Cement - Moneycontrol.comstatic-news.moneycontrol.com/static-mcnews/2018/01/Cement-sector_2...Cement Cement companies ... ban on use of petcoke in Rajasthan, ... companies adversely

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Cement

Cement companies reported 15%/6% YoY consolidated volume/realisation growth in

2QFY18. Operational ramp-up in new capacities drove volume growth, while a change in the

billing pattern led realisations improvement (+5.8% YoY). However, rising costs

(petcoke/diesel) offset the higher realisations, resulting in a 3% decline in EBITDA/t for the

sector (INR 808/t). Managements have a positive demand outlook for 2H, primarily on the

execution of government infrastructure and housing projects. East and North India are

expected to drive demand going forward. Rising costs and muted growth in realisations are

expected to weigh down on EBITDA/t in 3Q. Additionally, the ban on petcoke usage in 3

states around the NCR will impact Shree, JK Lakshmi and JK cement the most (-3% to -5%

impact on FY18 EBITDA). Key sector monitorables are demand and realisations improvement,

which could offset cost escalations. JK Lakshmi remains our top pick in the sector.

2H growth outlook positive; profitability to be impacted on muted prices and escalating

costs: Companies are optimistic about growth recovery in the cement sector in 2HFY18.

Government infrastructure projects (roads, irrigation, metro, etc.) and low-cost housing

are expected to be primary demand drivers. Managements expect better volume growth

in East India (9% - led by Odisha and West Bengal and pent up demand kicking in from

Chhattisgarh and Bihar) and the North (10% growth expectations for FY18). West/Central

India are expected to grow moderately at 6-10%/5-7%. Demand growth in the South is

expected to be driven by AP/Telangana (8-18%), offset by muted demand from TN/Kerala

(-14% to -5%) and Karnataka (-6% to 5%). Realisations are expected to be muted on a

sequential basis as cement prices have been stable-to-weak during Oct-Nov’17.

Profitability in 3Q could be under pressure as increasing costs and weak realisations

would weigh down on margins sequentially.

Volume/realisations grew 15%/6%, driving revenue in 2Q: Cement volumes in 2Q grew

15% YoY, primarily led by incremental volumes from new capacities added over the year.

Average capacity utilisation (of the 15 listed companies) at 65% in 2Q grew marginally

YoY (63% in 2QFY17). Cement production data as released by the government depicts a

0.4% decline in the Jul-Sep’17 quarter YoY, while the sales volume as reported grew

15%, implying increasing market share of organised players in the industry. Realisations

in 2Q grew primarily on a change in the billing pattern of the companies from ex works

to FOR. Realisations growth was accompanied by escalations in freight costs

Marginally lower EBITDA/t as power/fuel and freight costs offset realisation growth:

Weighted average EBITDA/t declined in 2Q as realisations growth was more than offset

by the increase in power/fuel and freight costs. Increasing petcoke/coal prices led the

growth in power/fuels costs, while higher diesel prices and a change in the billing pattern

led the escalation in freight costs. The rise in pe-coke/coal prices (18%/13% YoY) and

diesel prices (+7% YoY) in 3QFY18 (QTD) is expected to further impact the EBITDA/t.

Petcoke usage ban in Rajasthan, UP and Haryana: The Supreme Court of India ordered a

ban on use of petcoke in Rajasthan, Uttar Pradesh and Haryana; this will impact cement

companies adversely as c.76% of fuel requirements in kiln are met through petcoke.

Additionally, Rajasthan is an important state for the industry on account of its large

limestone reserves (12% of India’s overall reserves). A blanket ban on petcoke is expected

to impact Shree, JK Lakshmi and JK Cement the most (-3 to -5% on FY18E EBITDA).

However, we believe the impact would be transitory as cement companies could be

exempted in the medium term, as recommended by the EPCA in its report. Based on our

reading of the Supreme Court’s clarification, we could see restrictions on petcoke usage

in other states as well going forward.

JK Lakshmi remains the top pick

Abhishek Anand CFA [email protected] | Tel: (91 22) 66303067

Roshan Paunikar [email protected] | (91 22) 66303563

20 November 2017 India | Cement | Sector Report

2H outlook positive; rising costs to weigh down on EBITDA/t

Cement 20 November 2017

JM Financial Institutional Securities Limited Page 2

Management Outlook

Demand

South: Growth led by housing and infrastructure projects in AP/Telangana

- Cement demand in AP/Telangana has been growing 8-18% annually depending on the

region of operation, led by housing and infrastructure projects.

- TN/Kerala exhibited muted cement demand (-14% to -5%) on account of sand

unavailability. Demand is expected to be sluggish due to the unseasonal rain in TN in

3Q.

- Karnataka has been growing at -6% to 5%.

West: Gujarat/Maharashtra to show better growth in 2H

- Gujarat is expected to grow at 7% in FY18 on irrigation, road and government housing

projects (-6% YoY in 1H). Demand in Gujarat was affected by floods in the region as

well as RERA implementation.

- Maharashtra is growing at a steady pace of 6%-10% and this is expected to continue.

Central: Good growth in MP; UP/Bihar impacted on sand availability

- MP/UP grew 4-5% in 2QFY18 and are expected to grow 5-6% in FY18.

- Eastern UP and Bihar were impacted by sand unavailability and floods in Bihar.

East: Demand uptick expected; 2Q impacted on monsoons and floods

- Growing at 9% YoY in the areas around Odisha and West Bengal

- Chhattisgarh and Bihar were impacted due to floods in the region. Cement volumes are

expected to post better growth going forward as pent up demand kicks in

North: Expected to grow at 10% in FY18

- Saw 2% growth in cement demand in 2Q; players in the region benefitted as Binani

Cement stopped production

Pricing

The Chhattisgarh government has placed a cap on the cement price. Cement players are

in dialogue with the government and a resolution is expected in 3Q.

Prices in TN/Kerala declined by around INR5-10/bag during Oct-Nov’17; AP/Telangana

saw a decline in the cement prices in at beginning of 3Q (by around INR10-20/bag).

Central India saw stable pricing at the beginning of 3QFY18.

Prices in Maharashtra declined MoM during Oct-Nov’17 (-INR10-20/bag); Gujarat prices

fell by INR10/bag in Oct-Nov’17.

Prices in Northeast India have been stable.

Costs

Petcoke/coal prices have been rising and the full impact of the higher prices is expected to

be felt in forthcoming quarters.

- Average petcoke prices in 2QFY18 were USD85-100/t; current petcoke prices are at

USD105-110/t.

- Current petcoke prices are still cheaper than imported coal by 5-15%

Increased demand of slag has pushed its prices up; prices have increased from INR700/t to

INR1,000/t.

Diesel prices have also been rising; current diesel prices are hovering around 3-year highs.



Volume trends: Growth on capacity addition

The uptick in cement volumes continued in 2QFY18, predominantly driven by the

expansion in cement capacity.

Going forward, companies expect an uptick in volumes in 2HFY18 on demand from

government infrastructure projects, low-cost housing, the IHB segment and road projects.

Player-wise cement volume trends (Mn T) Exhibit 1.

Sep'15 Dec'15 Mar'16 Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17 QoQ YoY Commentary

UltraTech 11.00 11.47 13.58 12.92 10.88 11.41 13.55 12.90 12.84 -0.5 18.0 Incremental volumes from JP assets

Ambuja Cement 4.89 5.55 5.93 5.83 4.55 5.08 6.09 6.12 5.09 -16.8 11.9

ACC 5.61 6.00 6.36 6.12 5.07 5.45 6.60 6.74 5.96 -11.6 17.6 On operations ramp in Jamul and Sindri

Shree Cement 4.19 4.70 5.36 5.17 4.57 4.91 5.93 5.89 4.88 -17.1 6.9 Volume growth on capacity addition

India Cement 2.17 1.94 2.48 2.31 2.40 2.78 2.99 2.71 2.70 -0.2 12.6 Consolidation of Trinetra cement

Madras Cement 1.71 1.63 2.07 2.08 2.03 1.99 2.28 2.15 2.15 0.1 5.8 Higher demand from Eastern markets

JK Lakshmi 1.75 1.76 2.15 2.12 1.72 1.84 2.29 2.29 1.89 -17.3 10.0 Higher capacity vs. the base quarter

JK Cement 1.59 1.77 1.90 1.63 1.65 1.66 1.86 1.87 1.93 3.1 17.0 Growth partially on low base

Dalmia Bharat (ex OCL)

1.77 1.71 2.14 2.41 2.22 2.31 2.75 2.40 2.26 -5.8 1.8

OCL India 1.08 1.25 1.74 1.35 1.20 1.25 1.80 1.59 1.38 -13.2 15.0 Better growth in the eastern markets

Orient Cement 1.01 1.06 1.39 1.39 1.17 1.25 1.73 1.40 1.31 -6.4 11.5 Growth on entry in newer markets

Heidelberg 1.06 1.09 1.11 1.22 1.00 1.05 1.21 1.10 1.06 -3.8 6.0 Better volumes in MP

Mangalam cement 0.56 0.59 0.64 0.61 0.48 0.65 0.69 0.63 0.60 -4.5 24.2 Better volume on capacity commissioning

Sagar Cements 0.42 0.31 0.46 0.58 0.51 0.47 0.64 0.64 0.60 -6.2 16.8

Birla Corp 1.96 1.97 2.21 2.17 1.77 1.75 2.15 3.28 2.65 -19.2 50.1 Consolidation with Reliance cement

Cumulative

volumes 40.75 42.79 49.51 47.89 41.22 43.84 52.56 51.69 47.29 -8.5 14.7

%YoY 4.1 6.0 16.3 8.7 1.1 2.4 6.2 7.9 14.7

%QoQ -7.5 5.0 15.7 -3.3 -13.9 6.4 19.9 -1.7 -8.5

Source: Company, JM Financial

Capacity utilisation for players rose marginally to 65% in the Sep’17 quarter (vs. 63% in

Sep’16), indicating that 15% volume growth took place partially due to the expansion in

cement production capacity and partially on an increase in capacity utilisation.

Growth driven by capacity addition Exhibit 2.

Source: Company, JM Financial | Ultratech, Ambuja, Shree, ACC, India cement, Ramco, JK Lakshmi, JK Cement, Dalmia, OCL, Orient, Heidelberg, Mangalam, Sagar, Birla corp

The government released its cement production data for Sep’17, reporting flattish

growth; for 2QFY18, cement production declined marginally by 0.4% YoY.

Cement volumes as reported by the companies in 2QFY18 (cumulative volumes of the top

14 listed players in the sector – capacity share of c.61%) indicate volume growth of

14.7% YoY.

62.1 62.8 63.165.0 65.9

67.2 68.0 68.3

72.6

66%68%

78%74%

63%65%

77% 76%

65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

55

60

65

70

75

80

85

90

Sep'15 Dec'15 Mar'16 Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17

Total cement capacity (MTPA) Total Capacity Utilisation (%)



Disconnect between cement sales and production data Exhibit 3.

Government data on cement production Sales volume reported by Companies

Source: Company, JM Financial, Industry | * Ultratech, Ambuja, Shree, ACC, India cement, Ramco, JK Lakshmi, JK Cement, Dalmia, OCL, Orient, Heidelberg, Mangalam, Sagar, Birla corp

The volume trends indicate increasing market share for organised players. Market share

increased from 60% in Sep’16 to 70% in Sep’17.

Material change in share of listed players in Industry Exhibit 4.

Source: Company, JM Financial | Volumes for Ultratech, Ambuja, Shree, ACC, India cement, Ramco, JK Lakshmi, JK Cement, Dalmia, OCL,

Orient, Heidelberg, Mangalam, Sagar, Birla corp

67.3

78.475.6

68.266.8

69.2

73.0

68.0

4.512.0

5.7 3.3-0.8

-11.8

-3.5 -0.4

35

45

55

65

75

85

-75

-65

-55

-45

-35

-25

-15

-5

5

15

Dec'15 Mar'16 Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17

Volume (MnT) Growth (YoY %)

42.8

49.547.9

41.2

43.8

52.6 51.7

47.3

6.0

16.3

8.7

1.1 2.46.2 7.9

14.7

-75

-65

-55

-45

-35

-25

-15

-5

5

15

35

40

45

50

55

60

65

70

Dec'15 Mar'16 Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17

Cumulative volumes (MnT)* %YoY

40.842.8

49.5 47.9

41.243.8

52.6 51.747.3

66.1 67.3

78.475.6

68.2 66.869.2

73.0

68.0

62% 64% 63% 63%60%

66%

76%71% 70%

-30%

-10%

10%

30%

50%

70%

20

30

40

50

60

70

80

90

100

Sep'15 Dec'15 Mar'16 Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17

Listed player sales (MnT) - a All India Production (MnT) - b a/b %



Realisation trends: Higher realisations on the change in billing pattern

Realisations during the quarter remained flat sequentially, +5.8% YoY; a deviation from

the estimates was primarily on account of a change in the billing patter for some

companies.

Realisations growth was accompanied by increased freight costs for the quarter.

However, realisations growth was only partially offset by the escalations in freight costs.

Company-wise realisations trend Exhibit 5.

Sep'15 Dec'15 Mar'16 Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17 QoQ YoY

UltraTech 4,130 4,072 3,930 4,093 4,116 4,071 4,162 4,425 4,416 -0.2 7.3

Ambuja Cement 4,285 4,245 4,057 4,336 4,428 4,324 4,208 4,675 4,557 -2.5 2.9

ACC 4,530 4,409 4,231 4,356 4,406 4,510 4,348 4,648 4,733 1.8 7.4

Shree Cement 3,648 3,457 3,334 3,855 4,068 3,697 3,771 4,205 4,170 -0.8 2.5

India Cement 4,888 4,750 4,598 4,506 4,502 4,541 4,484 4,718 4,647 -1.5 3.2

Madras Cement 4,717 4,967 4,636 4,541 4,769 4,682 4,450 4,607 4,783 3.8 0.3

JK Lakshmi 3,690 3,681 3,419 3,486 3,618 3,485 3,370 3,773 3,935 4.3 8.9

JK Cement 3,788 3,580 3,392 3,705 3,652 3,594 3,720 3,991 3,943 -1.2 7.9

Dalmia Bharat (ex OCL) 4,979 5,334 5,086 4,495 4,822 4,660 4,890 5,303 5,132 -3.2 6.4

OCL India 4,456 4,355 4,430 4,659 4,625 4,918 4,518 4,842 4,637 -4.2 0.3

Orient Cement 3,519 3,209 3,143 3,145 3,273 3,632 3,443 4,065 3,996 -1.7 22.1

Heidelberg 3,740 3,681 3,571 3,788 3,842 3,693 3,744 3,915 3,962 1.2 3.1

Mangalam cement 3,570 3,579 3,285 3,674 3,922 3,607 3,749 4,022 3,956 -1.7 0.8

Sagar Cements 4,346 3,597 3,343 3,434 3,732 4,039 3,661 4,058 3,930 -3.1 5.3

Birla Corp 3,642 3,696 3,393 3,846 3,855 3,748 3,899 4,247 4,376 3.0 13.5

Average realisations 4,178 4,102 3,939 4,106 4,200 4,141 4,122 4,449 4,442 -0.2 5.8

%YoY -2.3 -1.7 -8.8 -1.9 0.5 1.0 4.6 8.4 5.8

%QoQ -0.2 -1.8 -4.0 4.2 2.3 -1.4 -0.5 7.9 -0.2


Companies with exposure to South India (Dalmia ex OCL, Sagar, India Cement, Orient)

saw realisations decline on a QoQ basis.

Players in the central regions (Heidelberg, Birla Corp) recorded a flat realisations trend on

a sequential basis.

Quarterly cement prices across India and region-wise Exhibit 6.

Sequential price decline in 2QFY18 Price decline across regions in Oct’17

Source: Company, JM Financial, Industry

200

220

240

260

280

300

320

340

2Q

FY1

3

4Q

FY1

3

2Q

FY1

4

4Q

FY1

4

2Q

FY1

5

4Q

FY1

5

2Q

FY1

6

4Q

FY1

6

2Q

FY1

7

4Q

FY1

7

2Q

FY1

8

INR/5

0 k

g b

ag)

230

260

290

320

350

380

410

Oct

-14

Jan-1

5

Ap

r-15

Jul-

15

Oct

-15

Jan-1

6

Ap

r-16

Jul-16

Oct

-16

Jan-1

7

Ap

r-17

Jul-17

Oct

-17

INR/5

0kg b

ag

Southern Eastern Northern Western Central



Cement price trends; price decline across regions in Oct’17

Oct’17 saw a moderate decline in cement prices MoM across regions

- Prices in the West fell 2.4% MoM in Oct

- South saw a marginal decline in cement prices in Oct MoM

- Prices in the North declined 1.8% MoM

- There was a 2% MoM decline in cement prices in the East

- There was a 1% MoM decline in Central India

As per the management of JK Lakshmi, the Chhattisgarh government limited cement

prices in the state to INR 230/bag in 2QFY18. Companies are still in dialogue with the

Chhattisgarh government on this issue. JK Lakshmi expects a resolution in 3QFY18.

As per management commentaries, prices have declined in the states of AP/Telangana,

Maharashtra, while cement prices have been flattish in Central India (MP and UP) and the

Northeast in Oct-Nov’17 vs. exit the prices of 2QFY18.



Costs: Commodity prices lead cost escalations

Power and fuel costs up 19% YoY

The effect of increased petcoke/coal prices in 2QFY18 led to 19.2% YoY growth in power

and fuel costs (sequentially higher by 7.4%).

Average international coal prices were nearly 35% higher YoY in 2QFY18, while average

petcoke prices were nearly 20% higher YoY during the same period.

Power and fuel cost trends Exhibit 7.


UltraTech 865 838 678 650 722 775 779 857 944 10.1 30.8

Ambuja Cement 994 807 863 802 961 817 885 923 955 3.5 -0.7

ACC 1,016 841 817 788 964 889 903 942 1,035 9.9 7.3

Shree Cement 566 521 479 387 492 533 576 612 650 6.2 32.0

India Cement 1,144 1,047 1,045 875 864 983 1,080 1,056 1,101 4.2 27.3

Madras Cement 794 709 628 623 591 645 617 782 802 2.5 35.6

JK Lakshmi 750 781 661 620 678 821 734 840 950 13.0 40.1

JK Cement 1,062 907 863 736 790 806 837 849 925 9.0 17.1

Dalmia Bharat (ex OCL) 761 723 610 589 754 787 853 1009 957 -5.2 26.9

OCL India 798 709 423 444 520 508 456 510 639 25.2 23.0

Orient Cement 938 970 797 926 1,045 929 915 984 1,004 2.0 -4.0

Heidelberg 1,111 979 1,000 843 1,062 986 964 945 1,023 8.2 -3.7

Mangalam cement 615 729 622 630 902 1,002 764 978 998 2.0 10.6

Sagar Cements 971 1,086 1,172 1,123 1,379 1,284 1,191 1,284 1,390 8.2 0.8

Birla Corp 988 992 912 921 971 880 929 1,080 1,156 7.0 19.1

Average Power & Fuel/t 891 810 732 691 790 793 807 877 941 7.4 19.2

%YoY -12.2 -17.4 -22.2 -20.7 -11.3 -2.2 10.2 26.9 19.2

%QoQ 2.3 -9.0 -9.7 -5.6 14.3 0.4 1.7 8.7 7.4


Going forward, we expect power and fuel costs to remain elevated on account of higher

petcoke and coal prices.

The average coal price is 13% higher YoY, Oct’17-Nov’17.

Petcoke prices in Oct’17 at USD105/t were 18% higher YoY. Petcoke on a per-Kcal basis

is still cheaper than coal.

Petcoke/coal price trends Exhibit 8.

Coal prices on an upward trajectory Petcoke prices still at elevated levels


99.31

47.27

109.7

30

40

50

60

70

80

90

100

110

120

No

v-1

4

Jan

-15

Mar-

15

May-

15

Jul-1

5

Sep

-15

No

v-1

5

Jan

-16

Mar-

16

May-

16

Jul-1

6

Sep

-16

No

v-1

6

Jan

-17

Mar-

17

May-

17

Jul-1

7

Sep

-17

Australian Coal Price 3 years min 3 years max

USD

/t

82

8991

96

90

80

87

9295

9289

9296

105

Sep

-16

Oct

-16

No

v-1

6

Dec-

16

Jan

-17

Feb-1

7

Mar-

17

Ap

r-1

7

May-

17

Jun-1

7

Jul-1

7

Au

g-1

7

Sep

-17

Oct

-17

Average Petcoke prices (USD/t)



Freight cost up 11.6% YoY

The average freight cost was higher 11.6%/2.6% YoY/QoQ in 2QFY18.

Freight costs during the quarter were higher partially on account of a YoY increase in

diesel prices (7% higher YoY) and partially owing to the change in the sales pattern of

the companies from ex works to FOR

Freight cost trends Exhibit 9.


UltraTech 1,100 1,096 1,092 1,087 1,046 1,088 1,123 1,118 1,100 -1.6 5.2

Ambuja Cement 826 851 870 876 906 888 923 941 943 0.2 4.1

ACC 1,000 1,051 1,048 979 1,070 1,108 1,152 1,196 1,228 2.6 14.8

Shree Cement 829 780 800 852 891 856 1,023 1,068 1,094 2.4 22.8

India Cement 1,017 1,005 946 1,008 1,045 1,006 1,041 1,052 1,098 4.3 5.0

Madras Cement 909 907 896 853 879 891 901 930 979 5.3 11.4

JK Lakshmi 870 911 909 862 912 923 922 937 1,082 15.6 18.6

JK Cement 984 941 943 902 925 950 921 1,022 1,121 9.7 21.2

Dalmia Bharat (ex OCL) 877 875 976 790 845 890 940 966 985 1.9 16.6

OCL India 866 920 855 941 887 922 848 820 718 -12.4 -19.0

Orient Cement 750 706 657 697 727 911 887 996 1,081 8.5 48.6

Heidelberg 504 505 511 514 533 538 551 566 578 2.0 8.3

Mangalam cement 1,010 1,003 1,062 1,026 1,156 1,081 1,090 1,153 1,186 2.9 2.6

Sagar Cements 551 562 648 572 751 826 638 805 840 4.4 12.0

Birla Corp 789 778 760 761 785 792 850 864 983 13.7 25.2

Average Freight costs/t 937 939 941 925 947 967 1004 1028 1055 2.7 11.5

%YoY -2.4 -1.6 -3.0 -7.7 1.1 2.9 6.7 11.1 11.5

%QoQ -6.5 0.3 0.2 -1.7 2.3 2.1 3.9 2.3 2.7


We expect freight costs to rise as other companies also shift their sales pattern in

subsequent quarters.

Average diesel prices have risen 5% YoY in 3QFY18 (QTD).

Diesel price trends Exhibit 10.

Source: JM Financial, Industry

58.31

44.18

59.02

40

42

44

46

48

50

52

54

56

58

60

Oct

-14

Dec-

14

Feb

-15

Ap

r-15

Jun-1

5

Au

g-1

5

Oct

-15

Dec-

15

Feb

-16

Ap

r-16

Jun-1

6

Au

g-1

6

Oct

-16

Dec-

16

Feb

-17

Ap

r-17

Jun-1

7

Au

g-1

7

Oct

-17

Indian Diesel price - Delhi (INR/l) 3 years min 3 years max



Other expenses: decline on deferment of maintenance shutdowns

Other expenses were uniformly lower in 2QFY18 across companies on deferred

maintenance shutdowns and partially on the reversion of provision for the District Mineral

Fund (DMF for limestone applicable from 17-09-2015 instead of 12-01-2015).

Other expense trends Exhibit 11.


UltraTech 780 692 606 635 763 702 676 652 686 5.3 -10.0

Ambuja Cement 1,023 931 794 792 1,018 988 797 833 943 13.2 -7.3

ACC 1,128 1,002 820 880 1,049 1,034 867 880 892 1.3 -15.0

Shree Cement 774 662 710 752 790 772 760 678 671 -0.9 -15.1

India Cement 1,420 1,397 1,332 1,342 1,356 1,307 1,291 1,344 583 -56.7 -57.0

Madras Cement 707 595 569 594 669 645 623 634 701 10.5 4.8

JK Lakshmi 335 391 350 372 403 329 345 364 381 4.6 -5.5

JK Cement 838 819 738 932 992 931 906 898 790 -12.0 -20.4

Dalmia Bharat 976 917 904 690 996 940 761 818 732 -10.5 -26.4

OCL India 1,318 1,128 1,203 1,036 1,583 1,493 1,128 1,148 1,015 -11.6 -35.9

Orient Cement 810 634 566 551 668 595 556 556 663 19.3 -0.8

Heidelberg 727 618 636 597 747 715 596 737 677 -8.2 -9.4

Mangalam cement 357 370 342 207 383 377 409 393 316 -19.5 -17.5

Sagar Cements 834 565 509 570 655 737 498 551 515 -6.6 -21.5

Birla Corp 886 703 838 896 887 762 775 940 912 -2.9 2.8


Total Cement Costs up 7.9% YoY

Power/fuel and freight cost escalations led to higher total costs in 2QFY18. Cost

escalation - led by commodity prices - was offset by the decline in other expenses.

Total cement costs Exhibit 12.


UltraTech 3,442 3,312 3,045 3,131 3,246 3,286 3,340 3,406 3,523 3.5 8.6

Ambuja Cement 3,682 3,697 3,340 3,345 3,751 3,744 3,561 3,612 3,949 9.3 5.3

ACC 4,085 4,065 3,670 3,689 3,958 4,111 3,851 3,936 4,178 6.1 5.5

Shree Cement 2,792 2,586 2,514 2,593 2,668 2,722 2,952 2,991 3,037 1.5 13.8

India Cement 3,892 4,002 3,790 3,659 3,610 3,828 3,841 4,034 3,992 -1.0 10.6

Madras Cement 3,496 3,467 3,144 3,208 3,227 3,359 3,298 3,358 3,518 4.8 9.0

JK Lakshmi 3,299 3,296 3,022 2,931 3,067 3,036 3,057 3,246 3,430 5.6 11.8

JK Cement 3,505 3,309 2,882 3,090 3,254 3,139 3,050 3,304 3,396 2.8 4.4

Dalmia Bharat (ex OCL) 3,630 3,945 3,667 3,135 3,552 3,531 3,696 3,838 3,800 -1.0 7.0

OCL India 3,634 3,431 3,247 3,321 3,469 3,637 3,278 3,553 3,621 1.9 4.4

Orient Cement 3,158 3,008 2,697 2,854 3,137 3,282 3,007 3,229 3,426 6.1 9.2

Heidelberg 3,287 3,153 2,993 3,133 3,244 3,321 3,165 3,394 3,191 -6.0 -1.6

Mangalam cement 3,588 3,420 2,822 2,903 3,460 3,290 3,326 3,399 3,500 3.0 1.2

Sagar Cements 3,917 3,207 2,804 2,982 3,167 3,429 3,254 3,392 3,288 -3.1 3.8

Birla Corp 3,371 3,441 2,965 3,252 3,459 3,465 3,479 3,540 3,743 5.7 8.2

Average Cement costs 3,521 3,448 3,152 3,187 3,369 3,432 3,396 3,500 3,634 3.8 7.9

%YoY -3.5 -5.2 -10.7 -9.5 -4.3 -0.5 7.8 9.8 7.9

%QoQ 0.0 -2.1 -8.6 1.1 5.7 1.9 -1.1 3.1 3.8




EBITDA/t: marginal decline in EBITDA/t as cost escalations were offset by lower other expenses and realisations growth

EBITDA/t marginally lower: Cement EBITDA/t for the industry declined 3% YoY on

account of realisations growth and lower other expenses being offset by power/fuel and

freight cost escalations.

With cement prices under pressure, cost escalations will impact profitability of cement

players in 3QFY18.

EBITDA/t trends Exhibit 13.


UltraTech 688 760 886 962 870 785 822 1,019 892 -12.4 2.6

Ambuja Cement 602 548 718 992 677 580 647 1,064 609 -42.8 -10.1

ACC 445 344 561 667 447 399 497 711 555 -21.9 24.2

Shree Cement 856 871 820 1,262 1,400 975 818 1,214 1,133 -6.7 -19.1

India Cement 996 748 808 847 892 714 642 684 655 -4.2 -26.6

Madras Cement 1,221 1,500 1,492 1,334 1,542 1,323 1,152 1,249 1,265 1.3 -18.0

JK Lakshmi 391 385 397 555 545 449 312 527 505 -4.1 -7.4

JK Cement 283 271 510 614 398 455 670 686 547 -20.4 37.3

Dalmia Bharat 1,149 1,193 1,313 1,352 1,230 1,183 1,212 1,395 1,213 -13.1 -1.4

Dalmia Bharat (ex OCL) 1349 1389 1419 1360 1270 1130 1194 1,465 1,333 -9.1 4.9

OCL India 822 924 1,182 1,338 1,156 1,281 1,240 1,289 1,016 -21.2 -12.1

Orient Cement 360 201 446 291 136 349 436 836 570 -31.8 317.8

Heidelberg 453 528 578 656 598 373 579 521 771 47.9 28.8

Mangalam cement -18 159 463 771 463 317 423 624 456 -26.9 -1.5

Sagar Cements 429 390 539 452 520 609 407 666 643 -3.6 23.6

Birla Corp 271 255 428 594 396 283 420 707 634 -10.4 60.1

Average EBITDA/t 657 654 788 919 830 709 726 949 808 -14.9 -2.7

%YoY 4.5 21.8 -0.5 38.3 26.4 8.4 -7.9 3.3 -2.7

%QoQ -1.1 -0.5 20.4 16.7 -9.7 -14.6 2.4 30.8 -14.9




Management guidance

Management guidance Exhibit 14.

Company Volume growth commentary and Guidance Prices Costs Company commentary

Ultratech

Demand uptick from:

- Maharashtra – infra projects like Trans-harbour link (work to start from Oct’17), JNPT renovation

- Gujarat - Western rail freight corridor

- Rajasthan - Road projects, demand on account of

Swacch Bharat initiatives by the govt - MP - Rajgarh district rehabilitation

- Haryana - Rural demand and road projects

White cement and Putty growing at 18% CAGR.

Spot prices of petcoke at USD105/t

vs. USD90/t average in 2QFY18

2HFY18 is expected

to be better for

cement. UT double

digit growth in rural.

ACC

Favourable 3QFY18 on

- Government spends on infrastructure; roads,

highways, affordable housing.

- Growth is expected to mirror overall economic growth

Ambuja

Expects better demand on

- Infrastructure projects; power, irrigation, roads, metros

and railways, and freight corridors.

- Affordable and low-cost housing and normal

monsoons are expected to boost the rural demand

DBEL

Region/state wise growth rates for the company

- East growing at 9% YoY

- Andhra/Telangana growing at 18% YoY - Maharashtra growing at 6% YoY

- Karnataka facing a decline of 6% YoY

Expects prices to remain stable from Nov'17 to Jun'18

Petcoke prices would remain at

USD85 levels, Slag prices have increase from INR700/t to

INR1000/t currently

Dalmia to outperform the industry

India

Cement

Region/State wise growth rates - Andhra/Telangana growing at 8% YoY in 2Q; signs of

pickup in the region

- Maharashtra is showing signs of pickup

- Karnataka grew by 4% YoY in 2Q - TN/Kerala decline 14% in 2Q; facing challenge on

account of North east monsoons/sand issue

Prices in TN/Kerala are steady in Oct

and 1st half of Nov. AP/Telangana and

Maharashtra faced a decline in

cement prices

Petcoke prices at USD 105/t. Pet-

coke still cheaper than imported

coal by nearly 20-25%

JK Lakshmi

cement

YoY growth on better volumes in east (27% growth in 2Q) and north (6% growth in 2Q). Udaipur to reach

80% capacity utilisation by 4QFY18.

Chhattisgarh government has put a price cap on cement at INR230/bag.

Company expects the resolution of

the issue by the 3Q end.

Petcoke/coal prices have grown;

Looking out for other options like

coal linkages. Company has commissioned 7.5MW of WHR

(INR50/t benefit) and in process of

setting up 20MW of TPP (INR200/t

benefit) which is expected to bring down the cost

JK Cement

Expect the north market to grow 10% in FY18;

Southern market to remain flat (on issues of sand and

monsoons); White putty segment is expected to grow by 10-12% and White cement to grow by 3-5%

Prices in Oct and Nov have fallen

MoM; aggressive pricing to push

volumes in AP/Telangana

Average Petcoke price of

INR7,100/t, current landed Pet-

coke costs at INR7,800-7,900/t

Expects to do 7.2-

7.3MT of Cement

volumes in FY18 and

an additional 0.3-0.35MT of clinker

volumes

Heidelberg UP/MP has grown by 4-5% in 2QFY18; demand predominantly coming from IHB segment. Expects the

region to grow at 5-6% in FY18-19

Prices have been more of less flattish

in the regions of operations. Expects the prices to be maintained even

when off take from Ultratech

increases.

Petcoke at around USD 100-105/t;

still cheaper than coal

Expects better period for cement going

forward.

Sagar Cement

Company expects the volumes to grow at 5%, 7-7.5%

and 10% in FY18-19-20 respectively

- AP/Telangana will grow at 12-15% in current year

- TN is facing a decline of 5% in the current year;

recovery expected in 2HFY18 - Karnataka is growing at 5% in the current year; flattish

for 1H

- Maharashtra is expected to grow at 10% in current

year; 20% YoY in 1H

Pricing in Oct

- Declined by INR10/bag in TN MoM

- Declined by INR5/bag in AP/Telangana MoM

- Declined by INR15-20/bag in

Maharashtra MoM

Petcoke is still 7.5-10% economical

for the company than coal. Pet-

coke average costs was INR7,600/t which has gone up to INR7,700/t

as on 30th, Oct'17

Sanghi

Industries

Expects 7% growth in Gujarat in FY18; -6% YoY in

1HFY18 on impact of real estate due to RERA. Growth

expected on account of irrigation, housing, and road projects from Government.

Rajasthan is expected to grow at 10% in FY18

Prices in Gujarat have been stable

sequentially in 2QFY18. Prices in Oct

have been under pressure in Gujarat and MH. INR10/bag decline in the

cement prices in Oct and Nov

Switched to lignite. Doesn’t expect

much of movement in prices of lignite

Star Cement Expects the demand to pick up in 2HFY18; full year

growth guidance of 10-12%

Prices have been stable in NE and is

expected to continue to be so

Uses coal; don’t foresee any

change in coal prices

Company will achieve the target of 10%

volume growth

despite lack lustre

1HFY18

SRCM Shree Cements revised the volume growth guidance downwards to 8-9% in FY18 from 12% earlier




Other key developments in the sector

Petcoke Ban

SC imposes ban on Petcoke in Rajasthan - expect transitory impact: The Supreme Court

of India ordered a ban on petcoke usage in Rajasthan, Uttar Pradesh and Haryana from

1Nov’17. On average, 76% of the fuel requirement in cement companies is met through

petcoke. Additionally, Rajasthan is an important state for the cement industry on account

of its large limestone reserves (12% of India’s overall reserves). The blanket ban on

petcoke in the region will adversely impact cement companies with exposure to the

states. We expect Shree, JK Lakshmi and JK Cement to be impacted the most (negative

impact of 3-5% on FY18E EBITDA). However, upon reading the judgement, along with

the environment report, we believe the impact to be transitory in nature as cement

companies could be exempted in the medium term, as recommended by the EPCA in its

report.

Please find our detailed report here

Supreme court order on Pet-coke usage ban

EPCA report to Supreme Court

Subsequent clarification from EPCA and SC: EPCA in its clarification to the states stated

that the petcoke usage ban is limited to the NCR region. Subsequently, Rajasthan passed

an order directing industries in the districts of Alwar and Bharatpur to stop using petcoke

and furnace oil. The Supreme Court in its hearing issued a clarification that the order on

the ban on the usage of petcoke is applicable to the entire states of UP, Rajasthan and

Haryana and is not restricted to the NCR region.

Supreme court clarification

EPCA clarification

Rajasthan order

Increasing petcoke usage in India Exhibit 15.


EBITDA/t impact on cement players Exhibit 16.

% Petcoke in Kiln

Capacity in

banned regions

mnT

Total Capacity

mnT

Impact/t

INR

FY18E EBITDA/t

INR

Proportionate

impact in FY18

INR

EBITDA/t impact

Ultratech 74% 20.6 87.5 -75 934 -7 -1%

Ambuja 67% 2.6 29.7 -68 806 -2 0%

ACC 65% 1.5 33.3 -78 569 -1 0%

Shree Cement 100% 21.2 29.3 -100 1,142 -30 -3%

JK Lakshmi Cement 85% 9.6 12.3 -85 545 -28 -5%

JK Cement 75% 7.5 10.5 -88 554 -26 -5%


10.111.8

14.6

19.3

23.6

65%

16%24%

33%22%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

6

11

16

21

26

31

36

41

FY13 FY14 FY15 FY16 FY17

Pet-Coke usage (MT) Growth (%)

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/Cementsector_Petcokeban_27Oct2017.pdf

http://supremecourtofindia.nic.in/supremecourt/1985/63998/63998_1985_Order_24-Oct-2017.pdf

http://supremecourtofindia.nic.in/supremecourt/1985/63998/63998_1985_Order_24-Oct-2017.pdf

http://www.indiaenvironmentportal.org.in/files/file/Acceptable-Fuels-furnace-oil-and-pet-coke-in-NCR.pdf

http://supremecourtofindia.nic.in/supremecourt/1985/63998/63998_1985_Order_17-Nov-2017.pdf

http://www.epca.org.in/letter-to-cs-rajasthan.pdf

http://environment.rajasthan.gov.in/content/dam/environment/RPCB/LatestNews/press%20note.pdf



Monsoon Update

We expect a volume uptick in cement on account of adequate rainfall across the country.

India’s 2017 monsoon was 5% below normal in the South-West monsoons and 9%

below normal in the North-East.

- However, spatial distribution has not been uniform, with western Rajasthan, Gujarat

and Coastal areas receiving above-normal rains while the land-locked areas of UP,

Vidarbha, MP and Jharkhand received below-normal rains

- Areas around the Eastern coast such as Odisha, West Bengal, Jharkhand and Andhra

Pradesh have received above-normal receding rainfall.

Monsoon Update Exhibit 17.

South West monsoons: 5% below normal from LTA in 2017

North East monsoons: 9% below LTA in 2017 (till 15th Nov’17)


-30%-27% -25% -24% -23% -21%

-17% -15% -15%-10% -10% -9% -8% -8% -5% -4% -4% -2% -1%

10% 10%14%

18%

26%

33%37%

39%

West

UP

East

UP

Hary

ana

East

MP

Vid

arb

ha (M

ah

a)

Pun

jab

Co

ast

al K

tka

Tela

ng

an

a

West

MP

Jhark

han

d

Kera

la

Od

isha

Bih

ar

East

Raja

sth

an

Ind

ia

Mara

thw

ad

a

WB

Sou

th K

tka

No

rth K

tka

West

Mah

ara

shtr

a

Gu

jara

t

Co

ast

al A

P

Mah

ara

shtr

a

Raya

lase

em

a (

AP)

Tam

il N

adu

Sau

rash

tra a

nd K

utc

h

West

Raja

sthan

-100%-100%-99% -98% -94% -89%-80%

-65%-55%

-42% -40%-29%

-16% -12% -12% -11% -9%

7% 8%16% 16% 20% 23% 23% 27%

46%54%

East

Raja

sth

an

West

Raja

sthan

West

UP

Hary

an

a

East

UP

Pun

jab

Sau

rash

tra a

nd K

utc

h

West

MP

East

MP

Guja

rat

Co

ast

al A

P

Bih

ar

Kera

la

Tam

il N

ad

u

Co

ast

al K

tka

Vid

arb

ha (M

ah

a)

Ind

ia

Sou

th K

tka

Tela

ng

an

a

No

rth K

tka

West

Mah

ara

shtr

a

Mara

thw

ad

a

Od

isha

Mah

ara

shtr

a

Jhark

han

d

Raya

lase

em

a (

AP)

WB



Capacity expansion in the pipeline

The majority of the expansion in the pipeline is slated to come online by FY19

Expansion pipeline Exhibit 18.

Company Location State Region Capacity (MTPA)

Commissioning

Ambuja Marwar Mundwa Rajasthan North 1.70*

Ultratech Cement Dhar Madhya Pradesh Central 3.50 4QFY19

Ultratech Cement Bara Uttar Pradesh Central 4.00 2QFY19

Ultratech Cement Super Dalla Uttar Pradesh Central 2.30* 2QFY19

Shree Cement Aurangabad Bihar East 0.90 2QFY18

Shree Cement Aurangabad Bihar East 5.50 4QFY18

Shree Cement Sriganganagar Rajasthan North 3.60 1QFY19

Shree Cement Gulbarga Karnataka South 3.00 3QFY19

Ramco Cement Vizag AP South 1.10 FY19

Ramco Cement Kolaghat WB East 1.10 FY19

Ramco Cement Haridaspur Odisha East 0.90 FY19

JK Lakshmi Cuttack Odisha East 0.60 2QFY19

Sanghi Cement Kutch Gujarat West 4.00 FY20

Star cement Siliguri West Bengal East 1.50

KCP

South 1.66 FY19

Penna

South 2.00* FY20

Total

31.36*

Source: Company, JM Financial, Industry | * - Clinker capacity is not included in the total capacity

Successful limestone/coal linkage auctions

Ambuja is putting up a clinker manufacturing unit with capacity 1.7MTPA in Marwar

Mundhwa in Rajasthan.

Successful limestone auctions Exhibit 19.

Company Name of the mine Location Reserves (MT) Winning bid

Limestone auction cost

per tonne of cement

(INR/t)

Winning Year

Ambuja Cement 3D1, Harima Pithasar Rajasthan 199.15 41.60% 255.4 Oct-17


Shree Cement has won coal mine linkages in Chhattisgarh for its Raipur plant.

Coal from New Kusmunda Mines will be used in the kilns in Raipur. Assuming 700Kcal/Kg

of clinker energy usage and 1.5x cement-to-clinker ratio in Raipur, 1.3MT of cement can

be produced through the linkage coal usage in this plant.

Coal linkages Exhibit 20.

Company Mine Usage Grade Calorific Value

(Kcal/t)

Quantity

(TPA)

Notified price

(INR/t)

Winning

premium

(INR/t)

INR/Kcal

Maximum cement

production through

coal usage (MTPA)

Shree Cement New Kusmunda Mines Cement plant in Raipur G11 4,300 80,000 970 0 0.23 0.74

Shree Cement New Kusmunda Mines Cement plant in Raipur G11 4,300 60,000 970 0 0.23 0.55

Shree Cement Baroud OC CPP in Raipur G8 5,200 70,300 1,700 775 0.48

Shree Cement Jampali OC CPP in Raipur G10 4,600 5,500 1,180 600 0.39




Company-wise updates

Ultratech

Management expects the Jaiprakash assets to be cash break-even by 1QFY19.

Net debt at end-Sep’17 stands at INR 136bn (vs. INR 129bn at end-Jun’17).

JP Super/Bara units (2.3MT clinker/4MT grinding) are expected to be commissioned in

Sept’18.

The company is putting up 4LMT of wall care putty capacity at an investment of INR

19.4bn, which is expected to be commissioned during 2QFY20.

Ambuja Cement

The company has recently won the bid for a limestone block at Harima Pithasar, in

Rajasthan with 199.15 MT of mineral reserves. The winning bid was 41.6% of the value

of mineral dispatched.

Shree Cement

The company has recently secured 75,800 TPA of coal linkage for its captive power plant

in Raipur.

Dalmia Bharat

Company reduced its net debt from c.INR 46bn at end-Jun’17 to c.INR 42.8bn at end-

Sep’17 (gross debt reduced by INR 1.79bn; INR5.08bn in 1HFY18); reduction in the net

debt by c.INR 3.3bn during 2QFY18 led to the net debt-to-EBITDA ratio being reduced to

2.2x from 2.4x at end-Jun’17 and cost of debt reduced to 8.1% (vs. 8.3% in 1QFY18).

Management expects the merger to be completed by end-FY18. Schemes of arrangement

- Involving Odisha Cement Ltd, Dalmia Bharat Ltd and Dalmia Cement (Bharat) Ltd is

pending for sanction by NCLT, Chennai bench and

- Involving Dalmia Cement (Bharat) Ltd and its subsidiaries has been approved by NCLT

Chennai branch in Oct’17 and is pending to be filed with ROC Chennai.

The company has undertaken the preparatory work to explore the brownfield and

greenfield expansion possibility at OCL.

Ramco Cement

Ramco completed the buyback of 2.5mn shares (representing 1.05% of the paid up

capital) for INR 1.68bn (average price of INR 670.8/share).

Ramco has subscribed to the Rights issue offer of Lynks Logistics Limited and has acquired

48.1mn shares for INR 48.1mn. Consequently, Ramco Cements’ shareholding in the

logistics company stands at 100mn (47.62% of the paid up capital from 47.18% earlier).

Lynks Logistics is a technology platform that aggregates transport service providers and

connects them with customers.

JK Lakshmi Cement

The company has commissioned 7.5MW of WHR in Durg, which is expected to benefit

partially in 3Q and completely from 4Q (INR 40-50/t benefit); ii) 20MW of thermal power

plant in Durg is expected to come on stream in 4QFY19 (INR 200/t benefit)

Gross debt stood at INR 22bn and net debt stood at INR 16.5bn with INR 5.25bn of

additional debt on Udaipur.

Orissa grinding unit construction picked up pace in 2QFY18 and the unit is expected to be

operational by 2QFY19.

Cement price caps applicable in Chhattisgarh still persist; management is confident of a

resolution in 3QFY18.



JK Cement

Net debt declined INR 1,760mn during 1HFY18 from INR 19.1bn at end-Mar’17 to INR

17.3bn at end-Sep’17. Gross debt declined by INR 1,520mn during 1HFY18 to INR

23.6bn at end-Sep’17 from end-Mar’17. Consequently the net debt-to-EBITDA ratio

stands reduced to 2.14x from 2.6x at end-Mar’17.

Please click on the links for detailed result notes

UltraTech Cement | Stable operational performance despite JP overheads

ACC | Improved profitability on strong realisations

Ambuja Cement | Muted realisation growth, cost escalations impact profitability

Shree Cement 2QFY18 | Better volumes on capacity addition; costs impact profitability

Dalmia Bharat | Profitability maintained on cost optimisation

The Ramco Cements | Cost escalations impact margins; volume growth encouraging

JK Lakshmi 2QFY18 results | Stable quarter; cost saving initiatives to benefit in FY19

JK Cement 2QFY18 result | Operations surprise positively

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/UTCEM_2QFY18ResultUpdate_181017.pdf

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/ACC_3QCY17ResultUpdate_171017.pdf

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/Ambuja_3QCY17ResultUpdate_241017.pdf

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/Shree_2QFY18%20Result%20Update_081117.pdf

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/Dalmia_2QFY18%20Result%20Update_071117.pdf

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/TRCL_2QFY18ResultUpdate_021117.pdf

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/JKLC_2QFY18%20Result%20Update_131117.pdf

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/JKCement_2QFY18ResultUpdate_121117.pdf



Valuation table Exhibit 21.

Company EV/EBITDA (x) EV/t (USD) PE (x) PBV (x)

FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

Ultratech Cement 16.8 13.5 10.0 226 209 198 43.6 27.1 18.6 4.5 3.9 3.2

Ambuja Cement 20.4 14.8 11.7 204 200 193 46.6 33.7 25.4 2.9 2.8 2.7

ACC 16.6 13.2 10.7 145 141 137 38.5 29.2 23.0 3.7 3.5 3.4

Shree Cement 22.8 14.9 12.3 270 221 217 41.6 30.2 27.6 6.6 5.2 4.3

Ramco Cement 15.1 13.3 10.3 178 150 144 24.6 22.0 16.8 4.1 3.6 3.1

Dalmia Bharat 15.8 13.1 10.9 202 189 180 49.7 32.5 23.8 5.0 4.4 3.8

JK Lakshmi Cement 13.4 8.9 6.6 92 81 75 34.7 18.0 12.2 3.4 3.0 2.5

JK Cement 11.6 8.7 6.7 142 136 127 21.6 16.0 11.5 3.5 3.0 2.4


Valuation Charts Exhibit 22.

Ultratech EV/EBITDA chart Ambuja EV/EBITDA chart

ACC EV/EBITDA chart Shree Cement EV/EBITDA chart

Ramco Cement EV/EBITDA chart Dalmia Bharat EV/EBITDA chart

JK Lakshmi EV/EBITDA chart JK Cement EV/EBITDA chart

Source: Company, JM Financial, Bloomberg

2

5

8

11

14

17

20

23

Sep

-07

Sep-0

8

Sep

-09

Sep

-10

Sep

-11

Sep

-12

Sep

-13

Sep-1

4

Sep

-15

Sep

-16

Sep

-17

Rolling EV/EBITDA

EV/EBITDA 5 year average (15.3x)


0

3

6

9

12

15

18

21

24

27

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oct

-14

Oct

-15

Oct

-16

Oct

-17

EV/EBITDA



0

3

6

9

12

15

18

21

24

Sep

-07

Sep

-08

Sep

-09

Sep

-10

Sep

-11

Sep

-12

Sep

-13

Sep

-14

Sep

-15

Sep

-16

Sep

-17

Rolling EV/EBITDA



0

3

6

9

12

15

18

21

24

27N

ov-

07

No

v-0

8

No

v-0

9

No

v-1

0

No

v-1

1

No

v-1

2

No

v-1

3

No

v-1

4

No

v-1

5

No

v-1

6

No

v-1

7

Rolling EV/EBITDA



0

3

6

9

12

15

18

No

v-0

7

No

v-0

8

Nov-

09

No

v-1

0

Nov-

11

Nov-

12

No

v-1

3

Nov-

14

No

v-1

5

No

v-1

6

No

v-1

7

EV/EBITDA

EV/E 5 year average (11.3x)

EV/E 10 year average (8.9x)

0

3

6

9

12

15

18

No

v-1

1

May-

12

Nov-

12

May-

13

No

v-1

3

May-

14

No

v-1

4

May-

15

No

v-1

5

May-

16

No

v-1

6

May-

17

No

v-1

7

EV/EBITDA

EV/EBITDA 5 year average (9x)

EV/E max period average (7.4x)

0

3

6

9

12

15

18

21

24

No

v-0

7

No

v-0

8

No

v-0

9

No

v-1

0

No

v-1

1

No

v-1

2

Nov-

13

No

v-1

4

No

v-1

5

No

v-1

6

No

v-1

7

EV/EBITDA



0

3

6

9

12

15

No

v-0

7

No

v-0

8

No

v-0

9

No

v-1

0

No

v-1

1

No

v-1

2

No

v-1

3

No

v-1

4

No

v-1

5

No

v-1

6

No

v-1

7

EV/EBITDA





Assumptions table Exhibit 23.

Company Capacity (MTPA) Volumes (MTPA) Realisation (INR/t) EBITDA/t (INR/t) Cost/t (INR/t)

FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

Ultratech 87.45 90.95 90.95 59.56 70.50 80.92 4,349 4,646 4,880 934 1,119 1,260 3,550 3,661 3,764

Ambuja Cement 29.65 29.65 29.65 22.97 25.24 27.94 4,456 4,725 4,917 806 972 1,072 3,650 3,753 3,844

ACC 33.30 33.30 33.30 24.85 26.64 28.31 4,614 4,854 5,060 569 713 815 4,014 4,120 4,228

Shree Cement 35.70 42.30 42.30 22.09 28.56 32.45 4,139 4,396 4,576 1,161 1,311 1,380 2,982 3,089 3,199

Ramco Cement 16.49 19.59 19.59 9.02 9.93 11.82 4,693 4,928 5,150 1,178 1,237 1,329 3,486 3,662 3,794

Dalmia Bharat 25.65 26.30 26.30 16.25 17.63 19.09 4,968 5,267 5,556 1,284 1,378 1,454 3,685 3,889 4,102

JK Lakshmi 10.70 11.30 11.30 8.75 9.45 10.00 3,840 4,053 4,254 490 648 769 3,379 3,441 3,527

JK Cement 10.47 10.47 10.47 7.54 8.28 9.08 3,922 4,118 4,283 565 678 780 4,093 4,233 4,365


Key financials Exhibit 24.

Company Net sales (INR mn) EBITDA (INR mn) Net Profit (INR mn) EPS (INR)

FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

Ultratech Cement 303,013 378,597 454,054 65,378 90,362 115,369 26,895 43,175 62,890 98.0 157.3 229.1

Ambuja Cement 102,876 120,481 138,758 19,026 25,739 31,336 11,816 16,334 21,655 6.0 8.2 10.9

ACC 128,206 143,251 158,764 18,657 22,701 27,191 8,768 11,572 14,664 46.6 61.6 78.0

Shree Cement 99,228 136,907 160,246 27,129 40,202 47,915 15,304 21,060 23,103 439.3 604.5 663.1

Ramco Cement 44,691 51,459 63,416 12,430 14,158 17,548 7,023 7,839 10,277 29.8 33.3 43.6

Dalmia Bharat 83,419 95,644 108,981 20,964 24,389 27,860 5,492 8,399 11,484 61.7 94.4 129.1

JK Lakshmi Cement 35,580 40,562 45,127 4,682 6,556 8,164 1,450 2,796 4,140 12.3 23.8 35.2

JK Cement 43,508 50,585 58,275 8,231 10,460 12,762 3,508 4,747 6,573 50.2 67.9 94.0


Key financial ratios Exhibit 25.

Company RoE (%) RoCE (%) ND:EBITDA (x) ND:Equity (x) DPS (INR)

FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

Ultratech 10.2 14.3 17.4 9.1 11.3 15.3 1.6 0.6 -0.1 0.4 0.2 0.0 10.0 11.0 12.0

Ambuja Cement 8.5 11.3 14.1 8.8 11.7 14.6 -1.5 -1.4 -1.6 -0.1 -0.2 -0.2 5.0 5.0 5.0

ACC 9.7 12.2 14.7 9.9 12.2 14.6 -1.5 -1.6 -1.7 -0.3 -0.4 -0.5 17.0 17.0 17.0

Shree Cement 15.9 17.4 15.6 17.5 19.2 17.3 -0.7 -1.0 -1.0 -0.2 -0.3 -0.3 24.0 24.0 24.0

Ramco Cement 16.7 16.2 18.1 12.3 12.5 15.1 1.1 1.0 0.3 0.3 0.3 0.1 4.5 5.0 6.5

Dalmia Bharat 10.1 13.6 16.1 7.7 9.4 11.0 1.8 1.1 0.3 0.7 0.4 0.1 6.2 9.4 12.9

JK Lakshmi 9.7 16.4 20.5 8.6 11.8 14.7 2.7 1.2 0.5 0.8 0.5 0.2 2.5 4.8 7.0

JK Cement 16.1 18.5 21.2 11.7 13.4 16.4 2.4 1.4 0.7 0.9 0.6 0.3 11.0 10.9 15.0




APPENDIX I

JM Financial Inst itut ional Secur it ies Limited

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SEBI Registration Nos.: BSE - INZ010012532, NSE - INZ230012536 and MSEI - INZ260012539, Research Analyst – INH000000610 Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.

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Definition of ratings

Rating Meaning

Buy Total expected returns of more than 15%. Total expected return includes dividend yields.

Hold Price expected to move in the range of 10% downside to 15% upside from the current market price.

Sell Price expected to move downwards by more than 10%

Research Analyst(s) Certification The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report. Important Disclosures This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.

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to make modifications and alterations to this statement as they may deem fit from time to time.



This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction.

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