View
216
Download
0
Category
Preview:
Citation preview
8/10/2019 Cement Sector MOST
1/12
8 July 2014 1
Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416
Sandipan Pal(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Demand recovery continues with ~8% growthUpgrading FY16 EPS, led by increase in pricing improvement to ~INR20/bag
Demand recovery continues; expect ~8% growth for our Cement universe
Cement demand recovery continued in 1QFY15, driven by strong rural housing
demand and partial resolution of sand mining issue. We estimate growth of 8.3%
YoY (decline of 4.5% QoQ) for our Cement universe. Capacity utilization would
remain stable YoY at ~74% (down 4pp QoQ). Cement dealers across regions indicate
improved sentiment and sustenance of demand recovery in 2HFY15.
Pre-monsoon price hikes across markets, estimate INR6/bag QoQ increase
While cement prices retraced from the highs of March-April 2014, especially in
North India, as the Binani plant commenced operations, blended prices were still
higher than in 4QFY14. Overall, we expect weighted average national prices to
increase by INR6/bag QoQ (and INR14/bag YoY) in 1QFY15. This includes specific
trends of (a) ~INR14/bag QoQ average increase in South India, benefiting from upto
~INR100/bag price increase in June 2014, (b) ~INR6/bag increase in West and
Central India, (c) INR3/bag increase in North India, and (d) ~INR4/bag decline in East
India. We now factor in INR12.5/INR20/INR20 per bag increase in realizations in
FY15/FY16/FY17 on back of ~INR5/bag decline in FY14 (v/s earlier assumption of
~INR12.5/12.5/15 per bag increase).
Profitability stable QoQ; south players to enjoy partial benefits of price hike
Profitability is likely to remain stable QoQ, as the benefit of higher price gets offset
by freight cost pressure and negative operating leverage, resulting in EBITDA/ton of
~INR731 (down INR73/ton YoY). While players focused on South India would benefit
significantly from sharp pricing recovery, weak pricing would impact profitability of
players based in North and East India. We estimate EBITDA/ton at
INR795/1,075/1,345 for FY15/FY16/FY17, against ~INR673/ton in FY14.
Valuation and view
While our FY15E EPS has seen downgrades, our assumption of higher pricing change
has led to up to 39% upgrade in FY16E EPS. While demand recovery would begradual, slowing capacity addition coupled with higher capex and opex cost would
support cement prices and profitability. Demand recovery would be critical for
operating and stock performance. Among large caps, we prefer ACC, UTCEM and
SRCM, and DBEL, JKCE, JKLC, and PRSC inmid-caps.
Company name
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Shree Cement
Ultratech Cement
Technology
June Results Preview | 8 July 2014
Cement
Investors are advised to refer through disclosures made at the end of the Research Report.
8/10/2019 Cement Sector MOST
2/12
8 July 2014 2
Expected quarterly performance summary (INR m)
Sector Sales EBDITA PAT
CMP
(INR)Rating Jun-14
Var %
YoY
Var %
QoQJun-14
Var %
YoY
Var %
QoQJun-14
Var %
YoY
Var %
QoQ
ACC 1,452 Buy 29,833 6.7 0.5 3,889 -10.3 6.5 2,656 2.5 -13.9
Ambuja Cements 224 Neutral 25,053 6.8 -5.1 5,172 5.1 -10.5 3,771 16.3 -15.7Birla Corporation 418 Buy 8,083 4.7 3.9 650 -2.7 17.2 392 -14.8 20.3
Grasim Industries 3,388 Buy 12,999 13.1 -15.0 1,148 -43.3 -16.9 1,199 -46.8 -3.4
India Cements 116 Neutral 12,624 1.9 16.9 1,342 -29.7 81.0 -46 PL Loss
Jaiprakash Associates 73 Buy 34,727 4.8 2.1 8,592 9.5 -1.5 59 -71.8 -93.7
Shree Cement 7,276 Buy 16,345 13.4 -1.5 4,498 18.4 5.6 3,048 7.2 34.1
Ultratech Cement 2,604 Buy 55,830 12.6 -4.3 10,203 -2.7 -10.7 6,186 -8.0 -18.9
Sector Aggregate 195,493 8.5 -1.7 35,495 -1.4 -2.8 17,264 -6.6 -11.4
Cement demand recovery apparent in 1QFY15 (%)
-5
0
5
10
15
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15E
IIP Data MOSL Universe
Source: Company, MOSL
MOSL cement universe volumes to grow 8% YoY (3% QoQ)
6.4
3.6 4
.34.0
9.4 1
0.4 13
.8
8.4
2.7
1.9
-2.0 0
.4 3.4
1.5
6.1
8.3
-2
3
8
13
18
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15E
Volumes (MT) - RHS Volume growth (%)
Source: Company, MOSL
Utilizations fail to improve in a seasonally strong quarter
60%
70%
80%
90%
100%
1Q
FY10
3Q
FY10
1Q
FY11
3Q
FY11
1Q
FY12
3Q
FY12
1Q
FY13
3Q
FY13
1Q
FY14
3Q
FY14
1Q
FY15
Source: Company, MOSL
Trend in average quarterly cement price (INR/bag)
259
316
275
289
262
281
245
307
272
294
264 2
77
245
308
271
300
266 2
79
269
328
281
281 2
93
289
272
324
287
295
298
295
North East West South Central National
Average
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15
Source: Company, MOSL
June 2014 Results Preview | Sector: Cement
8/10/2019 Cement Sector MOST
3/12
8/10/2019 Cement Sector MOST
4/12
8 July 2014 4
Quarterly Performance (Standalone) (INR Million)
Y/E December CY13 CY14 CY13 CY14E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 0 0
Cement Sales (m ton) 6.42 6.12 5.54 5.85 6.48 6.36 5.76 6.28 23.9 24.89
YoY Change (%) -4.5 1.2 2.6 -1.5 0.9 4.0 4.0 7.4 -0.7 4.0
Cement Realization 4,269 4,298 4,235 4,307 4,304 4,404 4,304 4,554 4,278 4,393
YoY Change (%) 0.9 -5.7 -5.9 3.4 0.8 2.5 1.6 5.7 -1.8 2.7
QoQ Change (%) 2.5 0.7 -1.5 1.7 -0.1 2.3 -2.3 5.8 0.0 0.0
Net Sales 29,111 27,952 25,087 26,934 29,671 29,833 26,500 30,444 109,084 116,448
YoY Change (%) 2.4 1.4 3.2 -13.1 1.9 6.7 5.6 13.0 -2.0 6.8
EBITDA 4,468 4,335 2,254 2,626 3,653 3,889 2,110 4,123 13,683 13,776
Margins (%) 15.3 15.5 9.0 9.8 12.3 13.0 8.0 13.5 12.5 11.8Depreciation 1,383 1,387 1,444 1,526 1,366 1,400 1,440 1,448 5,740 5,654
Interest 108 179 110 120 108 106 106 104 517 425
Other Income 1,205 908 1,023 1,438 1,668 1,000 1,200 1,382 4,573 5,250
PBT before EO Item 4,182 3,677 1,722 2,419 3,848 3,383 1,764 3,953 12,000 12,947
PBT after EO Item 5,861 3,677 1,722 3,178 4,975 3,383 1,764 3,953 14,437 14,075
Tax 1,484 1,086 514 396 988 727 379 861 3,479 2,956
Rate (%) 25.3 29.5 29.8 12.5 19.9 21.5 21.5 21.8 24.1 21.0
Reported PAT 4,377 2,591 1,208 2,781 3,987 2,656 1,384 3,092 10,958 11,119
Adjusted PAT 3,124 2,591 1,208 2,117 3,084 2,656 1,384 3,092 9,108 10,228
Margins (%) 10.7 9.3 4.8 7.9 10.4 8.9 5.2 10.2 8.3 8.8
YoY Change (%) -19.1 -38.0 -51.4 -11.5 -1.3 2.5 14.6 46.0 -29.5 12.3
E: MOSL Estimates; * Merger of RMC business from 4QCY12
June 2014 Results Preview | Sector: Cemen
ACCCMP: INR1,452 Buy
We expect dispatches to grow 4% YoY (decline 2% QoQ) in 2QCY14 to
6.36m tons. Average realization is likely to grow 2.3% QoQ (+2.5%
YoY) to INR4,404/ton.
Revenue would grow 6.7% YoY (1% QoQ) to INR29.8b. EBITDA margin
would shrink 2.5pp YoY (but expand 0.7pp QoQ) to 13% due to
moderate realization growth. We estimate cement EBITDA/ton at
INR600 (INR102 lower YoY; INR48 higher QoQ).
PAT would grow 2.5% YoY (but decline 14% QoQ) to INR2.65b.
We are cutting our CY14 EPS estimate (ex-synergies) by 9.9% to
INR54.4, while raising our CY15 EPS estimate by 6.2% to INR84.1 to
factor in for deferred recovery and higher pricing in FY15.
The stock trades at 16.2x CY15E EPS, and at an EV of 9.9x CY15E
EBITDA and USD120/ton. Maintain Buy with a target price of
INR1,804 (CY15E EV of USD152/ton).
Key issues to watch for
Volume growth recovery and outlook
Cement pricing outlook and sustainability
Progress in ongoing capex for 5m-ton Jamul expansion
Update on synergies and other guided cost saving measures
Bloomberg ACC IN
Equity Shares (m) 187.9
M. Cap. (INR b)/(USD b) 273 / 5
52-Week Range (INR) 1524 / 9121,6,12 Rel Perf. (%) -3 / 9 / -16
Financial and Valuation Summary (INR b)
Y/E Dec 2013 2014E 2015E 2016E
Sales 109.1 116.4 137.0 163.0
EBITDA 13.7 13.8 22.7 33.7
NP 9.1 10.2 15.8 22.5
Adj. EPS (INR) 48.6 54.4 84.1 119.9
EPS Gr. (%) -29.3 12.1 54.6 42.5
BV/Sh (INR) 416.4 434.9 472.5 545.9
RoE (%) 12.0 12.8 18.5 23.5
RoCE (%) 15.3 15.7 24.1 31.3
Payout (%) 60.2 68.8 55.3 38.8
Valuations
P/E (x) 30.3 27.0 17.5 12.3
P/BV (x) 3.5 3.4 3.1 2.7
EV/EBITDA (x) 17.6 16.4 10.7 6.8
EV/Ton (x) 133.2 124.9 120.6 113.0
8/10/2019 Cement Sector MOST
5/12
8 July 2014 5
Quarterly Performance (INR Million)Y/E December CY13 CY14 CY13 CY14E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 0 0
Sales Volume (m ton)* 5.96 5.46 4.89 5.29 6.03 5.62 5.03 5.67 21.60 22.36
YoY Change (%) -3.6 -3.1 2.0 -1.8 1.2 3.0 3.0 7.1 -1.8 3.5
Realization (INR/ton) 4,271 4,297 4,103 4,142 4,376 4,456 4,356 4,556 4,207 4,437
YoY Change (%) 0.3 -5.7 -9.2 -3.5 2.5 3.7 6.1 10.0 -4.4 5.5
QoQ Change (%) -0.5 0.6 -4.5 0.9 5.6 1.8 -2.2 4.6 0.0 0.0
Net Sales 25,448 23,457 20,049 21,913 26,398 25,053 21,920 25,820 90,868 99,191
YoY Change (%) -3.3 -8.6 -7.4 -5.3 3.7 6.8 9.3 17.8 46.1 40.2
EBITDA 5,118 4,920 2,554 2,890 5,776 5,172 3,224 4,522 15,482 18,694
Margins (%) 20.1 21.0 12.7 13.2 21.9 20.6 14.7 17.5 17.0 18.8
Depreciation 1,204 1,223 1,246 1,228 1,197 1,225 1,275 1,272 4,901 4,969
Interest 132 171 178 169 161 160 160 160 651 641
Other Income 1,339 1,051 940 1,019 1,414 1,175 1,100 1,311 4,349 5,000
PBT before EO Item 5,121 4,578 2,070 2,512 5,832 4,962 2,889 4,400 14,280 18,084
Extraordinary Inc/(Exp) 1,741 0 481 1,046 948 0 0 0 3,269 948
PBT after EO Exp/(Inc) 6,862 4,578 2,551 3,558 6,780 4,962 2,889 4,400 17,549 19,031
Tax 1,983 1,336 891 393 1,579 1,191 693 1,057 4,603 4,521
Rate (%) 28.9 29.2 34.9 11.0 23.3 24.0 24.0 24.0 26.2 23.8
Reported Profit 4,879 3,242 1,660 3,165 5,200 3,771 2,196 3,343 12,946 14,510
Adj PAT 3,641 3,242 1,346 2,234 4,473 3,771 2,196 3,343 10,464 13,788
YoY Change (%) -28.3 -30.9 -60.1 -2.8 22.9 16.3 63.1 49.6 -32.2 31.8
E: MOSL Estimates
June 2014 Results Preview | Sector: Cemen
Ambuja CementsCMP: INR224 Neutral
We expect dispatches to grow 3% YoY (decline 7% QoQ) to 5.62m
tons in 2QCY14. Average realization would grow 3.7% YoY (1.8% QoQ)
to INR4,456/ton. We estimate revenue at INR25.1b (up 6.8% YoY, but
down 5% QoQ).
EBITDA margin would remain flat YoY (decline 1.3pp QoQ) to 20.6%.
We estimate EBITDA/ton at ~INR920 (up INR19/ton YoY; down
INR38/ton QoQ).
Adjusted PAT is likely to grow 16% YoY (decline 16% QoQ) to INR3.8b.
We are raising our CY15 EPS estimate (ex-synergies) by 11.6% to
factor in higher realizations. Our CY14 EPS estimate is unchanged.
Maintain Neutral with a target price of INR247 (CY15E EV of
USD160/ton).
Key issues to watch for
Volume growth recovery and outlook
Cement pricing outlook and sustainability
Progress in ongoing mining land acquisition and capex in 4.5m-ton
Nagaur (Rajasthan) plant.
Bloomberg ACEM IN
Equity Shares (m) 1979.3
M. Cap. (INR b)/(USD b) 443 / 7
52-Week Range (INR) 244 / 1481,6,12 Rel Perf. (%) -7 / 1 / -15
Financial and Valuation Summary (INR b)
Y/E Dec 2013 2014E 2015E 2016E
Sales 90.9 99.2 114.6 136.5
EBITDA 15.5 18.7 25.8 35.0
NP 10.5 13.8 17.9 24.3
Adj. EPS (INR) 6.8 7.0 9.0 12.3
EPS Gr. (%) -32.4 2.9 29.7 36.1
BV/Sh. (INR) 61.2 51.5 56.0 63.8
RoE (%) 11.5 14.0 16.8 20.5
RoCE (%) 16.3 19.0 23.7 28.9
Payout (%) 49.9 55.7 50.2 36.9
Valuations
P/E (x) 32.7 31.8 24.5 18.0
P/BV (x) 3.6 4.3 4.0 3.5
EV/EBITDA (x) 19.0 21.0 14.8 10.6
EV/Ton (USD) 173.3 224.5 218.0 211.1
8/10/2019 Cement Sector MOST
6/12
8 July 2014 6
Quarterly Performance (INR Million)Y/E March FY14 FY15 FY14 FY15
1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE 0 0
Cement Sales (m ton) 1.87 1.85 1.81 1.91 1.98 1.96 1.95 2.06 7.43 7.96
YoY Change (%) 14.8 17.3 16.5 11.6 6.0 6.0 8.0 8.0 15.0 7.0
Cement Realization 3,864 3,541 3,579 3,753 3,813 3,713 3,913 4,212 3,686 3,916
YoY Change (%) -3.9 -10.0 -5.4 4.8 -1.3 4.8 9.3 12.2 -3.7 6.2
QoQ Change (%) 7.9 -8.3 1.1 4.8 1.6 -2.6 5.4 7.6 0.0 0.0
Net Sales 7,720 7,107 7,098 7,780 8,083 7,818 8,169 9,203 29,705 33,273
YoY Change (%) 17.3 13.3 15.9 16.9 4.7 10.0 15.1 18.3 15.9 12.0
EBITDA 668 585 299 555 650 555 885 1,118 2,107 3,208
Margins (%) 8.7 8.2 4.2 7.1 8.0 7.1 10.8 12.1 7.1 9.6
Depreciation 302 311 319 393 360 365 380 391 1,326 1,496
Interest 207 249 202 198 200 205 215 222 856 842
Other Income 367 422 323 485 400 450 350 690 1,598 1,890
Profit before Tax 525 448 101 448 490 435 640 1,194 1,523 2,759
Tax 66 32 -59 186 98 87 128 239 225 552
Rate (%) 12.5 7.1 -58.0 41.6 20.0 20.0 20.0 20.0 14.8 20.0
Reported PAT 460 416 160 262 392 348 512 955 1,298 2,207
EO Income/(Expense) 0 0 0 -109 0 0 0 0 -109 0
PAT 460 416 160 326 392 348 512 955 1,391 2,207
Margins (%) 6.0 5.9 2.3 4.2 4.8 4.5 6.3 10.4 4.7 6.6
YoY Change (%) -45.7 -48.2 -50.4 -55.1 -14.8 -16.3 220.4 193.1 -48.5 58.7
E: MOSL Estimates
June 2014 Results Preview | Sector: Cemen
Birla CorporationCMP: INR418 Buy
We expect volumes to grow 6% YoY (3.9% QoQ) to 1.98m tons in
1QFY15. Average realization is likely to grow 1.6% YoY (decline 1.3%
QoQ) to INR3,813/ton.
EBITDA margin would shrink 0.7pp YoY (but expand 0.9pp QoQ) to
8%. EBITDA/ton (including non-cement business) is likely to decline by
INR29 YoY (but increase by ~INR37 QoQ).
We estimate PAT at INR392m, down 14.8% YoY.
We are cutting our EPS estimate for FY15 by 21% to factor in lower
realizations for the year, but raising our EPS estimate for FY16 by
3.9% to factor in better realizations.
The stock trades at 8.1x FY16E EPS, and at an EV of 3.8x FY16E EBITDA
and USD40/ton. We maintain Buy, with a target price of INR566
(FY16E EV of USD60/ton).
Key issues to watch for
Volume growth recovery and outlook
Cement pricing outlook and sustainability
Timeline and clarity on Rajasthan Mining permission
Bloomberg BCORP IN
Equity Shares (m) 77.0
M. Cap. (INR b)/(USD b) 32 / 1
52-Week Range (INR) 429 / 1911,6,12 Rel Perf. (%) 4 / 32 / 46
Financial and Valuation Summary (INR b)
Y/E March 2014 2015E 2016E 2017E
Sales 29.7 33.3 38.5 43.5
EBITDA 2.1 3.2 5.8 8.5
NP 1.3 2.2 4.0 6.0
Adj. EPS (INR) 16.9 28.7 51.4 77.6
EPS Gr. (%) -51.9 70.1 79.3 50.9
BV/Sh. (INR) 328.0 346.2 386.0 452.0
RoE (%) 5.1 8.3 13.3 17.2
RoCE (%) 6.1 9.0 14.0 18.1
Payout (%) 55.5 36.5 22.6 15.0
Valuations
P/E (x) 24.8 14.6 8.1 5.4
P/BV (x) 1.3 1.2 1.1 0.9
EV/EBITDA (x) 11.5 7.4 3.8 2.1
EV/Ton (x) 43.4 42.6 39.9 31.7
8/10/2019 Cement Sector MOST
7/12
8/10/2019 Cement Sector MOST
8/12
8 July 2014 8
Quarterly Performance (Standalone)(INR Million
Y/E March FY14 FY15 FY14E FY15E
1Q 2Q 3Q 4QE 1QE 2QE 3QE 4QE
Sales Dispatches (m ton) 2.65 2.44 2.29 2.65 2.73 2.56 2.45 2.91 10.04 10.65
YoY Change (%) 11.3 -2.9 -5.2 -4.4 3.0 5.0 7.0 9.5 -0.2 6.1
Realization (INR/ton) 4,188 4,116 4,429 4,009 4,209 4,609 4,409 4,609 4,178 4,460
YoY Change (%) -6.2 -5.5 1.5 -5.0 0.5 12.0 -0.4 15.0 -4.2 6.8
QoQ Change (%) -0.8 -1.7 7.6 -9.5 5.0 9.5 -4.3 4.5 0.0 0.0
Net Sales 12,384 10,859 10,365 10,801 12,624 12,483 11,107 13,757 44,409 49,972
YoY Change (%) 3.1 -3.3 -4.2 -9.3 1.9 15.0 7.2 27.4 -3.4 12.5
EBITDA 1,910 1,276 1,444 742 1,342 1,989 1,444 2,373 5,371 7,148
Margins (%) 15.4 11.7 13.9 6.9 10.6 15.9 13.0 17.3 12.1 14.3
Depreciation 680 682 686 716 680 700 706 710 2,764 2,796
Interest 999 988 773 778 750 800 825 852 3,537 3,227
Other Income 25 80 19 272 30 50 60 30 396 170
PBT before EO expense 257 -314 4 -480 -58 539 -27 841 -533 1,296
Extra-Ord expense 0 0 0 1,091 0 0 0 0 1,091 0
PBT 257 -314 4 -1,571 -58 539 -27 841 -1,624 1,296
Tax 89 -89 0 0 -12 108 -5 168 0 259
Rate (%) 34.6 28.3 0.0 0.0 20.0 20.0 20.0 20.0 0.0 20.0
Reported PAT 168 -225 4 -1,571 -46 431 -22 673 -1,624 1,036
Adj PAT 168 -225 4 -480 -46 431 -22 673 -533 1,036
YoY Change (%) -77.5 -145.9 -98.4 -282.2 -127.4 -291.5 -622.1 -240.2 -130.2 -294.5
Margins (%) 1.4 -2.1 0.0 -4.4 -0.4 3.5 -0.2 4.9 -1.2 2.1
E: MOSL Estimates
June 2014 Results Preview | Sector: Cemen
India CementsCMP: INR116 Neutral
We expect volumes to grow 3% YoY (3% QoQ) to 2.73m tons. Strong
uptick in prices in June 2014 should aid 1QFY15 realizations. We
expect 0.5% YoY decline (but 5% QoQ increase) in realizations to
INR4,209/ton.
We estimate EBITDA at INR1.34b, up 81% QoQ. EBITDA margin is
likely to shrink 4.8pp YoY (but expand 3.7pp QoQ) to 10.6%,
translating into net loss of INR46m (v/s INR480m in 4QFY14).
Pure Cements EBITDA/ton is likely to increase by ~INR108/ton QoQ
to INR375/ton.
We are revising our EPS estimates for FY15/FY16 by -26%/+29% to
factor in deferred uptick in cement realizations in FY16.
The stock trades at 11x FY16E EPS, and at an EV of 6.1x FY16E EBITDA
and USD73/ton. Maintain Neutral, with a target price of INR126
(FY16E EV of USD75/ton).
Key issues to watch for
Demand and pricing outlook, especially in South India
Expected timeline and potential cost savings from captive coal
block in Indonesia and AP power plant
Timeline and capex plan for TN expansion of 2.6m tons
Bloomberg ICEM IN
Equity Shares (m) 307.2
M. Cap. (INR b)/(USD b) 36 / 1
52-Week Range (INR) 131 / 431,6,12 Rel Perf. (%) 1 / 72 / 73
Financial and Valuation Summary (INR b)
Y/E March 2014 2015E 2016E 2017E
Sales 44.4 50.0 59.1 69.9
EBITDA 5.4 7.1 10.3 13.6
NP -0.5 1.0 3.3 5.7
Adj. EPS (INR) -7.9 2.9 10.6 19.0
EPS Gr. (%) -235.7 -136.2 269.8 79.7
BV/Sh (INR) 125.4 126.4 133.6 148.7
RoE (%) -1.3 2.7 8.2 13.2
RoCE (%) 4.2 6.4 10.8 14.8
Payout (%) 0.0 68.9 32.7 18.7
Valuations
P/E (x) -14.7 40.7 11.0 6.1
P/BV (x) 0.9 0.9 0.9 0.8
EV/EBITDA (x) 12.0 9.4 6.1 4.2
EV/Ton (USD) 78.5 78.1 72.9 65.9
8/10/2019 Cement Sector MOST
9/12
8 July 2014 9
Quarterly performance (INR Million)Y/E June FY13 FY14 FY13 FY14E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE
Sales Dispat. (m ton) 3.04 3.00 3.26 3.17 3.26 3.44 3.84 3.86 12.46 14.39
YoY Change (%) 22.4 5.2 -6.2 -6.0 7.2 14.7 17.8 21.8 -16.2 15.5
Realization (INR/Ton) 3,815 3,724 3,498 3,578 3,334 3,430 3,863 3,925 3,628 3,656
YoY Change (%) 12.2 4.1 -1.7 -4.6 -12.6 -7.9 10.4 9.7 3.4 0.8
QoQ Change (%) 1.7 -2.4 -6.1 2.3 -6.8 2.9 12.6 1.6 0.0 0.0
Net Sales 12,964 14,281 14,281 14,414 12,475 13,170 16,600 16,345 55,671 58,590
YoY Change (%) 52.2 19.4 0.3 0.4 -3.8 -7.8 16.2 13.4 -4.0 5.2
EBITDA 3,902 3,717 4,058 3,800 2,494 2,694 4,261 4,498 15,378 13,947
Margins (%) 30.1 26.0 28.4 26.4 20.0 20.5 25.7 27.5 27.6 23.8
Depreciation 942 818 1,265 1,332 1,139 1,156 1,667 1,639 4,356 5,600
Interest 543 563 447 378 312 309 363 394 1,931 1,378
Other Income 328 323 572 913 740 111 546 804 2,114 2,200
PBT before EO Exp 2,745 2,659 2,918 3,003 1,783 1,339 2,777 3,269 11,205 9,169
Extra-Ord Expense 10 120 1 0 11 32 59 -48 11 0
PBT 2,736 2,539 2,917 3,002 1,773 1,308 2,719 3,317 11,194 9,169
Tax 454 365 176 159 50 153 494 225 1,155 921
Rate (%) 16.6 14.4 6.0 5.3 2.8 11.7 18.2 6.8 10.3 10.1
Reported PAT 2,281 2,174 2,741 2,843 1,722 1,155 2,225 3,093 10,040 8,248
Adj PAT 2,289 2,277 2,741 2,843 1,732 1,183 2,273 3,048 10,049 8,248
YoY Change (%) 438.0 284.6 85.2 -19.1 -24.3 -48.0 -17.1 7.2 59.6 -17.9
E:MOSL Estimates
June 2014 Results Preview | Sector: Cemen
Shree CementCMP: INR7,276 Buy
We expect 4QFY14 cement volumes to grow 22% YoY (12% QoQ) to
3.86m tons (including clinker) and realizations to grow 9.7% YoY
(1.6% QoQ) to INR3,925/ton. Moderate rise in realizations and
benefit of positive operating leverage QoQ would lead to Cement
business profitability at INR1,139/ton (up INR63/ton QoQ).
We estimate merchant power sales at 368m units (v/s 536m units
QoQ and 795m QoQ) at ~INR3.3/unit (v/s INR3.3/unit in 3QFY14 and
INR3.88/unit in 4QFY13). Power EBITDA contribution would be
INR104m (v/s INR130m in 4QFY13 and INR840m in 3QFY14). Adjusted
PAT would be INR3b (v/s INR2.8b in 4QFY13 and INR2.3b in 3QFY14).
We are raising our EPS estimates by 8.7% for FY15 and 28% for FY16
to factor in higher volumes and realizations.
The stock trades at 16.9x FY16E EPS, and at an EV of 8.7x FY15E
EBITDA and USD162/ton. Buy with a target price of INR8,250 (FY16E
EV of USD190/ton).
Key issues to watch for
Volume and pricing outlook for North India
Pet coke price trend and update on any forward agreements for
merchant power
Update on planned expansion and progress in capex plans
Bloomberg SRCM IN
Equity Shares (m) 34.8
M. Cap. (INR b)/(USD b) 253 / 4
52-Week Range (INR) 7982 / 34131,6,12 Rel Perf. (%) -4 / 41 / 26
Financial and Valuation Summary (INR b)
Y/E March 2014 2015E 2016E 2017E
Sales 58.6 70.7 85.8 102.9
EBITDA 13.9 18.4 25.4 33.7
NP 8.2 9.8 15.0 21.3
Adj EPS (INR) 236.7 280.2 431.1 610.3
EPS Gr. (%) -17.9 18.4 53.9 41.6
BV/Sh. (INR) 1,312 1,562 1,958 2,534
RoE (%) 19.6 19.5 24.5 27.2
RoCE (%) 19.6 22.0 27.2 31.1
Payout (%) 11.9 10.8 8.1 5.7
Valuations
P/E (x) 30.7 26.0 16.9 11.9
P/BV (x) 5.5 4.7 3.7 2.9
EV/EBITDA (x) 17.4 13.2 8.7 5.8
EV/Ton (USD) 197.7 174.1 161.9 143.2
8/10/2019 Cement Sector MOST
10/12
8 July 2014 10
Quarterly Performance (INR Million)
Y/E March FY14 FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales (m ton) 10.09 9.23 9.98 12.18 11.57 10.16 11.18 13.33 41.5 46.2
YoY Change (%) -2.3 -0.6 0.4 9.4 14.7 10.0 12.0 9.4 2.0 11.5
Grey Cement
Realn.(INR/ton) * 4,120 3,973 3,936 3,912 4,032 3,932 4,182 4,493 3,982 4,179
YoY Change (%) 0.0 -5.8 -2.8 -2.5 -2.2 -1.0 6.2 14.9 -2.9 4.9
QoQ Change (%) 2.7 -3.6 -0.9 -0.6 3.1 -2.5 6.4 7.5 0.0 0.0
Net Sales 49,575 45,021 47,864 58,319 55,830 49,250 57,013 72,513 200,779 234,606
YoY Change (%) -2.3 -4.2 -1.5 8.2 12.6 9.4 19.1 24.3 0.3 16.8EBITDA 10,491 6,597 7,641 11,429 10,203 6,050 10,437 17,948 36,160 44,638
Margins (%) 21.2 14.7 16.0 19.6 18.3 12.3 18.3 24.8 18.0 19.0
Depreciation 2,521 2,573 2,645 2,785 2,850 3,000 3,200 3,348 10,523 12,398
Interest 660 888 905 739 800 825 835 855 3,192 3,315
Other Income 1,882 574 996 1,858 1,750 800 1,000 1,600 5,310 5,150
PBT before EO expense 9,192 3,711 5,088 9,763 8,303 3,025 7,402 15,345 27,755 34,076
Extra-Ord expense 0 0 0 -956 0 0 0 0 -956 0
PBT after EO Expense 9,192 3,711 5,088 10,719 8,303 3,025 7,402 15,345 28,711 34,076
Tax 2,466 1,070 1,391 2,340 2,117 771 1,887 3,913 7,266 8,689
Rate (%) 26.8 28.8 27.3 21.8 25.5 25.5 25.5 25.5 25.3 25.5
Reported PAT 6,726 2,641 3,698 8,379 6,186 2,254 5,514 11,432 21,445 25,386
Adj PAT 6,726 2,641 3,698 7,632 6,186 2,254 5,514 11,432 20,731 25,386
YoY Change (%) -13.6 -52.0 -38.5 5.1 -8.0 -14.7 49.1 49.8 -21.9 22.5
E: MOSL Estimates; * Grey cement realization is our estimate
June 2014 Results Preview | Sector: Cemen
Ultratech CementCMP: INR2,604 Hold
We expect cement volumes to grow 14.7% YoY (but decline 5% QoQ)
to 11.57m tons. Realizations are likely to grow 3.1% QoQ (but decline
2.2% QoQ) to INR4,032/ton.
White cement volumes and realizations are likely to grow 8.8% YoY
and 12% YoY, respectively. RMC volumes and realizations would grow
7.1% YoY and 2% YoY, respectively.
We estimate EBITDA/ton at INR871 (down INR55/ton QoQ). EBITDA
margin would decline by 2.9pp YoY (and 1.3pp QoQ) to 18.3%.
EBITDA is likely to de-grow 3% YoY (and 11% QoQ) to INR10.2b,
translating into PAT de-growth of 8% YoY to INR6.2b.
We are revising our FY15/FY16 EPS estimates by -3.7%/+10.9% to
factor in deferred uptick in realizations.
The stock trades at 19.6x FY16E EPS, and at an EV of 10.9x FY16E
EBITDA and USD185/ton. Maintain Buy, with a target price of
INR2,906 (EV of FY16E USD200/ton).
Key issues to watch for
Volume growth recovery and outlook
Cement pricing outlook and sustainability
Progress and timeline of JPA deal
Update on financial performance of Star Cement, UAE
Bloomberg UTCEM IN
Equity Shares (m) 274.0
M. Cap. (INR b)/(USD b) 714 / 12
52-Week Range (INR) 2868 / 14051,6,12 Rel Perf. (%) -3 / 26 / 3
Financial and Valuation Summary (INR b)
Y/E March 2014 2015E 2016E 2017E
Sales 200.8 234.6 280.8 334.1
EBITDA 36.2 44.2 62.8 85.9
NP 20.7 25.0 36.5 51.8
Adj EPS (INR) 75.6 91.3 133.0 189.0
EPS Gr. (%) -21.2 20.8 45.7 42.1
BV/Sh (INR) 623.5 703.1 823.4 998.4
RoE (%) 12.8 13.8 17.4 20.7
RoCE (%) 14.4 15.9 20.9 26.2
Payout (%) 13.5 12.7 9.6 7.4
Valuations
P/E (x) 34.5 28.5 19.6 13.8
P/BV (x) 4.2 3.7 3.2 2.6
EV/EBITDA (x) 18.7 15.5 10.9 7.4
EV/Ton (USD) 191.7 193.7 185.5 171.2
8/10/2019 Cement Sector MOST
11/12
8 July 2014 11
N O T E S
June 2014 Results Preview | Sector: Cement
8/10/2019 Cement Sector MOST
12/12
8 July 2014 12
DisclosuresThis report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or
inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution
and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees
to hold MOSt or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or
its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its
affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any
of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of
merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision
based on this report or for any necessary explanation of its contents.
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of
Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Disclosure of Interest Statement Companies where there is interest
1. Analyst ownership of the stock No2. Group/Directors ownership of the stock Birla Corporation
3. Broking relationship with company covered No
4. Investment Banking relationship with company covered Ultratech Cement
Analyst Cer ti fic ation The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is,
or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally
responsible for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.
Regional Disclosures (outside India)This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary
to law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For U.K.This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity
to which this document relates is only available to investment professionals and will be engaged in only with such persons.
For U.S.Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United
States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under
applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services
described herein are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major
institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only
available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange
Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the
U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this
report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-
dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a
research analyst account.
For SingaporeMotilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial
Advisors Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed
in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Ano sh K oppik ar Kadam bari Balac handran
Email:anosh.Koppikar@motilaloswal.com Email : kadambari.balachandran@motilaloswal.com
Contact(+65)68189232 Contact: (+65) 68189233 / 65249115
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
Motilal Oswal Securities LtdMotilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Recommended