Shree Cement (SHRCEM) - ICICI Directcontent.icicidirect.com/mailimages/IDirect_ShreeCement_Q2FY16.pdf · Shree Cement distributes cement under different brand names - Shree Ultra,

November 17, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Power segment boosts EBITDA growth… • Shree Cement’s Q2FY16 (September quarter) revenues increased

7.2% YoY to | 1,724.3 crore (above I-direct estimate of | 1,667.6 crore) mainly due to 7.6% YoY increase in cement revenues. Cement volumes increased 10% YoY led by capacity expansion. However, realisation declined 2.4% YoY due to pricing pressure in north. Power segment reported net revenue of | 197 crore (up 4.08% YoY led by 10% YoY rise in volumes while realisation declined 5.5% YoY)

• Cement EBITDA/tonne declined 6.0% YoY to | 791/tonne led by higher other expenses/tonne (up 11.5% YoY due to DMF provision of | 34.38 crore). However, 1.8x YoY rise in power EBITDA to | 58 crore led to 3.7% YoY rise in blended EBITDA/tonne to | 930/tonne

• Adjusted PAT increased 13.1% YoY to | 131 crore

Healthy expansion plans to fuel future growth

Shree Cement would continue to remain ahead of its peers in terms of capacity expansion and operating efficiency leading to better volume growth and higher profitability. Shree Cement has commissioned 2.0 MT grinding unit in Bulandshahr, Uttar Pradesh and aims to increase the Bihar grinding unit capacity from 2 MT to 3.6 MT over the next year, thereby taking its capacity to 27 MT. We think the management’s proactive approach in cost-saving initiatives and significant expansion plans will help it to join the large capacity league sooner than later.

Best player in terms of cost efficiency in northern India

Shree Cement is one of the low cost producers of cement in India with total cement capacity of 25.6 MT (as on October 2015). It has been operating at over ~90% capacity utilisation in the last couple of years with healthy operating margins vs. industry. Its cost efficiency emanates from high usage of alternate fuel (pet coke), logistic advantage and self sufficiency in power with capacity of 597 MW. Due to this, it enjoys high margins in the industry. For FY15, the company generated higher EBITDA/tonne of | 835/tonne vs. industry EBITDA/tonne of | 734/tonne mainly due to an advantage of low cost production and best regional mix.

Comfortable D/E along with healthy operating cash flows

While the debt-equity ratio was at 2.1x in FY07, at the end of FY15, it reduced to 0.3x and is expected to remain at this level in the coming years. Operating cash flow has also remained healthy for the company with FY15 operating cash flow of | 1,350 crore. With the lower D/E ratio and healthy operating cash flow, going forward, a further expansion will not create any balance sheet burden.

Correction offers good entry point; upgrade to BUY…

Despite near term concern, the long term prospect of the company remains positive. Given the upcoming new capacity, we expect profitability growth to remain healthy over the next two years. On the back of timely expansion, we expect volume CAGR of 13.3% in FY15-17E to 20.7 MT with healthy realisation growth. Further, a strong balance sheet and better efficiency in terms of cost remains a key positive for this company. Hence, we maintain our target price of |12,500 on the stock and upgrade the rating from HOLD to BUY [i.e. at 20x FY17E EV/EBITDA, $250/tonne on FY17E capacity (27 MT)].

Rating matrix

Rating : BuyTarget : | 12,500Target Period : 9-12 monthsPotential Upside : 14%

What’s Changed? Target UnchangedEPS FY17E Changed from | 286.0 to | 296.8Rating Changed from Hold to Buy

Quarterly Performance

Q2FY16* Q2FY15 YoY (%) Q1FY16 QoQ (%)Revenue 1,724.3 1,608.1 7.2 1,724.6 0.0EBITDA 389.3 340.4 23.0 356.8 9.1EBITDA (%) 22.6 21.2 141 bps 20.7 189 bpsPAT 131.0 115.8 13.1 127.4 2.9

* September quarter, change in financial year Key Financials | Crore FY14^ FY15^ FY16E* FY17E

Net Sales 5887.3 6453.6 5545.4 8990.1

EBITDA 1389.8 1343.9 1379.6 2303.4

Adjusted PAT 865.0 464.1 524.1 1032.7Adjusted EPS (|) 248.6 133.3 150.6 296.8

Valuation summary

FY14^ FY15^ FY16E* FY17E

PE (x) 48.3 89.2 72.8 36.8

Target PE (x) 50.3 93.7 83.0 42.1

EV to EBITDA (x) 28.0 29.0 28.2 16.9

EV/Tonne(US$)** 334 301 229 213

Price to book (x) 8.1 7.2 6.6 5.7

RoNW (%) 16.7 8.1 9.1 15.4

RoCE (%) 13.0 6.2 7.8 14.9

*9M period due to change in financial year, ^June year ending**adjusted for cement business Stock data

Amount

Mcap | 38009 crore

Debt (FY15) | 1469 crore

Cash & Invest (FY15) | 476 crore

EV | 39001 crore

52 week H/L | 13,345 / 8,700

Equity cap | 34.8 crore

Face value | 10

Particular

Price performance (%)

1M 3M 6M 12M

ACC -5.0 -3.5 -10.0 -12.3

Ambuja Cement -8.5 -14.2 -17.3 -15.6

Shree Cement -8.6 -0.5 -8.0 19.5

UltraTech Cement -7.4 -11.9 -2.5 4.6

Shree Cement (SHRCEM) | 10,992

Research Analyst

Rashesh Shah [email protected]

Devang Bhatt [email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments

Total Operating Income 1724.3 1,667.6 1,608.1 7.2 1,724.6 0.0

Cement sales rose sharply by 7.6% YoY while power sales increased 4.1% YoY. The increase in cement revenues was due to 10.3% YoY increase in volumes. However, realisation witnessed a decline due to pricing pressure in the north

Other Income 23.0 47.0 28.1 -17.9 39.2 -41.3Raw Material Consumed 138.6 136.3 137.4 0.9 162.8 -14.8Stock Adjustment -9.8 0.0 -6.6 48.5 -38.9 -74.7Employee Expense 122.8 121.8 112.8 8.9 119.0 3.2Power, Oil & Fuel 375.4 411.9 413.5 -9.2 415.7 -9.7 Decline in pet coke prices led to lower power & fuel costFreight cost 346.8 383.8 317.0 9.4 401.1 -13.5Other Expenses 361.2 308.3 293.7 23.0 308.1 17.2 The increase in other expenses was due to DMF provision of | 34 croreEBITDA 389.3 305.4 340.4 14.3 356.8 9.1EBITDA Margin (%) 22.6 18.3 21.2 141 bps 20.7 189 bps Decline in power & fuel cost led to higher EBITDA marginInterest 23.2 37.6 35.0 -33.6 26.4 -11.9Depreciation 270.4 252.0 222.7 21.5 238.3 13.5PBT 116.6 62.8 104.1 11.9 107.4 8.5

Total Tax -12.2 11.6 -4.7 159.8 3.3 -469.6The company reported tax credit during the quarter led by deferred tax and MAT credit entitlement

PAT 131.0 51.2 115.8 13.1 127.4 2.9Lower interest cost (down 33.6% YoY) led to 13.1% YoY rise in net profit during the quarter

Key MetricsVolume (MT) 4.19 4.19 3.80 10.3 4.35 -3.8 Volume growth was led by capacity expansionRealisation/tonne (|) 3,646 3,545 3,736 -2.4 3,480 4.8 High competition in the north led to pricing decline during the quarter

Blended EBITDA per Tonne (| 930 728 897 3.7 819 13.5 The increase in blended EBITDA/tonne was led by improvement in power EBITDA

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) OLD New % Change Old New % Change Comments

Revenue NA 5,545.4 NA 8,848.7 8,990.1 1.6We expect revenues to improve in FY17E led by better realisation due to pick up in rural and government demand

EBITDA NA 1,379.6 NA 2,220.8 2,303.4 3.7

EBITDA Margin (%) NA 24.9 NA 25.1 25.6 52 bpsMargins are expected to improve led by stabilisation of new plant and lower power & fuel cost

Adjusted PAT NA 524.1 NA 995.2 1,032.7 3.8Adjusted EPS (|) NA 150.6 NA 286.0 296.8 3.8

FY16E* FY17E

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

CommentsFY13 FY14 FY15 FY16E* FY17E FY15 FY16E FY17E

Volume (MT) 12.4 14.2 16.1 13.3 20.7 16.1 18.6 20.7

We broadly maintain our volume growth guidance taking into account timely commissioning of a new plant along with volume growth led by higher government spend on infrastructure

Realisation (|) 3,675 3,696 3,572 3,732 3,996 3,572 3,768 3,930

EBITDA per Tonne (|) 1,253 979 835 1,039 1,114 835 1,015 1,075We expect the company to report EBITDA/tonne of over | 1000/tonne by FY17E

EarlierCurrent

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


Company Analysis Strong presence in northern region

The company is one of the major players in the northern region with a market share of ~20%. Rajasthan is the highest revenue generator state for the company followed by Haryana and Punjab. The company has a total capacity of 25.6 MTPA most of which is located in Rajasthan except capacity of 1.2 MTPA in Roorkee, Uttarakhand, 1.5 MTPA in Panipat, Haryana (acquisition completed on April 27, 2015), 2.6 MT in Chhattisgarh 2.0 MTPA in UP and 2.0 MTPA in Bihar. Shree Cement distributes cement under different brand names - Shree Ultra, Bangur and Rockstrong. In FY09-15, sales and PAT posted growth at a CAGR of 16% and 12%, respectively, while plants are operating at over 90% utilisation.

Power business: Not just another segment

The company is among the first companies in the cement industry to have entered the power business. Shree Cement has evolved from a mere captive power producer to a major merchant power player and is also a Category I power trading licensee. The company has increased its capacity from 560 MW in FY 12 to 597 MW in FY 15. The power business contributes more than 10% to total revenues of the company. Moreover, it is also one of the most efficient users of fuel in the industry. Captive capacity along with better efficiency results in lower P&F cost per tonne for the company. It is the first company in the world to utilise 100% pet-coke in all its operations for both cement and power plants.

Exhibit 1: Consumes lower fuel/tonne in cement industry

75

79 7875 74

79 79 7875

73 74

83 82 81 8179 79

84 8481 80

8683

81 81 80 8077

8780

65

70

75

80

85

90

FY10 FY11 FY12 FY13 FY14 FY15

Kwh/

tonn

e

Shree JK Lakshmi UltraTech* ACC Ambuja

Source: Company, ICICIdirect.com Research, * UltraTech cement FY 15 figures is provisional

Exhibit 2: Lower P&F cost per tonne vs. industry

580683

544693 634

561 565 624759 807 759

9081015 986 950 997

0

200

400

600

800

1000

1200

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

| / t

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Shree Cement Industry

Source: Company, ICICIdirect.com Research

Cement capacity to expand over 26.5% from FY15

The company has commissioned its 2.0 MT grinding unit each in Ras, Rajasthan, and Aurangabad, Bihar. The company has also commissioned 2.5 MT integrated unit in Raipur, Chhattisgarh. Further Shree Cement has commissioned 2.0 MT grinding unit in Bulandshahr, Uttar Pradesh in October 2015 and aims to increase Bihar grinding unit capacity from 2 MT to 3.6 MT over next one year. Post these expansions, the capacity of the company will reach ~27.2 MTPA by FY17E i.e. over ~26.5% of capacity addition from FY15 levels.

Revenue share in northern region

Others (Delhi, Bihar,

J&K)14%

UP10%

Uttranchal17%

Punjab17%

Haryana20%

Rajasthan22%


Comfortable D/E along with healthy operating cash flows

While the debt-equity ratio was at 2.1x in FY07, at the end of FY15, it has reduced to 0.3x and is expected to remain at this level in the coming years. Operating cash flow has also remained healthy for the company with FY15 operating cash flow of | 1,350 crore. With the lower D/E ratio and healthy operating cash flow, going forward, a further expansion will not create any balance sheet burden.

Exhibit 3: D/E ratio trend

2.2

1.3 1.1 1.00.5 0.4 0.4 0.3 0.2 0.20.0

0.5

1.0

1.5

2.0

2.5

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E* FY17E

D/E


Exhibit 4: Cash flow from operations

776 7341420 1122

2592

1191 1351 1278 1484143

0

500

1000

1500

2000

2500

3000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E* FY17E

(| c

rore

)

Cashflow from Operations



Expect revenue CAGR of 18.0% during FY15-17E

Revenues have grown at a CAGR of ~16.4% during FY11-15 mainly led by robust growth in the power segment due to commissioning of the 300 MW power capacity at Beawar in FY12 while the cement segment’s revenue grew at a CAGR of 15.8% during the same period. Due to moderate growth in the power segment, we expect capacity expansion in cement to drive revenue CAGR of ~18.0% during FY15-17E. Shree Cement is venturing into the eastern region where cement prices have been higher than the northern region historically. This is expected to lead to an improvement in realisation for the company.

Exhibit 5: Expect expansion led revenue CAGR of 18.0% during FY15-17E

31965317 4571 5244 5752 4953

8261315

583 643 702593

730

1046

0

2000

4000

6000

8000

10000

FY11 FY12* FY13 FY14 FY15 FY16E* FY17E

(| C

rore

)

Cement Sales (| crore) Power Sales (| crore)

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

Exhibit 6: Capacity addition plans State Region MT

Current Capacity 23.6

Additions :

Bulandshahar UP North 2.0

Bihar North 1.6

Total by FY17E 27.2


Exhibit 7: Volume to grow at CAGR of 13.3% during FY15-17E

10.2

14.912.4

14.216.1

13.3

20.7

0.0

5.0

10.0

15.0

20.0

25.0


Cement Sales Volumes (In MT)

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

Exhibit 8: Realisation to pick up from H2FY16 led by recovery in demand

31203579 3675 3696 3572 3732 3996

0

1000

2000

3000

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-10

-5

0

5

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Cement Realisation (|/tonne) -LS Growth (%) -RS


Exhibit 9: Merchant power sales growth to remain flat

942

2505 2610

1860 18851611

1920

0500

10001500200025003000


Power Sale volume (In lac units)


Exhibit 10: Realisation trend in merchant power segment

4.894.36 4.01

3.46 3.72 3.68 3.80

0

1

2

3

4

5

6


(|)

-30

-20

-10

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Power Realisation (per unit) - LS Growth (%) -RS



Exhibit 11: Power volume increases 10.1% YoY in September 2015

417 409536 498 488 491

334

572 537

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Power Sales Volume


Exhibit 12: Power realisations decline 5.5% YoY in September 2015

3.85

3.38

3.31

3.36 3.

89

3.89

3.35 3.

65

3.68

0.74

0.57

0.24 0.43 0.60

0.36

1.11

1.08

-0.0

3

-1.00

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Power Realisation (|/unit) Power EBITDA (|/unit)


Exhibit 13: Cement volume grows 10.3% YoY in September 2015

3.20 3.443.84 3.72 3.80 3.81 4.14 4.35 4.19

0.0

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Sales volumes -LHS Growth (%) -RHS


Exhibit 14: Cement realisations decline 2.4% YoY in September 2015

3397 3434

38764009

3736

3551 3537 3480

3646

3050

3250

3450

3650

3850

4050

Sep-

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Cement Realisation (|/tonne) -LS



Margins to improve led by stabilisation in cost structure We expect operating margins to improve driven by an improvement in prices coupled with operating leverage benefits.

Exhibit 15: Expect EBITDA/tonne of |1040 in FY17E

754

1092 1050933

756908

1040

-100100300500700900

110013001500


Cement EBITDA/Tonne

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

Exhibit 16: Margins to remain healthy due to cost efficiencies

27.7 23.6 20.8 24.9 25.625.2 27.9

0

15

30

45

60


(%)

Total EBITDA Margin (%)


Exhibit 17: Quarterly trend in EBITDA

683 719

1089 1185

842 726 794673

791

0

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800

1200

Sep-

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Dec-

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Mar

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Jun-

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| pe

r ton

ne


Exhibit 18: Pick-up in margins expected, going forward

20.0 20.5

25.9 26.5

21.219.8

21.6 20.722.6

15

20

25

30

35

Sep-

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Dec-

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Mar

-14

Jun-

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Sep-

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Jun-

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(%)

Total EBITDA Margin


Expect net profit margin to stabilise at 11.5% in FY 17E

We expect net margins to stabilise at 11.5% due to heavy depreciation charges. Exhibit 19: Profitability trend

258

631

1005865

464 524

1033

0

200

400

600

800

1000

1200


| cr

ore

0.0

5.0

10.0

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(%)

Net profit - LS Net profit margin -RS



Outlook and valuation Shree Cement would continue to remain ahead of its peers in terms of capacity expansion and operating efficiency leading to better volume growth and higher profitability. We think the management’s proactive approach to cost-saving initiatives and significant expansion plans will help it join the large capacity league sooner rather than later. Despite near term concern, the long term prospects of the company remain positive. Given the upcoming new capacity, we expect profitability growth to remain healthy over the next two years. On the back of timely expansion, we expect volume CAGR of 13.3% in FY15-17E to 20.7 MT with healthy realisation growth. Further, a strong balance sheet and better efficiency in terms of cost remains a key positive for this company. Hence, we maintain our target price of |12,500 on the stock and upgrade the rating from HOLD to BUY [i.e. at 20x FY17E EV/EBITDA, $250/tonne on FY17E capacity (27 MT)]. Exhibit 20: Key assumptions | per tonne FY12^ FY13^ FY14^ FY15^ FY16E* FY17E

Sales Volume 14.9 12.4 14.2 16.1 13.3 20.7

Realisation 3579 3675 3696 3572 3732 3996

Total Expenditure 2487 2625 2763 2809 2824 2956

Stock Adj 10 -12 -12 -56 -7 0

Raw material 390 377 327 360 315 375

Employee 215 263 279 283 278 196

Power & fuel 634 561 565 624 547 655

Freight 702 736 839 867 828 880

Others 537 700 765 732 863 850

EBITDA per Tonne 1092 1050 933 763 908 1040

Power Volumes (million units) 1322 2610 1860 1885 1611 1920Realisation (|/unit) 4.4 4.0 3.5 3.7 3.7 3.8EBITDA (|/unit) 0.6 1.0 0.4 0.7 1.1 0.8

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


Exhibit 21: One year forward EV/EBITDA

05000

100001500020000250003000035000400004500050000

Nov

-07

May

-08

Nov

-08

May

-09

Nov

-09

May

-10

Nov

-10

May

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Nov

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May

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Nov

-12

May

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Nov

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May

-14

Nov

-14

May

-15

Nov

-15

(| c

rore

)EV 30.0x 22.0x 15.0x 8.0x 5.0x


Exhibit 22: One year forward EV/tonne

0100020003000400050006000700080009000

Nov

-07

May

-08

Nov

-08

May

-09

Nov

-09

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-10

Nov

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Nov

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Milli

on $

EV $300 $250 $200 $150 $120 $90


Exhibit 23: Key valuation summary

Sales Growth EPS Growth PE EV/tonne EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%)

FY14 5887.3 5.3 226.2 -21.6 48.3 334.1 28.0 16.7 13.0FY15 6453.6 9.6 122.5 -45.8 89.2 301.0 29.0 8.1 6.2FY16E* 5545.4 -14.1 150.0 22.5 72.8 229.3 28.2 9.1 7.8FY17E 8990.1 62.1 296.8 97.8 36.8 213.1 16.9 15.4 14.9



Company snapshot

Target Price: | 12,500

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Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventFeb-09 Government announces excise duty cut of 2% to boost cement sales

Mar-09 Company completes its 1 MTPA clinkerisation unit (unit-VII) at Bangur city and starts trial production May-10 Reports surprise net loss of | 71.3 crore due to change in depreciation policyMay-12 CCI completes probe into alleged cartilsation by 39 cement companies and finds these companies including Shree Cement guilty of forming cartelisationJun-12 CCI imposes | 397 crore penalty on Shree Cement for indulging in restrictive trade practicesJul-13 Supreme Court directs six cement firms (including Shree Cement) to pay 24% interest on royalty due between 1992 and 1996 to Rajasthan state government

Jul-13 Recommends dividend of | 12/share for June year ending FY13Aug-14 To acquire 1.5 MTPA cement grinding unit of Jaiprakash Associates situated at Panipat, Haryana for consideration of | 360 croreOct-14 The company commissions 2.0 MT grinding unit each in Ras, Rajasthan and Aurangabad, BiharApr-15 The company completes accquisition 1.5 MTPA cement grinding unit of Jaiprakash Associates

May-15 The company commissions clinker manufacturing unit of 1.50 MT capacity at Baloda Bazar near Raipur in ChhattisgarhOct-15 Commissions 2.0 MT capacity at Bulandshahr in Uttar Pradesh

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Shree Capital Services, Ltd. 30-Sep-15 25.30 8.8 -0.22 Digvijay Finlease, Ltd. 30-Sep-15 12.16 4.2 0.03 FLT, Ltd. 30-Sep-15 10.33 3.6 0.04 Mannakrishna Investments Pvt. Ltd. 30-Sep-15 5.86 2.0 0.05 Newa Investments Pvt. Ltd. 30-Sep-15 3.95 1.4 0.06 Ragini Finance, Ltd. 30-Sep-15 3.59 1.3 0.07 Didu Investments Pvt. Ltd. 30-Sep-15 3.36 1.2 0.08 NBI Industrial Finance Co., Ltd. 30-Sep-15 2.44 0.9 0.09 Cartica Capital, Ltd. 30-Sep-15 2.13 0.7 0.110 UTI Asset Management Co. Ltd. 30-Sep-15 1.62 0.6 0.0

(in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15Promoter 64.79 64.79 64.79 64.79 64.79FII 9.83 10.85 11.49 13.10 13.59DII 6.28 5.53 5.65 5.12 4.90Others 20.30 18.83 18.07 16.99 16.72

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesCartica Capital, Ltd. 16.85m 0.09m Shree Capital Services, Ltd. -30.47m -0.17m PineBridge Investments Asia Limited 13.71m 0.08m Franklin Templeton Asset Management (India) Pvt. Ltd. -10.25m -0.10m Nomura Asset Management Co., Ltd. 10.78m 0.06m APG Asset Management -9.60m -0.06m ICICI Prudential Asset Management Co. Ltd. 8.44m 0.05m First State Investments (Singapore) -8.73m -0.06m DSP BlackRock Investment Managers Pvt. Ltd. 6.48m 0.04m IDFC Asset Management Company Private Limited -7.41m -0.06m

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore (Year-end March) FY14 FY15 FY16E FY17E

Total operating Income 5,887.3 6,453.6 5,545.4 8,990.1

Growth (%) 5.3 9.6 -14.1 62.1

Raw material cost 447.5 500.4 408.6 775.2

Power & Fuel cost 1378.7 1579.8 1144.8 1930.0

Freight cost 1190.5 1395.5 1099.1 1819.1

Employees cost 395.3 455.0 368.4 405.2

Others 1085.5 1179.0 1144.9 1757.1

Total Operating Exp. 4,497.5 5,109.7 4,165.8 6,686.7

EBITDA 1,389.8 1,343.9 1,379.6 2,303.4

Growth (%) -11.0 -3.3 2.7 67.0

Depreciation 549.9 924.8 823.2 1,140.6

Interest 129.2 120.6 69.7 57.0

Other Income 184.9 137.9 69.1 112.0

PBT 895.7 436.3 555.8 1,217.8

Others 80.5 35.5 2.1 0.0

Total Tax 27.9 -25.5 31.6 185.1

PAT 787.2 426.3 522.2 1,032.7

Adjusted PAT 865.0 464.1 524.1 1,032.7

Growth (%) -13.9 -46.4 12.9 97.0

Adjusted EPS (|) 248.6 133.3 150.6 296.8

Source: ICICIdirect.com Research

Cash flow statement | Crore (Year-end March) FY14 FY15 FY16E FY17E

Profit after Tax 787.2 426.3 522.2 1,032.7

Add: Depreciation 549.9 924.8 823.2 1,140.6

Add: Interest 129.2 120.6 69.7 57.0

(Inc)/dec in Current Assets -261.5 -487.2 462.3 -1,152.2

Inc/(dec) in CL and Provisions -14.2 366.1 -599.1 406.0

CF from operating activities 1,190.7 1,350.6 1,278.3 1,484.2

(Inc)/dec in Investments -41.1 581.8 0.0 0.0

(Inc)/dec in Fixed Assets -2,022.6 -1,487.9 -1,000.0 -1,430.0

Others -49.1 -52.3 0.0 0.0

CF from investing activities -2,112.8 -958.5 -1,000.0 -1,430.0

Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0

Inc/(dec) in loan funds 315.9 -262.5 -100.0 -250.0

Dividend paid & dividend tax -82.8 -107.6 -73.3 -73.3

Inc/(dec) in Sec. premium 162.8 246.7 0.0 0.0

Others -129.2 -120.6 -69.7 -57.0

CF from financing activities 266.7 -244.0 -243.0 -380.2

Net Cash flow -655.4 148.2 35.3 -326.1

Opening Cash 814.6 159.2 307.3 342.6

Closing Cash 159.2 307.3 342.6 16.6


Balance sheet | Crore (Year-end March) FY14 FY15 FY16E FY17E

Liabilities

Equity Capital 34.8 34.8 34.8 34.8

Reserve and Surplus 4,676.0 5,241.4 5,690.3 6,649.7

Total Shareholders funds 4,710.8 5,276.3 5,725.1 6,684.6

Total Debt 1,731.2 1,468.7 1,368.7 1,118.7

Deferred Tax Liability -142.9 -195.2 -195.2 -195.2

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 6,299.1 6,549.8 6,898.6 7,608.1

Assets

Gross Block 6,185.6 7,673.5 9,213.5 10,623.5

Less: Acc Depreciation 4,733.3 5,658.1 6,481.3 7,622.0

Net Block 1,452.3 2,015.5 2,732.2 3,001.6

Capital WIP 1,500.0 1,500.0 960.0 980.0

Total Fixed Assets 2,952.3 3,515.5 3,692.2 3,981.6

Investments 2,244.4 1,662.6 1,662.6 1,662.6

Inventory 809.8 918.9 653.3 1,059.1

Debtors 296.6 476.4 409.4 663.6

Loans and Advances 689.2 906.6 779.0 1,262.9

Other Current Assets 34.3 15.3 13.1 21.3

Cash 159.2 307.3 342.6 16.6

Total Current Assets 1,989.1 2,624.5 2,197.4 3,023.5

Creditors 768.1 1,164.8 607.7 985.2

Provisions 118.6 88.0 45.9 74.5

Total Current Liabilities 886.7 1,252.8 653.6 1,059.7

Net Current Assets 1,102.4 1,371.7 1,543.8 1,963.9

Application of Funds 6,299.1 6,549.7 6,898.6 7,608.0


Key ratios (Year-end March) FY14 FY15 FY16E FY17E

Per share data (|)

EPS 248.6 133.3 150.6 296.8

Cash EPS 384.2 388.3 386.6 624.5

BV 1,353.7 1,516.2 1,645.2 1,920.9

DPS 20.0 26.0 18.0 18.0

Cash Per Share 45.7 88.3 98.5 4.8

Operating Ratios (%)

EBITDA Margin 23.6 20.8 24.9 25.6

PAT Margin 13.4 6.6 9.4 11.5

Inventory days 50.2 52.0 43.0 43.0

Debtor days 18.4 26.9 26.9 26.9

Creditor days 47.6 65.9 40.0 40.0

Return Ratios (%)

RoE 16.7 8.1 9.1 15.4

RoCE 13.0 6.2 7.8 14.9

RoIC 20.7 8.8 9.9 17.5

Valuation Ratios (x)

P/E 48.3 89.2 72.8 36.8

EV / EBITDA 28.0 29.0 28.2 16.9

EV / Net Sales 6.6 6.0 7.0 4.3

Market Cap / Sales 6.5 5.9 6.9 4.2

Price to Book Value 8.1 7.2 6.6 5.7

Solvency Ratios

Debt/EBITDA 1.2 1.1 1.0 0.5

Debt / Equity 0.4 0.3 0.2 0.2

Current Ratio 2.2 2.1 3.4 2.9

Quick Ratio 1.3 1.4 2.4 1.9



ICICIdirect.com coverage universe (Cement)

CMP M Cap(|) TP(|) Rating (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

ACC* 1325 1475 Hold 24,897 61.8 47.2 69.6 18.6 14.9 11.4 127 113 111 13.7 15.3 18.4 14.1 12.2 14.1Ambuja Cement* 199 225 Hold 30,778 9.7 7.7 9.3 13.5 14.9 12.5 164 138 133 17.8 15.9 17.9 14.4 11.2 12.8UltraTech Cem 2747 3600 Buy 75,378 73.4 103.8 143.4 20.2 14.5 11.0 208 178 170 12.1 14.7 18.1 10.6 13.3 15.7Shree Cement 10922 12,500 Buy 38,009 122.5 150.0 296.8 29.0 28.2 16.9 301 229 213 6.2 7.8 14.9 8.1 9.1 15.4Heidelberg Cem 73 81 Hold 1,836 2.6 1.4 2.9 9.5 12.2 9.7 84 85 84 9.2 7.6 10.0 -0.1 3.5 6.8India Cement 82 90 Hold 2,519 1.0 5.0 5.7 7.7 6.2 5.5 56 54 52 6.8 9.2 10.4 0.8 4.5 4.6JK Cement 640 710 Hold 4,476 22.4 23.8 41.0 14.9 11.4 9.2 94 91 98 8.5 10.6 12.6 9.5 9.3 14.0JK Lakshmi Cem 348 373 Hold 4,096 8.1 2.6 9.9 15.9 17.2 12.6 140 96 87 7.8 5.5 9.0 7.2 2.3 8.4Mangalam Cem 198 220 Hold 529 8.9 8.9 22.7 11.0 9.1 6.2 43 42 42 7.2 7.4 11.2 5.3 4.4 10.1SFCL 137 215 Buy 3,041 2.9 5.8 10.6 9.0 7.0 4.9 173 168 116 11.2 17.2 26.8 9.4 15.7 22.7

RoE (%)RoCE (%)Company

EPS (|) EV/Tonne ($)EV/EBITDA (x)

Source: Company, ICICIdirect.com Research,*CY ending


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

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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Documents

Shree Cement (SHRCEM) - ICICI Directcontent.icicidirect.com/mailimages/IDirect_ShreeCement_Q2FY16.pdf · Shree Cement distributes cement under different brand names - Shree Ultra,