/tonne EV/EBITDA
(x)
(x)
141.5
491.9
45.8
132.6
376.5
46.7
48.7
347.6
24.0
32.4
343.3
16.8

RoNW
(%)
8.1
7.4
16.9
20.6

Source: Company, ICICIdirect.com Research,* 9M period due to change in financial year

ICICI Securities Ltd | Retail Equity Research

Page 8

RoCE
(%)
6.1
5.3
14.5
21.5

19,500

70.0

17,000

60.0

14,500

50.0

12,000

40.0

9,500

30.0

7,000

20.0

4,500

10.0

2,000

(%)

(|)

Recommendation history vs. consensus estimate

0.0
May-14

Aug-14

Oct-14
Price

Jan-15

Mar-15

Jun-15

Idirect target

Aug-15

Oct-15

Consensus Target Mean

Jan-16

Mar-16

Jun-16

Aug-16

% Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Feb-09

Event
Government announces excise duty cut of 2% to boost cement sales

Mar-09
May-10
May-12
Jun-12
Jul-13

Company completes its 1 MTPA clinkerisation unit (unit-VII) at Bangur city and starts trial production
Reports surprise net loss of | 71.3 crore due to change in depreciation policy
CCI completes probe into alleged cartilsation by 39 cement companies and finds these companies including Shree Cement guilty of forming cartelisation
CCI imposes | 397 crore penalty on Shree Cement for indulging in restrictive trade practices
Supreme Court directs six cement firms (including Shree Cement) to pay 24% interest on royalty due between 1992 and 1996 to Rajasthan state government

Jul-13
Aug-14
Oct-14
Apr-15

Recommends dividend of | 12/share for June year ending FY13

To acquire 1.5 MTPA cement grinding unit of Jaiprakash Associates situated at Panipat, Haryana for consideration of | 360 crore
Commissions 2.0 MT grinding unit each in Ras, Rajasthan and Aurangabad, Bihar
Completes accquisition 1.5 MTPA cement grinding unit of Jaiprakash Associates

May-15
Oct-15

Commissions clinker manufacturing unit of 1.50 MT capacity at Baloda Bazar near Raipur in Chhattisgarh
Commissions 2.0 MT capacity at Bulandshahr in Uttar Pradesh

Jun-16

Expands grinding unit by 1.6 MT in Bihar to 3.6 MT

Jul-16

Increases its clinker capacity at Beawar (Rajasthan) from 1.1 MT to 1.4 MT

Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank Name
1
Shree Capital Services, Ltd.
2
Digvijay Finlease, Ltd.
3
FLT, Ltd.
4
Mannakrishna Investments Pvt. Ltd.
5
Newa Investments Pvt. Ltd.
6
Ragini Finance, Ltd.
7
Didu Investments Pvt. Ltd.
8
NBI Industrial Finance Co., Ltd.
9
Cartica Capital, Ltd.
10 UTI Asset Management Co. Ltd.
Source: Reuters, ICICIdirect.com Research

Shareholding Pattern
Latest Filing Date % O/S Position (m) Change (m)
30-Jun-16
25.8
9.0
0.0
30-Jun-16
12.2
4.2
0.0
30-Jun-16
10.3
3.6
0.0
30-Jun-16
5.9
2.0
0.0
30-Jun-16
4.0
1.4
0.0
30-Jun-16
3.6
1.3
0.0
30-Jun-16
3.4
1.2
0.0
30-Jun-16
2.4
0.8
0.0
30-Jun-16
2.2
0.7
0.0
30-Jun-16
1.6
0.6
0.0

(in %)
Promoter
FII
DII
Others

Jun-15 Sep-15 Dec-15 Mar-16

64.79
64.79
64.79
64.79
13.10
13.59
13.60
13.63
5.12
4.90
4.96
5.14
16.99
16.72
16.65
16.44

Jun-16
64.79
13.81
5.09
16.31

Recent Activity
Buys
Investor name
Birla Sun Life Asset Management Company Ltd.
BlackRock Institutional Trust Company, N.A.
Sydinvest
Candriam Belgium S.A.
DSP BlackRock Investment Managers Pvt. Ltd.
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Value
3.13
3.50
2.93
1.83
1.40

Shares
0.01
0.01
0.01
0.01
0.01

Sells
Investor name
ICICI Prudential Asset Management Co. Ltd.
Mirae Asset Global Investments Co., Ltd.
SBI Funds Management Pvt. Ltd.
Tata Asset Management Limited
UTI Asset Management Co. Ltd.

Value
-10.36
-3.17
-3.45
-3.48
-2.27

Shares
-0.05
-0.02
-0.02
-0.01
-0.01

Page 9

Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)

| Crore
FY15

FY16

FY17E

FY18E

6,448.4

5,567.8

10,213.1

12,385.1

9.5

-13.7

83.4

21.3

Cash flow statement

(Year-end March)

| Crore
FY15

FY16

FY17E

FY18E

Profit after Tax

426.3

454.9

1,238.8

1,862.4

Add: Depreciation

924.8

908.4

1,264.2

1,313.3

Raw material cost

500.4

473.8

795.5

856.4

Add: Interest

120.6

75.1

107.2

102.8

Power & Fuel cost

1579.8

1130.9

1532.7

1808.9

(Inc)/dec in Current Assets

-487.2

-244.6

-1,010.4

-793.6

Freight cost

1395.5

1141.6

1880.7

2108.0

Inc/(dec) in CL and Provisions

366.1

-275.6

681.9

248.8

455.0

364.5

530.4

583.4

1,350.6

918.2

2,281.7

2,733.5

Employees cost

CF from operating activities

Others

1179.0

1136.7

2914.9

3415.0

(Inc)/dec in Investments

581.8

88.7

0.0

0.0

Total Operating Exp.

5,109.7

4,247.5

7,654.2

8,771.6

(Inc)/dec in Fixed Assets

-1,487.9

-707.7

-1,800.0

-1,800.0

EBITDA

1,338.7

1,320.3

2,558.8

3,613.5

Others

-3.7

-1.4

93.8

41.2

924.8

908.4

1,264.2

1,313.3

Growth (%)
Depreciation

CF from investing activities

Issue/(Buy back) of Equity

-52.3

-860.5

0.0

0.0

-958.5

-1,479.4

-1,800.0

-1,800.0

0.0

0.0

0.0

0.0

Interest

120.6

75.1

107.2

102.8

Inc/(dec) in loan funds

-262.5

163.0

0.0

0.0

Other Income

143.0

120.1

391.5

160.0

Dividend paid & dividend tax

-107.6

-99.3

-107.6

-124.1

PBT

436.3

456.8

1,578.9

2,357.4

Inc/(dec) in Sec. premium

246.7

548.3

0.0

0.0

35.5

2.3

0.0

0.0

Others

-120.6

-75.1

-107.2

-102.8
-226.9

Others
Total Tax

-25.5

-0.4

340.1

495.1

CF from financing activities

-244.0

536.9

-214.8

PAT

426.3

454.9

1,238.8

1,862.4

Net Cash flow

148.2

-24.4

266.9

706.6

Adjusted PAT

464.1

457.2

1,238.8

1,862.4

Opening Cash

159.2

307.3

283.0

549.8

Closing Cash

307.3

283.0

549.8

1,256.5

Growth (%)

-46.4

-1.5

170.9

50.3

Adjusted EPS (|)

133.3

131.4

356.0

535.2

Source: ICICIdirect.com Research, ^FY17E and FY18E estimates is as per IND AS

Source: Company, ICICIdirect.com Research, ^FY17E and FY18E estimates is as per

IND AS

Balance sheet

Key ratios

(Year-end March)

| Crore
FY15

FY16

FY17E

FY18E

Liabilities
Equity Capital
Reserve and Surplus

(Year-end March)

FY15

FY16

FY17E^

FY18E^

Per share data (|)

34.8

34.8

34.8

34.8

EPS

133.3

131.4

356.0

535.2

5,241.4

6,145.4

7,276.6

9,014.8

Cash EPS

388.3

391.8

719.3

912.5

Total Shareholders funds

5,276.3

6,180.2

7,311.4

9,049.6

BV

1,516.2

1,775.9

2,101.0

2,600.5

Total Debt

1,468.7

1,631.7

1,631.7

1,631.7

DPS

26.0

24.0

26.0

30.0

-195.2

-263.4

-263.4

-263.4

Cash Per Share

88.3

81.3

158.0

361.0

0.0

0.0

0.0

0.0

6,549.8

7,548.5

8,679.7

10,417.9

20.8

23.7

25.1

29.2

6.6

8.2

12.1

15.0

Deferred Tax Liability

Minority Interest / Others
Total Liabilities
Assets

Operating Ratios (%)

EBITDA Margin
PAT Margin

Gross Block

7,673.5

8,381.2

10,701.2

12,501.2

Inventory days

52.0

53.4

40.0

40.0

Less: Acc Depreciation

5,658.1

6,566.5

7,830.7

9,144.0

Debtor days

27.0

21.5

24.0

25.0

Net Block

2,015.5

1,814.7

2,870.5

3,357.2

Creditor days

65.9

62.7

58.0

55.0

Capital WIP

1,500.0

1,500.0

980.0

980.0

20.6

Return Ratios (%)

Total Fixed Assets

3,515.5

3,314.7

3,850.5

4,337.2

RoE

8.1

7.4

16.9

Investments

1,662.6

2,366.2

2,366.2

2,366.2

RoCE

6.1

5.3

14.5

21.5

Inventory

918.9

815.2

1,119.2

1,357.3

RoIC

8.7

6.9

17.7

27.5

Debtors

476.4

328.6

671.5

848.3

Loans and Advances

906.6

1,393.3

1,736.2

2,105.5

141.5

132.6

48.7

32.4

Other Current Assets

15.3

24.6

45.2

54.8

45.8

46.7

24.0

16.8

307.3

283.0

549.8

1,256.5

EV / Net Sales

9.5

11.1

6.0

4.9

Total Current Assets

2,624.5

2,844.7

4,122.0

5,622.2

Market Cap / Sales

9.4

10.8

5.9

4.9

Creditors

1,164.8

955.9

1,622.9

1,866.2

Price to Book Value

11.4

9.8

8.3

6.7

88.0

21.3

36.1

41.5

Cash

Provisions

Valuation Ratios (x)

P/E
EV / EBITDA

Solvency Ratios

Total Current Liabilities

1,252.8

977.1

1,659.0

1,907.8

Debt/EBITDA

1.1

1.2

0.6

0.5

Net Current Assets

1,371.7

1,867.6

2,463.0

3,714.5

Debt / Equity

0.3

0.3

0.2

0.2

Application of Funds

6,549.7

7,548.5

8,679.7

10,417.9

Current Ratio

2.1

2.9

2.5

2.9

Quick Ratio

1.4

2.1

1.8

2.2

Source: Company, ICICIdirect.com Research, ^FY17E and FY18E estimates is as per

IND AS

ICICI Securities Ltd | Retail Equity Research

Source: Company, ICICIdirect.com Research, ^FY17E and FY18E estimates is as per

IND AS

Page 10

ICICIdirect.com coverage universe (Cement)

CMP
M Cap
Company
(|)
TP(|) Rating
(| Cr)
1665
1875
Buy
31,292
ACC*
270
300
Buy
41,850
Ambuja Cement*
3738
4000
Buy 102,571
UltraTech Cem
17339 18650
HOLD
58,986
Shree Cement
127
135
Hold
3,059
Heidelberg Cem
121
105
Buy
3,809
India Cement
767
855
Buy
5,364
JK Cement
433
480
Buy
5,096
JK Lakshmi Cem
342
365
Buy
913
Mangalam Cem
116
132
Buy
2,575
SFCL
Source: Company, ICICIdirect.com Research,*CY ending

EPS (|)
EV/EBITDA (x)
FY16 FY17E FY18E FY16 FY17E FY18E
31.3 57.8 68.2
25.6
17.9
14.6
5.2
7.5
8.3
25.7
19.5
17.2
79.8 100.7 124.6
23.7
19.1
16.2
131
356
535
46.7
24.0
16.8
1.7
4.1
6.0
17.4
11.9
9.8
4.5
7.3
6.2
8.7
7.4
7.5
14.9 34.3 44.9
15.4
11.2
10.1
0.5
6.1 13.9
24.8
15.4
11.1
0.0 20.0 29.4
35.4
8.7
6.6
4.1
5.9
8.4
8.4
7.1
5.7

ICICI Securities Ltd | Retail Equity Research

EV/Tonne ($)
FY16 FY17E FY18E
163
147
142
164
177
176
254
237
233
376
348
343
113
111
108
73
70
68
108
104
105
135
114
82
64
54
50
178
174
132

RoCE (%)
RoE (%)
FY16 FY17E FY18E FY16 FY17E FY18E
6.0 11.9 13.4
7.0 12.0 12.9
7.9 12.0 13.3
7.8 10.8 11.3
12.0 13.9 16.4 10.6 11.6 13.3
5.3 14.5 21.5
7.4 16.9 20.6
7.1 12.1 14.6
4.3
9.3 12.2
8.4
9.8
8.7
4.2
5.8
4.7
8.8 12.3 13.6
6.1 13.1 14.3
3.4
8.0 12.1
0.5
5.2 10.7
1.4 13.0 16.6
NA 10.1 13.1
12.0 14.5 18.1 12.3 15.4 18.4

Page 11

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

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
S C

ICICI Securities Ltd | Retail Equity Research

Page 12

ANALYST CERTIFICATION
We /I, Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately
reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990.ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking
and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and
has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of
which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Rashesh Shah, CA, and Devang Bhatt,PGDBM Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve
months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.

ICICI Securities Ltd | Retail Equity Research

Page 13