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7/28/2019 IDirect_CementMonthly_June2013
1/6CICI Securities Ltd.|Retail Equity Research
June 28, 2013ment Monthly: June 2013
Prices rise to cover losses from falling volumes
Cement prices recover in June; demand remains tepidAll-India cement prices saw an uptrend led by price hikes across all
regions in the country. The southern region saw an average price hike of| 30/bag, the highest among all regions, which took the all-India average
June 2013 prices to | 308/bag as compared to | 294/bag in May 2013. In
the east and west region, prices increased by | 15-20/bag, which took
average prices in the east and west region to | 333/bag and | 306/bag,
respectively, for June 2013. In the northern and central region, prices
increased in the range of | 5-10/bag, taking the northern & central price
average to | 296/bag and | 293/bag, respectively. Demand fell drastically
across regions mainly due to early arrival of monsoons and a general
slowdown in the infrastructure sector. With this upward pricing trend, all-
India average cement prices stood at | 308/bag, a rise of ~| 14/bag MoM.
On a YoY basis, prices are up by | 15/bag. According to dealers, cement
prices are expected to remain firm in the coming days, which is importantto cover the costs as volumes are not supporting and falling continuously
due to monsoon arrival in the country.
Cement dispatches decline on low demandMangalam and JK Lakshmi reported cement dispatches numbers for May
2013. Cement volumes for both these companies declined 14.6% and
12.5% YoY respectively. Given the weak macro environment, slowdown
in housing demand and low infra spending by government, we expect
prices to see some correction going ahead. Hence, we continue to remain
cautious on the sector unless we see a clear trend of healthy recovery in
volumes.
Industry outlookAll-India cement dispatch growth for FY13 remained tepid due to sluggish
consumption from the housing and infrastructure segments on account of
key issues like rising cost of capital, land acquisition & clearances and
unavailability of key raw materials like coal for the manufacturing industry.
Also, government led demand push growth remained lower in FY13.
Although we expect H1FY14 to remain tepid in terms of demand, we
continue to remain neutral with a positive bias on the industry as we
believe the demand supply scenario will improve on the back of a pick-up
in infra spending by the government (with higher allocation towards
expenditure vs. last year) and revival in private sector spending on likely
softening of the interest rate cycle.
xhibit 1:Valuation matrixCMP(|) TP(|) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E
CC* 1222 1340 56.4 78.9 89.6 21.7 15.5 13.6 10.2 10.2 7.5 121 121 120 14.4 16.8 17.4 18.8 16.2 20.8
mbuja* 185 205 8.4 10.6 11.5 22.0 17.5 16.1 10.2 9.9 7.5 167 154 138 14.7 15.4 14.7 20.9 15.7 19.0
ltraTech 1872 2 040 96.8 93.4 117.8 19.3 20.1 15.9 11.5 11.0 9.0 189 158 156 17.4 14.3 15.4 18.7 16.5 18.4
hree Cem 4667 4725 275.4 273.4 320.4 16.9 17.1 14.6 9.0 8.1 6.5 165 162 135 28.1 22.2 21.0 24.6 23.3 23.4
dia Cem 57 71 5.3 6.3 8.5 10.7 9.1 6.7 5.5 5.6 5.0 53 55 55 4.0 4.5 5.8 8.1 7.3 8.6
K Cem 224 302 33.4 28.7 35.6 6.7 7.8 6.3 4.5 6.0 5.0 58 78 58 13.8 10.7 12.0 14.5 10.8 12.4
K Lakshmi 99 136 14.9 18.7 20.9 6.5 5.2 4.6 4.5 4.4 3.8 67 75 50 13.9 14.8 14.5 11.5 11.2 11.8
Mangalam 115 155 29.0 22.8 31.6 4.0 5.0 3.6 3.5 4.2 2.5 40 47 28 15.7 11.0 13.6 14.0 9.3 14.2
eidelberg* 42 58 1.4 0.5 2.8 32.6 30.9 15.1 25.7 12.9 6.7 71 56 49 3.6 1.3 7.0 2.3 4.9 9.9
ompany
EPS (|) P/E (x) EV/EBITDA (x) EV/Tonne ($) RoNW (%) RoCE (%)
ource: Company, ICICIdirect.com Research
ote: For ACC, Ambuja,& Heidelberg FY12,FY13E and FY14E denotes CY12, CY13E and CY14E
ector View
eutral
ement dispatches
Mn Tonnes May-13 May-12 YoY (%) Apr-13 MoM (%)
Mangalam 0.15 0.17 -14.6 0 .17 -10.3K Lakshmi 0.39 0.45 -12.5 0.40 -0.8
otal 0.54 0.62 -13.1 0.56 -3.6
All India average cement price (|/50 kg bag)
200
220
240
260
280
300
320
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
|./
bag
All India average cement price
| 308
ource: Cement dealers
Analysts name
Rashesh Shah
Ricky Gupta
7/28/2019 IDirect_CementMonthly_June2013
2/6ICICI Securities Ltd.|Retail Equity Research Page 2
North region: Prices rise ~| 5-10/bag MoM in June 2013In the north, cement prices on an average rose by | 5-10/bag MoM in
June 2013 accompanied by a huge fall in demand. Average cement prices
in the region stood at | 296/bag during the month. Delhi witnessed a price
increase of | 15/bag while Gurgaon and Jalandhar witnessed a rise of
| 10/bag. On a YoY basis, prices in the region rose by | 20-25/bag.
According to our discussion with dealers, prices are expected to remain atcurrent levels in the near term owing to prices bottoming out in the
previous months that hurt margins.
Exhibit 2:Cement prices in northern region
150
170
190
210
230
250
270
290
310
330
Jun-1
1
Aug-
11
Oct-11
Dec-
11
Feb-1
2
Apr-12
Jun-1
2
Aug-
12
Oct-12
Dec-
12
Feb-1
3
Apr-13
Jun-1
3
|/bag
Delhi Jaipur Amritsar
Source: Cement dealers, ICICIdirect.com Research
East region: Prices rise | 15-20/bag
Continuing the rising trend, prices in the eastern region rose by | 15-
20/bag in June 2013. Average cement prices in the region stood at| 333/bag during the month. Kolkata saw a price increase of ~| 25/bag
MoM while prices in Patna and Raipur increased by | 20/bag MoM.
According to dealers in the region, prices are expected to remain stable at
these levels over the next couple of days.
Exhibit 3:Cement prices in eastern region
150
200
250
300
350
400
450
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
|.
/bag
Kolkata Patna Bhubaneswar
Source: Cement dealers, CMIE,, ICICIdirect.com Research
Prices in Delhi increased by | 15/bag MoM due to rising
cost pressure and already bottomed out prices
Average cement prices increased by | 15-20/bag. The gap
between the regions average price and the price in Kolkata
widened to | 57/bag
7/28/2019 IDirect_CementMonthly_June2013
3/6ICICI Securities Ltd.|Retail Equity Research Page 3
Western region: Prices rise | 10-15; fall in Surat & Ahmedabad
Cement prices in the western region increased by | 10-15/bag on an MoM
basis in June 2013. Prices in Mumbai increased by a marginal | 5/bag
while prices increased by | 50/bag in Pune. In Nagpur and Nasik, price
increased by | 25/bag and | 20/bag, respectively. Prices in Surat and
Ahmedabad fell in the range of | 10-15/bag. Average prices in this regionstood at ~| 306/bag in June 2013, up by | 13/bag from last month.
According to dealers, prices are likely to be volatile in the near term.
Exhibit 4:Cement prices in western region
150
200
250
300
350
Jun-1
1
Aug-1
1
Oct-11
Dec-1
1
Feb-1
2
Apr-1
2
Jun-1
2
Aug-1
2
Oct-12
Dec-1
2
Feb-1
3
Apr-1
3
Jun-1
3
|/bag
Mumbai Nagpur Ahmedabad
Source: Cement dealers, CMIE,, ICICIdirect.com Research
South region: Cement prices pick up; Hyderabad prices increase 40%
Average cement prices in the southern region have risen by | 25-30/bag
MoM in June 2013. Prices in Hyderabad rose by | 85/bag and stood at| 300/bag crossing | 280 levels after more than a year. Prices in Bangalore
increased by | 20/bag on a MoM basis. In Chennai and Kochi, prices
increased in the range of | 5-10/bag. Average prices in the southern
markets were | 311/bag in June 2013, up | 30/bag on an MoM basis. On a
YoY basis, prices are up by | 13/bag in South.
Exhibit 5:Cement prices in southern region
100
150
200
250
300
350
Jun-
11
Aug-
11
Oct-11
Dec-
11
Feb-
12
Apr-12
Jun-
12
Aug-
12
Oct-12
Dec-
12
Feb-
13
Apr-13
Jun-
13
|/bag
Hyderabad Chennai Bangalore
Source: Cement dealers, CMIE,, ICICIdirect.com Research
In the western region, average cement prices increased by
| 10-15/bag amid high volatility and heterogeneous price
fluctuations among cities
Prices in Hyderabad increased by | 85/bag MoM crossing
| 280/bag after more than a year
7/28/2019 IDirect_CementMonthly_June2013
4/6ICICI Securities Ltd.|Retail Equity Research Page 4
Central region: Prices rise by ~| 5-10/bag MoM in June 2013
Average cement prices in the central region have risen by ~| 5-10/bag
MoM in June 2013. Prices in Bhopal and Ghaziabad increased by | 10/bag
MoM. In Lucknow, Allahabad and Indore, prices increased by | 5/bag on
an MoM basis. Average cement prices in this region stood at ~| 293/bag,
higher by | 5/bag compared to last month. According to dealers, prices inthe region are likely to remain choppy in the coming months due to
sooner-than-expected monsoon arrival and less movement in price as
compared to price changes in other regions across India.
Exhibit 6:Cement prices in central region
150
200
250
300
350
Jun-
11
Aug-
11
Oct-1
1
Dec-1
1
Feb-
12
Apr-12
Jun-
12
Aug-
12
Oct-1
2
Dec-1
2
Feb-1
3
Apr-13
Jun-
13
|/bag
Lucknow Indore Ghaziabad
Source: Cement dealers, CMIE,, ICICIdirect.com Research
Cement dispatches in May 2013 declines on poor demand
Mangalam and JK Lakshmi reported cement dispatches numbers for May2013. Cement volumes for both these companies declined 14.6% and
12.5% YoY, respectively. Given the weak macro environment, slowdown
in housing demand and low infra spending by the government, we expect
prices to see some correction, going ahead. Hence, we continue to
remain cautious on the sector unless we see a clear trend of healthy
recovery in volumes.
Exhibit 7:May 2013 dispatchesMn Tonnes May-13 May-12 YoY (%) Apr-13 MoM (%) YTDFY13 YTDFY12 YoY (%)
Mangalam 0.15 0.17 -14.6 0.17 -10.3 0.31 0.33 -4.6
JK Lakshmi 0.39 0.45 -12.5 0.40 -0.8 0.79 0.77 1.9
Total 0.54 0.62 -13.1 0.56 -3.6 1.10 1.10 0.0 Source: Company, ICICIdirect.com Research
Cement prices increased by ~| 5-10/bag MoM in central
regions coupled with extremely weak demand
7/28/2019 IDirect_CementMonthly_June2013
5/6ICICI Securities Ltd.|Retail Equity Research Page 5
Valuations
We expect volume CAGR of 9.7% during FY13-15E for cement companies
under our coverage. Higher volume growth is expected in Heidelberg
Cement (~25.4%), UltraTech Cement (~13.6%) and Mangalam Cement
(~16.7%) led by capacity expansion. On the realisations front, we expect
moderate growth of 4-5% each in FY13E, FY14E led by a pick-up in infra
spending by the government (with higher allocation towards expenditure
vs. last year) and revival in private sector spending on likely softening of
the interest rate cycle. Given the expansion led growth in volumes, we
expect cement companies to post a topline CAGR of ~13.2% during
FY13-15E. Margins are expected to improve progressively on account of
an improvement in realisations and volume led operating leverage
benefits.
Exhibit 8:Key financials| Crore FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E
ACC* 24.1 24.9 27.6 11130.6 11379.2 13705.6 1969.0 1966.7 2630.2 1059.3 1483.5 1683.1 56.4 78.9 89.6
Ambuja Cement* 21.4 22.2 24.4 9674.9 9992.6 11874.4 2417.7 2296.2 2881.4 1297.1 1619.4 1760.3 8.4 10.6 11.5
UltraTech Cement 41.5 46.1 53.6 20020.9 22163.5 27525.2 4522.8 4715.9 5679.8 2655.6 2560.0 3229.2 96.8 93.4 117.8
Shree Cement** 12.7 14.4 15.1 5770.5 6318.3 7026.6 1583.5 1713.7 1991.7 958.3 951.5 1115.0 275.4 273.4 320.4
India Cement 10.1 10.5 10.9 4597.0 4844.3 5237.7 843.3 827.9 958.0 163.5 192.1 259.6 5.3 6.3 8.5
JK Cement 5.8 6.1 6.4 2904.0 3043.8 3404.4 552.1 552.4 680.7 233.6 200.6 249.3 33.4 28.7 35.6
Orient Paper 3.8 4.0 4.1 2458.6 2647.3 2955.7 394.3 277.9 492.3 212.5 143.2 280.9 11.0 7.0 13.7
JK Lakshmi 5.3 5.7 6.4 2054.9 2350.1 2806.3 428.7 493.1 576.6 175.7 220.7 246.4 14.9 18.7 20.9
Mangalam Cement 1.9 2.0 2.6 698.7 765.8 1051.8 123.3 120.9 193.8 77.3 60.8 84.5 29.0 22.8 31.6
Heidelberg Cem* 2.9 4.3 4.6 1101.2 1696.1 1892.0 74.4 141.6 235.8 30.8 10.9 63.1 1.4 0.5 2.8
Sales EBITDA PATCement Volume# EPS
Source: Company, ICICIdirect.com Research
# Cement volumes in million tonnes, * FY13/FY14E/FY15E denotes CY12/CY13E/CY14E, **FY13E/FY14E/FY15E denotes JY13E/JY14E/JY15E
On the valuations front, we are neutral on large caps like ACC, Ambuja,
UltraTech and Shree Cements due to expensive valuations. We remain
positive on midcap cement companies like JK Cement, JK Lakshmi,
Mangalam Cement and Heidelberg Cement on account of growth in sales
volumes and earnings, improvement in return ratios and inexpensive
valuations.
Exhibit 9:Valuations & recommendationsMarket Cap CMP TP Rating FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E
ACC* 22961 1222 1340 HOLD 21.7 15.5 13.6 10.2 10.2 7.5 121 121 120
Ambuja Cement* 28305 185 205 HOLD 22.0 17.5 16.1 10.2 9.9 7.5 167 154 138
UltraTech Cement 51330 1872 2040 HOLD 19.3 20.1 15.9 11.5 11.0 9.0 189 158 156
Shree Cement** 16241 4667 4725 HOLD 16.9 17.1 14.6 9.0 8.1 6.5 165 162 135
India Cement 1751 57 71 HOLD 10.7 9.1 6.7 5.5 5.6 5.0 53 55 55
JK Cement 1566 224 302 BUY 6.7 7.8 6.3 4.5 6.0 5.0 58 78 58
JK Lakshmi 1142 99 136 BUY 6.5 5.2 4.6 4.5 4.4 3.8 67 75 50
Mangalam Cement 307 115 155 BUY 4.0 5.0 3.6 3.5 4.2 2.5 40 47 28
Heidelberg Cem* 952 42 58 BUY 32.6 30.9 15.1 25.7 12.9 6.7 71 56 49
P/E EV/EBITDA EV/Tonne ($)
Source: Company, ICICIdirect.com Research
* FY12/FY13E/FY14E denotes CY11/CY12E/CY13E, ** FY12 denotes 15MJY12, FY13E/FY14E denotes JY13E/JY14E
7/28/2019 IDirect_CementMonthly_June2013
6/6ICICI Securities Ltd.|Retail Equity Research Page 6
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.
Sector view:
Over weight compared to index
Equal weight compared to index
Under weight compared to index
Index here refers to BSE 500
Pankaj Pandey Head Research [email protected] Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No 7, MIDCAndheri (East)
Mumbai 400 093
[email protected] CERTIFICATIONWe/I, Rashesh Shah CA, Ricky Gupta MBA, research analysts and the authors of this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views
about any and all of the subject issuer(s) or securities. We also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
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leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant
percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes.
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