CMP (Rs) 4500.00

Target Price (Rs) 4950.00

ISIN: INE070A01015

April 30th

, 2013

SHREE CEMENT LIMITED Result Update: Q3 FY13

BUYBUYBUYBUY

Stock Data

Sector Cement

BSE Code 500387

Face Value 10.00

52wk. High / Low (Rs.) 4800.00/2270.00

Volume (2wk. Avg ) 370.00

Market Cap ( Rs in mn ) 156780.00

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY12A FY13E FY14E

Net Sales 58981.20 56803.64 60211.86

EBITDA 17962.00 17614.39 18903.11

Net Profit 6185.00 10121.79 11454.68

EPS 177.53 290.52 328.78

P/E 25.35 15.49 13.69

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX SHREE CEMENT LTD

SYNOPSIS

Shree Cement, established in 1985, is today

among 5th largest cement manufacturers in

India, with a capacity of 14 million tons in

eight plants and four grinding units.

During the quarter, the robust growth of Net

Profit is increased by 139.85% to Rs.

2740.90 millions.

Shree Cement Ltd has declared Interim

Dividend @ Rs. 8/- per Equity Share of Rs.

10 each for the financial year 2012-13.

Profit before interest, depreciation and tax

is Rs.4629.20 millions as against Rs.4475.67

millions in the corresponding period of the

previous year.

Shree Cement has informed on operational

performance of the Company for the month

of Feb- 2013.

� Cement production: 9.83 lac tons

� Cement dispatch: 9.67 lac tons

The Planning Commission has projected an

investment of over Rs. 45 lakh crore (about

US $ 1 trillion) during the 12th Plan (2012-

17) to the infrastructure space in cement

industry.

Net Sales and PAT of the company are

expected to grow at a CAGR of 20% and

76% over 2011 to 2014E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Shree Cement Ltd 4500.00 156780.00 177.53 25.35 5.73 200.00

UltraTech Cement Ltd 1901.10 521243.40 96.85 19.63 3.36 80.00

Ambuja Cements Ltd 186.45 287643.30 8.41 22.17 3.08 160.00

ACC Ltd 1237.10 232512.90 56.46 21.91 3.15 300.00

Investment Highlights

Results updates- Q3 FY13,

Shree Cement, established in 1985, is today among

the five largest cement manufacturers in India, with

a capacity of 14 million tons in eight plants and four

grinding units, reported its financial results for the

quarter ended 31st March, 2013. The third quarter

witnesses healthy profitability on account of the

back of robust performance from power sector and

lower depreciation.

Months Mar-13 Mar-12 % Change

Net Sales 14716.30 14780.16 (0.43)

PAT 2740.90 1142.76 139.85

EPS 78.67 32.80 139.83

EBITDA 4629.20 4475.67 3.43

The company’s net profit jumps to Rs.2740.90 million against Rs.1142.76 million in the corresponding quarter

ending of previous year, an increase of 139.85%. Revenue for the quarter declines 0.43% to Rs.14716.30 million

from Rs.14780.16 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs.78.67 a share during the quarter, registering 139.83% increase over previous year period.

Profit before interest, depreciation and tax is Rs.4629.20 millions as against Rs.4475.67 millions in the

corresponding period of the previous year.

Expenditure :

During the quarter Depreciation is decreased by

46%. Total expenditure in Q3 FY13 was at Rs.

11779.20 million as against Rs.12377.30 million in

Q3 FY12. Other Expenditure was at Rs. 2415.80

millions against Rs. 1887.30 millions in the

corresponding period of the previous year. Freight

and forward charges was at Rs. 2395.30 million and

Cost of Material consumed was Rs. 1406.80 million,

Power and Fuel was at Rs. 3544.90 millions in Q3

FY13 are the primarily attributable to decline of

expenditure.

Segment Revenue

Latest Updates

• Shree Cement Ltd has declared Interim Dividend @ Rs. 8/- per Equity Share of Rs. 10 each for the financial

year 2012-13.

• Shree Cement Ltd has been conferred the Nirmata Rajya Mitra Award by Commercial Taxes Department,

Government of Rajasthan for highest tax payer for the year 2011-12 in "manufacturer category".

• Operational Performance for the month of Feb 2013

Shree Cement Ltd has informed on operational performance of the Company for the month of February -

2013.

Particulars Figure in Lac tons

Cement production for February-13 9.83

Cement dispatch for February-13 9.67

Company Profile

Shree Cement, established in 1985, is today among the five largest cement manufacturers in India, with a

capacity of 14 million tons in eight plants and four grinding units. Shree Cement engaged in the cement and

power sector and it is an energy efficient, environment friendly and sustainable company.

The company has more than trebled its cement capacity in the last 5 years to reach a present cement capacity of

13.5 million tons per annum. Its cement plants are located at Beawar, Ras, Khushkhera, Jobner and Suratgarh in

Rajasthan and Laksar (Roorkee) in Uttarakhand. The company follows a multi-brand strategy and sells cement

under the highly recognized brands of Shree Ultra, Bangur and Rockstrong which together enjoy the largest

market share in high value markets of Rajasthan, Delhi and Haryana.

Shree also has a power generation capacity of 260 MW with plants located at Beawar and Ras in Rajasthan,

including waste heat recovery power plants of 46 MW capacity, which is the largest such capacity in the global

cement industry excluding China. The company is further expanding its power capacity by setting up a 300 MW

(2 x 150MW) power plant at Beawar which is likely to be commissioned by the third quarter of 2011-12 and will

take Shree's overall capacity to 560 MW.

Shree follows a triple bottom-line approach of measuring performance i.e. performance against the benchmarks

of economical, social and environmental benefits. It has received various awards and accolades at the national

and international level for excellence in energy efficiency, environment management and sustainability. Shree is

an active participant at climate change forums and is the first Indian cement company to join the Cement

Sustainability Initiative (CSI) of the World Business Council for Sustainable Development, Switzerland.

Brands:

The company offers a portfolio of three brands; together these brands enjoy the largest market share in the north

Indian markets of Rajasthan, Delhi and Haryana.

o Shree Ultra

Shree Ultra is our flagship brand, contributing to more than half of our sales volume and is the first manifestation

of our strategic move from commodity to brand marketing. Its two variants, Shree Ultra OPC and Shree Ultra Jung

Rodhak Cement are distinctly positioned in the market. Shree Ultra Jung Rodhak Cement through its unique rust

prevention properties has high acceptance amongst brand influencers (masons etc.) and high brand recall

value. The brand, while enhancing its presence in highly educated markets of Delhi has increased its reach in the

interior markets of Madhya Pradesh, Uttrakhand, Uttar Pradesh and Punjab.

o Bangur Cement

Bangur Cement, launched as a premium brand in the market, is designed to meet the high end market segment.

Its unique brand tagline "Sasta Nahin, sabse Achcha", gives it the status of 'top of the market' value brand.

o Rockstrong Cement

Rockstrong Cement is the youngest brand from the Shree stable. It has recorded the highest year on year growth

amongst the three brands of Shree in 2009-10. It holds a position in the market on the promise of high

performance and ability to withstand exceptionally harsh environment conditions. Rockstrong promotions are

carried out through a series of witty hoardings on current topics.

Financial Highlight

Balance sheet as at June 30th, 2012

(A*- Actual, E* -Estimations & Rs. In Millions)

Particulars March (Rs.in.mn) FY12A FY13E FY14E

SOURCES OF FUNDS

Shareholder's Funds

Share Capital 348.40 348.40 348.40

Reserves and Surplus 26990.90 35088.17 42807.57

1. Total Net worth 27339.30 35436.57 43155.97

Non Current Liabilities

Long Term Borrowing 8177.40 5887.73 4710.18

Other Long Term Liabilities 3696.90 3733.87 3752.91

Long Term Provisions 174.10 186.29 193.74

2. Sub-Total-Non Current Liabilities 12048.40 9807.88 8656.83

Current Liabilities

Short Term Borrowings 1433.30 1146.64 997.58

Trade Payables 5842.90 7011.48 7782.74

Other Current Liabilities 11282.60 13539.12 14893.03

Short Term Provisions 1779.50 1388.01 1138.17

3. Sub-Total-Current Liabilities 20338.30 23085.25 24811.52

Total Liabilities (1+2+3) 59726.00 68329.70 76624.32

APPLICATION OF FUNDS

Non-Current Assets

Fixed Assets

Tangible assets 15205.90 18703.26 22076.70

Intangible assets Under Development 4.70 5.64 6.43

Capital Work in Progress 967.30 764.17 794.73

a) Sub-Total- Fixed Assets 16177.90 19473.06 22877.86

b) Deferred Tax Asset 697.40 725.30 747.05

c) Non- Current Investments 13352.00 14553.68 15572.44

d) Long Term loans and advances 2053.00 2360.95 2620.65

1. Sub-Total- Non Current Assets 32280.30 37112.99 41818.01

Current Assets

Current Investment 12000.00 13200.00 14256.00

Inventories 5033.20 5939.18 6830.05

Trade receivables 1810.80 2469.93 3161.51

Cash and Bank Balances 4589.70 5140.46 5675.07

Short-terms loans & advances 3626.80 3974.08 4292.01

Other current assets 385.20 493.06 591.67

2. Sub-Total- Current Assets 27445.70 31216.71 34806.31

Total Assets (1+2) 59726.00 68329.70 76624.32

Annual Profit & Loss Statement for the period of 2011 to 2014E

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 15m 12m 12m

Net Sales 35141.33 58981.20 56803.64 60211.86

Other Income 445.10 1627.80 1487.71 1562.10

Total Income 35586.43 60609.00 58291.35 61773.95

Expenditure -26747.10 -42647.00 -40676.96 -42870.84

Operating Profit 8839.33 17962.00 17614.39 18903.11

Interest -978.26 -2353.60 -2036.18 -2137.98

Gross profit 7861.07 15608.40 15578.22 16765.13

Depreciation -6757.59 -8730.90 -4099.68 -3894.70

Profit Before Tax 1103.48 6877.50 11478.54 12870.43

Tax 993.52 -692.50 -1356.74 -1415.75

Net Profit 2097.00 6185.00 10121.79 11454.68

Equity capital 348.37 348.40 348.40 348.40

Reserves 19513.38 26990.90 35088.17 42807.57

Face value 10.00 10.00 10.00 10.00

EPS 60.19 177.53 290.52 328.78

Quarterly Profit & Loss Statement for the period of 30th Sep, 2012 to 30th June, 2013E

Value(Rs.in.mn) 30-Sep-12 31-Dec-12 31-Mar-13 30-Jun-13E

Description 3m 3m 3m 3m

Net sales 13237.90 14280.30 14716.30 14569.14

Other income 292.00 323.00 427.80 444.91

Total Income 13529.90 14603.30 15144.10 15014.05

Expenditure -9309.70 -10683.10 -10514.90 -10169.26

Operating profit 4220.20 3920.20 4629.20 4844.79

Interest -543.10 -562.90 -447.20 -482.98

Gross profit 3677.10 3357.30 4182.00 4361.82

Depreciation -941.50 -818.30 -1264.80 -1075.08

Profit Before Tax 2735.60 2539.00 2917.20 3286.74

Tax -454.30 -364.60 -176.30 -361.54

Net Profit 2281.30 2174.40 2740.90 2925.19

Equity capital 348.40 348.40 348.40 348.40

Face value 10.00 10.00 10.00 10.00

EPS 65.48 62.41 78.67 83.96

Ratio Analysis

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 60.19 177.53 290.52 328.78

EBITDA Margin (%) 25.15% 30.45% 31.01% 31.39%

PBT Margin (%) 3.14% 11.66% 20.21% 21.38%

PAT Margin (%) 5.97% 10.49% 17.82% 19.02%

P/E Ratio (x) 74.76 25.35 15.49 13.69

ROE (%) 10.56% 22.62% 28.56% 26.54%

ROCE (%) 42.44% 72.24% 47.69% 42.41%

Debt Equity Ratio 0.85 0.35 0.28 0.25

EV/EBITDA (x) 19.08 9.01 9.18 8.55

Book Value (Rs.) 570.13 784.71 1017.12 1238.69

P/BV 7.89 5.73 4.42 3.63

Charts

Outlook and Conclusion

� At the current market price of Rs.4500.00, the stock P/E ratio is at 15.49 x FY13E and 13.69 x FY14E

respectively.

� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.290.52 and

Rs.328.78 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 76% over 2011 to 2014E

respectively.

� On the basis of EV/EBITDA, the stock trades at 9.18 x for FY13E and 8.55 x for FY14E.

� Price to Book Value of the stock is expected to be at 4.42 x and 3.63 x respectively for FY13E and FY14E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.4950.00 for Medium to Long term

investment.

Industry Overview

Cement is one of the core industries which plays a vital role in the growth and development of a nation. The

industry occupies an important place in the Indian economy. Keeping in line with the technological world, the

Indian cement industry has transited itself into a more advanced one. At present, the Indian cement industry is

positioned second globally. This has offered advantages to the industry.

There are 139 large cement plants and over 365 mini cement plants in India, with currently 42 players in the

industry.

With the ever increasing industrial activities, real estate, construction and infrastructure, in addition to the onset

of various Special Economic Zones (SEZs) being developed across the country, there is a huge demand for

cement. The industry is not only meeting the requirements arising within the domestic market but also fulfilling

the burgeoning demands of the international arena. India is also exporting good amount of cement clinker and by

products of cement.

Market Size

The cement industry of India is expected to add 30-40 million tonnes per annum (MTPA) of capacity in 2013. The

industry has a current capacity of 324 MTPA and operates at 75-80 per cent utilisation.

The cement and gypsum products sector has attracted foreign direct investments (FDI) worth US$ 2,625.90

million between April 2000 to November 2012, according to the data published by the Department of Industrial

Policy and Promotion (DIPP).

"It is anticipated that the cement industry players will continue to increase their annual cement output in coming

years and the country's cement production will grow at a compound annual growth rate (CAGR) of around 12 per

cent during 2011-12 - 2013-14 to reach 303 MMT," according to a report titled 'Indian Cement Industry Forecast

to 2012', by research firm RNCOS.

Investments

• Ambuja Cements Ltd plans to invest Rs 2,000 crore (US$ 370.37 million) to enhance its cement capacities in

Rajasthan and northern region. The proposed project at Rajasthan would add five million tonne (MT)

capacity to the total cement production of India. "We are adding new capacities. We are actively pursuing the

five MT capacity expansion in Rajasthan and neighboring northern regions," according to Ajay Kapur, Chief

Executive Officer, Ambuja Cements

• Dalmia Cement plans to invest Rs 1,800 crore (US$ 333.33 million) to increase the company's cement

manufacturing capacity over the next two years. The company also plans to set up a 2.5 million tonne (MT)

greenfield unit in Karnataka

• Germany-based Heidelberg Cement has commissioned Phase-I of its Jhansi grinding unit. The company

currently executing its Rs1,400 crore (US$ 259.36 million) expansion plan through the recent initiative has

escalated the capacity of its unit to 2.7 MT. The company also aims to accelerate the operational capacity at

its Damoh plant in Madhya Pradesh, which will be raised to 6 MT

• France-based Vicat Group is likely to sell 4.5 MT of cement in India in FY 2013, said Mr Gilles du Manoir,

Country-Head (India), Vicat. Apart from the newly-commissioned Rs 1,800 crore (US$ 333.33 million) joint

venture (JV) cement plant, Vicat-Sagar Cement at Chattrasal, Gulbarga district of Karnataka, Vicat owns 51

per cent stake in Bharathi Cement

• Amrit Cement India Ltd (ACIL) has announced the launch of Amrit Cement in North-Eastern market. ACIL

possesses ambitious plan to achieve annual production of 5 MT by 2015-16 through capacity addition in

North-East and adding fresh capacities in Nepal and Bihar for which initiative has already been taken

Government Initiatives

India would require overall cement capacity of around 480 MT. The industry will have to add another 150 MT of

capacity during the period, according to the latest report from the working group on the industry for the 12th

Five Year Plan (2012-17).

Highlights of the Union Budget 2012-13:

Excise duty rationalised for packaged cement, whether manufactured by mini cement plants or others.

Packaged cement, whether manufactured by mini-cement plants or others, attracts differential excise duty

depending on the Retail Sale Price per bag. It is proposed to prescribe a unified rate of 12 per cent + Rs 120 (US$

2.22) PMT for non-mini cement plants and 6 per cent + Rs 120 (US$ 2.22) PMT for mini-cement plants. It is

proposed to charge this duty on the Retail Sale Price less abatement of 30 per cent.

• The Indian construction industry has shown significant development over the years with eminent and

efficient engineers at the helm and is among the best in the world, said Anand Sundaresan, Managing

Director, Schwing Stetter (India) Pvt Ltd, while inaugurating a conference on 'Latest Trends in Construction

Industry'

• The private sector is expected to contribute 44 per cent of the total projected spend of US$ 100 billion on

roads and highways over the Twelfth Five Year Plan (2012-17) period

• The Union Budget 2012- 13 is a pragmatic and growth-oriented one. "Infrastructure sector has been given

due thrust in the budget

Road Ahead

Indian cement majors, including ACC Ltd, Shree Cement Ltd and Ultratech, have signed a co-operation pact to

support low-carbon investments in India. The pact was signed in Geneva with member companies of the World

Business Council (WBC) for Sustainable Development's Cement Sustainability Initiative and International

Finance Corporation (IFC). The roadmap will pave a possible transition path for the Indian cement industry to

reduce its direct emissions by 18 per cent by 2050. This is the first roadmap to focus on one specific industrial

sector in a single country, as per a WBC release.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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