UltraTech Cement (ULTCEM) - ICICI Directcontent.icicidirect.com/mailimages/IDirect_UltraTech...UltraTech Cement 6.2 3.0 32.9 8.8 Research Analyst Rashesh Shah [email protected]

July 20, 2016

ICICI Securities Ltd | Retail Equity Research

Result Update

Lower power & fuel cost drives margins… • UltraTech results were above our estimates at EBITDA and PAT level.

However, there was topline miss (| 6182.3 crore vs I-direct estimate of | 6390.6 crore) due to adoption of Ind AS accounting. Under the new accounting standard discounts and direct sales incentives are directly deducted from sales instead of showing it as an expense line. If we adjust this then topline would have been higher by ~| 100-125 crore to |6307.3 crore. Hence on an adjusted basis topline was broadly in line with our estimate.

• Volumes during the quarter increased 6.4% YoY to 13.2 mt (vs I-direct estimate of 13.1 mt) driven by healthy infra spends in north, east and south.

• EBITDA margin increased 380 bps YoY to 22.2% (above I-direct estimate of 20.6%). EBITDA/t increased 17.9% YoY to | 1,040/t (vs I-direct estimate of |1007/t) in Q1FY17 led by lower power & fuel cost/t.

Structurally positive trend in demand-supply scenario to improve utilisation Over FY08-FY15, utilisation in cement sector witnessed a decline from 83% in FY08 to 65% in FY15 mainly due to capacity addition (incremental supply of 188 mt) outpacing demand (incremental demand of 92 mt). As a result industry capacity doubled from 198 mt in FY08 to 392 mt in FY15 vs demand which increased from 164 mt in FY08 to 255 mt in FY15. However, we expect demand-supply balance to improve in the next 3 years with slower pace of capacity additions (~32 mt) and likely improvement in demand (~50 mt) positively impacting utilisation levels. Cement sector’s utilisation is expected to improve from 65% in FY16 to 71% in FY18E leading to higher margins for cement players (driven by operating leverage benefits).

Normal monsoon and 7th pay commission to drive rural housing A pick up in rural housing on the back of normal monsoon and 7th pay commison is expected to drive cement demand in the coming years. Apart from this, the company will be key beneficiary of expected revival in the demand on account of higher budgetary allocation towards development of roads and highways along with governments focus on rural development. We expect cement demand to reach to 305 mt by FY18E (i.e. at CAGR of 7.5%) v/s (CAGR of 3.5% over last 5 years). In addition, we believe a stable pricing scenario is expected to positively impact revenues and margins over the next three years. Consolidation of Jaypee, a long term value accretive deal The consolidation of 21.2 mt cement assets of Jaiprakash Associates (Jaypee) will take the company’s total capacity to 91.1 mt. This will enable the company to further strengthen its leadership in India going forward with a market share of over ~22% (post the deal) from 18.0% currently and become 4th largest player globally. The transaction is subject to various regulatory approvals resulting in a gestation period of 10-12 months. We are yet to incorporate Jaypee acquisitions into our financials. Beginning of an uptrend in cement cycle is visible; Maintain Buy!!! We expect company's revenues to increase at a CAGR of 11.5% over the next two years led by government’s focus on infrastructure, normal monsoon and 7th pay commission. Further, EBITDA/t is expected to increase from | 890/t to over | 1048/t led by increase in realisation, commissioning of various grinding units and WHRS. With the industry-leading growth, higher margins and healthy balance-sheet, we maintain our positive view with a target price of | 4,000/share (i.e. at 17.0x FY18E EV/EBITDA).

UltraTech Cement (ULTCEM) | 3,550 Rating matrix Rating : BuyTarget : | 4000Target Period : 9-12 monthsPotential Upside : 13%

What’s changed? Target Price Changed from | 3,800 to | 4,000EPS FY17E* Changed from | 99.3 to | 100.7EPS FY18E* changed from | 119.7 to | 124.6Rating Unchanged

Quarterly performance

Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%)Revenue 6,182.3 5,947.6 3.9 6,435.9 -3.9EBITDA 1,372.3 1,093.9 25.4 1,285.0 6.8EBITDA (%) 22.2 18.4 380 bps 20.0 223 bpsPAT 774.9 604.0 28.3 681.4 13.7 *We have not incorporated Jaypee financials Key financials | Crore FY15 FY16 FY17E* FY18E*

Net Sales 22651.5 23750.8 25994.2 29510.2

EBITDA 3915.3 4350.2 5175.2 5975.3

Net Profit 2014.7 2189.5 2763.4 3418.2

EPS (|) 73.4 79.8 100.7 124.6 Valuation summary

FY15 FY16 FY17E* FY18E*

PE (x) 48.3 44.5 35.3 28.5

EV to EBITDA (x) 25.8 22.5 18.1 15.4

EV/Tonne(US$) 267 241 225 221

Price to book (x) 5.2 4.7 4.1 3.8

RoNW (%) 10.7 10.6 11.6 13.3

RoCE (%) 11.0 12.0 13.9 16.4 Stock data

Amount

Mcap | 97412 crore

Debt (FY15) | 9669 crore

Cash & Invest (FY15) | 7699 crore

EV | 99382 crore

52 week H/L | 3600 / | 2581

Equity cap | 274.2 crore

Face value | 10

Particular

Price performance

1M 3M 6M 12M

ACC 3.0 9.5 29.7 7.8

Ambuja Cement 11.4 14.9 37.3 4.8

Shree Cement 17.4 24.4 63.7 37.9

UltraTech Cement 6.2 3.0 32.9 8.8 Research Analyst

Rashesh Shah [email protected]

Devang Bhatt [email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis Q1FY17 Q1FY17E Q1FY16 YoY (%) Q4FY16 QoQ (%) Comments

Net Sales 6,182.3 6,390.6 5,947.6 3.9 6,435.9 -3.9Revenue growth was driven by 6.4% YoY increase in volumes (led by capacity expansion and higher infra spend) while realisation declined 2.3% YoY

Other Incomes 200.6 167.2 177.0 13.3 105.5 90.1The increase in other income was due to MTM gains on investment and recognition of income on accrual basis led by adoption of Ind AS

Raw Material Expenses 1,092.4 1,073.3 1,044.7 4.6 1,122.2 -2.7Employee Expenses 346.6 353.4 313.7 10.5 339.0 2.2

Power and fuel 923.7 1,047.2 1,097.3 -15.8 1,016.5 -9.1Energy cost declined due to an increase in pet coke consumption in the fuel mix (74% in Q1FY17 vs. 68% in Q1FY16)

Freight 1,545.2 1,596.9 1,552.7 -0.5 1,636.9 -5.6Logistic cost declined due to withdrawal of 15% busy season surcharge on rail freight for 2 months and improved lead distance

Others 902.1 1,001.3 845.4 6.7 1,036.4 -13.0EBITDA 1,372.3 1,318.5 1,093.9 25.4 1,285.0 6.8EBITDA Margin (%) 22.2 20.6 18.4 380 bps 20.0 223 bps The EBITDA margin improved due to lower power cost

Depreciation 302.7 340.9 285.2 6.2 349.3 -13.3 Capitalisation of stores and mines restoration led to higher depreciation chargeInterest 152.5 100.1 139.9 9.0 111.0 37.3PBT 1,117.7 1,044.6 845.9 32.1 930.1 20.2Total Tax 342.8 323.8 241.9 41.7 248.7 37.8

PAT 774.9 720.8 604.0 28.3 681.4 13.7PAT increased mainly on account of better performance at operating level and higher other income

Key MetricsVolume (MT) 13.20 13.09 12.41 6.4 13.60 -2.9 Volume growth was mainly led by capacity expansion and higher infra spendRealisation (|) 4,684 4,882 4,794 -2.3 4,732 -1.0 Prices during the quarter declined due to pricing pressure in east and southEBITDA per Tonne (|) 1,040 1,007 882 17.9 945 10.0 EBITDA/tonne improved due to lower power cost/t

Source: Company, ICICIdirect.com Research

Change in estimates

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

Revenue 26,513.7 25,994.2 -2.0 29,514.3 29,510.2 0.0We have revised FY17E revenue estimates downwards mainly due to adoption of Ind AS

EBITDA 5,016.0 5,175.2 3.2 5,747.4 5,975.3 4.0 We expect EBITDA margin to be stable at 20%EBITDA Margin (%) 18.9 19.9 99 bps 19.5 20.2 77 bps

PAT 2,724.1 2,763.4 1.4 3,283.8 3,418.2 4.1 We expect PAT to improve led by lower interest expensesEPS (|) 99.3 100.7 1.4 119.7 124.6 4.1

FY17E FY18E

Source: Company, ICICIdirect.com Research Assumptions

CommentsFY14 FY15 FY16 FY17E FY18E FY17E FY18E

Volume (MT) 42.6 45.3 48.7 52.4 57.0 52.6 57.2We expect volumes to increase mainly led by higher infra spend and pick up in rural housing

Realisation (|) 4,713 4,995 4,874 4,958 5,176 5,038 5,157We expect realisation to remain healthy mainly due to uptick in demand

EBITDA per Tonne (|) 849 863 893 987 1,048 953 1,004We expect EBITDA/tonne to remain healthy on acount of improved realisation and cost rationalisation

EarlierCurrent



Company Analysis Improvement in demand-supply scenario to boost utilisation

Over FY08-FY15, utilisation in cement sector witnessed a decline from 83% in FY08 to 65% in FY15 mainly due to capacity addition (incremental supply of 188 mt) outpacing demand (incremental demand of 92 mt). As a result industry capacity doubled from 198 mt in FY08 to 392 mt in FY15 vs demand which increased from 164 mt in FY08 to 255 mt in FY15. However, we expect demand-supply balance to improve in the next 3 years with slower pace of capacity additions (~32 mt) and likely improvement in demand (~50 mt) positively impacting utilisation levels. Cement sector’s utilisation is expected to improve from 65% in FY16 to 71% in FY18E leading to higher margins for cement players (driven by operating leverage benefits).

Exhibit 1: Demand supply scenario

198 216

276304 319

357 368392 409 421 424

305283264255247241229214

203178164

050

100150200250300350400450

FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17E FY 18E

0102030405060708090

Capacity Demand Utilisation (%)

Demand expected to register strong growth in FY16-18E

UltraTech derives majority of its revenue from northern, western India, at 29%, 31%, respectively. Other than this, 17% of revenue is from eastern India where prices remain strong while 23% of its revenue comes from southern India where prices are improving. On the whole, the sales mix across India is well distributed, indicating lower volatility in blended realisation, going forward. The company has indicated some green shoots of recovery in demand from big-ticket infra projects in north. Further, in the east sustained infra spending in Odisha, Bihar and Chhattisgarh are expected to continue to drive volume growth over FY16-18E. In south, the company expects demand from Seemandhra and Telangana to drive volume growth over FY16-18E.

Exhibit 2: Region-wise demand trend in Q1FY17


Regional presence

East17%

South23%

West31%

North29%


Exhibit 3: Region-wise demand trend in Q1FY17


Largest pan-India player in cement Industry UltraTech Cement is the largest player in capacity terms (~69.9 MT) with a market share of over ~18% in India. The acquisition of 21.2MT cement assets of Jaiprakash Associates (Jaypee) will enable the company to maintain its leadership in India going forward. This move will increase its capacity by 30% to 91.1 MT, making it the largest cement player in the domestic market (fourth largest player globally) with a market share of over 22%. With this deal, UltraTech will have a presence across regions (except NE). Jaypee’s cement assets are spread across regions namely 1) Central region (11.4 mt), 2) North (4.8 mt) and 3) South (5 mt). The 11 plant location of Jaypee complements the existing 40 location of Ultratech. The acquisition is expected to give ULTCEM access to newer markets of Satna (11.4 mt) and coastal Andhra Pradesh (5.0 mt). Operates at healthy EBITDA/tonne vis-à-vis industry

With lower lead distances due to a pan-India presence, captive power plants and higher sales realisations due to a higher trade mix coupled with higher white cement sales realisation, the company generates highest EBITDA/tonne in the industry. It has also been able to reduce its power consumption per tonne gradually through various initiatives to ~76/kwh. Further, the company is taking various cost saving initiatives like increasing WHRMS capacity (59MW) from 6% of total power requirement to 11% over the next 3 years, increased usage of pet coke which will further help in lowering power cost. Apart from this the company has recently set up various grinding units which will help in reducing freight cost. Further, higher utilisation of grinding unit (from 50% to 80%) will further aid margins.

Exhibit 4: Gradual reduction in power requirement

83.182.0 81.3 81.1 81.0

80.0

76.0

72747678808284

FY10 FY11 FY12 FY13 FY14* FY15 FY16*

Kwh/T of cement

Source: Company, ICICIdirect.com Research,*FY14,FY16 figures provisional

Exhibit 5: Higher EBITDA/tonne vis-à-vis peer group

914

843

775

781

1,03

9

882

834 90

0

945

787

820

718

644 85

1

703

740

669 77

3

-200

400600

8001,000

1,200

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

Q4FY

16

EBIT

DA/to

nne

(|)

Ultratech Industry

Source: Company, ICICIdirect.com Research Peer set includes ACC, Ambuja, Shree cement and India cement


Expect revenue CAGR of 11.5% during FY16-18E

Revenues have grown at a CAGR of ~7.0% during FY12-16 mainly led by moderate growth in volumes of 4.0% CAGR and realisation growth of 2.7% CAGR during FY12-16. However, over FY16-18E we expect volumes CAGR of 8.2% vs 4.0% over FY16-18E mainly led by higher infra spend by the government. Further we expect realisation to increase at a CAGR of 3.1% over FY16-18E led by pick up in demand. Consequently, revenues are expected to grow at a CAGR of 11.5% over the next two years.

Exhibit 6: Expect volume led revenue CAGR of 11.5% during FY16-18E

18184 20021 2007822652 23751

2599429510

-5,000

10,00015,00020,00025,00030,00035,000

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Sales (| crore)


Exhibit 7: Capacity addition plans (standalone) Unit Clinker Grey Cement

Opening FY15 48 61.5

Additions Q1FY16 - -

Q2FY16 Jhajar, Haryana - 1.6

Q2FY16 Dankuni, WB - 1.6

Q4FY16 - -

Q1FY17 Bihar - 1.6

Q2FY17 -

Closing FY17 48 66.3


Exhibit 8: Volume to grow at CAGR of 8.2% during FY16-18E

41.7 42.6 45.3 48.7 52.457.0

0.010.020.030.040.050.060.070.0

FY13 FY14 FY15 FY16 FY17E FY18E

Sales Volumes


Exhibit 9: Realisation to pick up led by uptick in demand

48004713

49954874

4958

5176

4400450046004700480049005000510052005300

FY13 FY14 FY15 FY16 FY17E FY18E

-4.0-2.00.02.04.06.08.010.012.0

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


Exhibit 10: Robust volume growth led by higher infra spend…

12.5 12.010.7 10.8 11.9 12.4

11.1 11.613.6 13.2

02468

10121416

Q4FY

14

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

Q4FY

16

Q1FY

17

Milli

on T

onne

Sales Volume


Exhibit 11: Quarterly realisation trend

4725

5028

5068 51

72

4794

5053

4955

4732

4684

4000

4250

4500

4750

5000

5250

5500

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

Q4FY

16

Q1FY

17

(|)

Realisation



Margins to improve led by operating efficiency

In Q1FY17 total cost/t declined 6.9% YoY led by lower energy cost. Going forward, cost/t is expected to increase led by higher pet coke prices. However, with the pick up in demand we expect realisation to improve in the coming quarters leading to improvement in margins. This, in turn, would help the company in achieving 20% margins by FY18E.

Exhibit 12: Expect EBITDA/tonne of |1048 in FY18E

9621084

849 863 893987 1048

0

200

400

600

800

1000

1200


EBITDA/Tonne


Exhibit 13: Margins to improve led by improvement in realisations

22.0 22.6

18.0 17.3 18.319.9 20.2

10.0

15.0

20.0

25.0

30.0


EBITDA Margin (%)


Exhibit 14: Q1FY17 EBITDA per tonne stood at | 1040/t

843 775 781

1039882 834 900 945

1040

0200400600800

10001200

Q1FY

15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

Q4FY

16

Q1FY

17

| pe

r ton

ne


Exhibit 15: Pick-up in margins expected, going forward

17.815.4

15.420.1 18.4

16.5

18.220.0

22.2

0

5

10

15

20

25Q1

FY15

Q2FY

15

Q3FY

15

Q4FY

15

Q1FY

16

Q2FY

16

Q3FY

16

Q4FY

16

Q1FY

17

(%)

EBITDA Margin


Expect net profit CAGR of 24.9% during FY16-18E

After witnessing a sharp decline in profit in FY15, we expect net margins to improve to 11.6% in FY18E, which is still lower than the average NPM of 13.3% in FY12. Exhibit 16: Profitability trend

2014.7

3418.2

2763.42189.52446.2

2655.6

2144.5 11.610.69.28.9

10.7

13.313.5

0500

1000150020002500300035004000

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

| cr

ore

0.02.04.06.08.010.012.014.016.0

(%)

Net profit - LS Net profit margin -RS



Outlook and valuation At the CMP of | 3,550, the stock is trading at 18.1x and 15.4x its FY17E and FY18E EV/EBITDA, respectively. We believe the industry’s capacity utilisation bottomed at ~65% in FY15. With the government taking measures to boost infrastructure development through steps like long-term fund availability for major infra projects, higher budgetary allocation towards public infrastructure development, we expect robust cement demand growth in FY16-18E to reach 305 MT (i.e. at CAGR of 7.5%, 1.0x of GDP in line with last 10 year’s average vs (CAGR of 3.5% over last 5 years). The company expects government infra spends to gain momentum especially on construction of concrete roads and new capital city creation in Andhra Pradesh. UltraTech is well positioned to reap the benefit of a recovery in demand and generate healthy free cash flows in future. We assign premium valuations multiple to UltraTech vs. its peer companies due to its ability to generate higher margins and healthy cash flows. Further a normal monsoon and 7th pay commission could lead to robust rural spending. Hence, we continue to maintain our positive view on the stock with a BUY recommendation with target price to | 4,000/share (i.e. at 17.0x FY18E EV/EBITDA).

Exhibit 17: Key assumptions | per tonne FY14 FY15 FY16 FY17E FY18E

Sales Volume* 43 45 49 52 57

Net Realisation* 4713 4995 4874 4958 5176

Total Expenditure 3864 4132 3981 3971 4128

Raw material 781 785 817 872 900

Power & Fuel 971 1046 870 826 900

Freight 1075 1190 1218 1193 1225

Employees 238 269 275 272 288

Others 799 842 801 808 815

EBITDA per Tonne 849 863 893 987 1048

Source: ICICIdirect.com Research; * Blended (grey + white + clinker)

Exhibit 18: Ultratech fuel mix trend Fuel mix FY13 FY14 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY16 Q1FY17

Petcoke (%) 38 48 52 68 65 74 70 70 74

Imported coal (%) 35 26 26 20 23 18 21 20 18

Indigenous coal and others (%) 27 26 22 12 12 8 9 10 8

Total 100 100 100 100 100 100 100 100 100

Source: Company, ICICIdirect.com Research;

Exhibit 19: Ultratech transport mix trend Transport mix FY13 FY14 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY16 Q1FY17

Rail (%) 34 34 29 30 29 26 27 28 26

Road (%) 63 63 67 67 69 71 70 69 71Sea (%) 3 3 4 3 3 3 3 3 3

Total 100 100 100 100 101 100 100 100 100

Source: Company, ICICIdirect.com Research;


Exhibit 20: One year forward EV/EBITDA

5008500

1650024500325004050048500565006450072500805008850096500

104500

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

(| C

rore

)

EV 20.5x 18.5x 16.5x 14.5x 10.5x


Exhibit 21: One year forward EV/Tonne

0

5000

10000

15000

20000

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Milli

on $

EV $250 $225 $175 $125 $80


Exhibit 22: Valuation Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) ($) (x) (%) (%)

FY14 20077.9 0.3 78.2 -19.3 45.4 289 27.2 12.5 11.7FY15 22651.5 12.8 73.4 -6.1 48.3 267 25.8 10.7 11.0FY16 23750.8 4.9 79.8 8.7 44.5 241 22.5 10.6 12.0FY17E 25994.2 14.8 100.7 37.2 35.3 225 18.1 11.6 13.9FY18E 29510.2 24.2 124.6 56.1 28.5 221 15.4 13.3 16.4



Company snapshot

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jul-16Jun-16Apr-16Mar-16Jan-16Dec-15Oct-15Sep-15Jul-15Jun-15May-15Mar-15Feb-15

(|)

0.010.020.030.040.050.060.070.080.090.0100.0

(%)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventJul-12 Announces that the company has signed an agreement with the shareholders of Gotan Lime Stone Khanij Udyog Pvt Ltd (GKUPL), Rajasthan to acquire 100% equity

shares of GKUPL. With this acquisition, GKUPL becomes a wholly-owned subsidiary of the companySep-13 Announces that the company will acquire 4.8 MT of Gujarat Cement plant of Jaypee Cement. Other than this, ~ 10 MTPA capacity will be commissioned by FY15.

Total cement capacity is expected to reach ~70 MTPAJun-14 Company starts including Jaypee Cement operations in quarterly result from Q1FY15

Sep-14 Commissions 1.4 MT cement mill at Karnataka and 25 MW power plant at AP

Dec-14 Board approves acquisition of cement business of Jaiprakash Associates in MP with capacity of 4.9 MT

Aug-15 Commissions a bulk terminal with a capacity of 2 MT in Pune, Maharashtra.

Sep-15 Commissions a cement grinding unit with a capacity of 1.6 MT at Jhajjar, Haryana.

Sep-15 Commissions a cement grinding unit with a capacity of 1.6 MT at Dankuni, West Bengal.

Dec-15 Compat sets aside the Competition Commission of India (CCI) order of alleged cartelisation

Feb-16 The company signs binding MoU with Jaiprakash Associate to acquire 22.4 MT cement capacity

Apr-16 Commissions a cement grinding unit with a capacity of 1.6 MT at Patliputra, Bihar.

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Last filing date % O/S Position (m) Change (m)1 Aberdeen Asset Management (Asia) Ltd. 30-Jun-15 2.53 6.94 0.002 Life Insurance Corporation of India 31-Mar-16 2.50 6.86 0.353 OppenheimerFunds, Inc. 31-Mar-16 1.41 3.88 0.004 Aberdeen Asset Managers Ltd. 31-May-16 1.11 3.04 (0.38)5 J.P. Morgan Asset Management (Hong Kong) Ltd. 31-May-16 0.94 2.57 0.006 The Vanguard Group, Inc. 30-Jun-16 0.68 1.87 0.027 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-May-16 0.59 1.62 0.088 UTI Asset Management Co. Ltd. 30-Jun-16 0.55 1.51 (0.00)9 APG Asset Management 31-Dec-15 0.53 1.45 (0.00)10 Franklin Advisers, Inc. 30-Apr-16 0.44 1.21 0.00

(in %) Jun-15 Sep-15 Dec-15 Mar-16 Jun-16Promoter 61.69 61.69 62.67 62.50 62.27FII 18.52 18.43 18.10 19.01 19.64DII 6.77 7.10 7.44 7.09 6.80Others 13.02 12.78 11.79 11.40 11.29

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor Name Value Shares Investor Name Value SharesToubro Holdings, Ltd. 34.03 0.70 William Blair Investment Management, LLC -26.11 -0.62Grantham Mayo Van Otterloo & Co LLC 22.43 0.55 Norges Bank Investment Management (NBIM) -21.28 -0.51Life Insurance Corporation of India 17.02 0.35 T. Rowe Price Hong Kong Limited -21.57 -0.44China International Fund Management Co., Ltd. 10.50 0.25 Aberdeen Asset Managers Ltd. -18.01 -0.38Tata Asset Management Limited 6.38 0.13 Aditya Birla Group -18.52 -0.37

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary Profit and loss statement | Crore (Year-end March) FY15 FY16 FY17E* FY18E*

Total operating Income 22,651.5 23,750.8 25,994.2 29,510.2

Growth (%) 12.8 4.9 9.4 13.5

Raw material cost 3560.1 3980.5 4573.5 5131.2

Power & Fuel cost 4742.9 4240.8 4331.4 5131.2

Freight cost 5397.0 5934.9 6252.4 6984.1

Employees cost 1218.3 1342.4 1425.3 1642.0

Others 3817.9 3902.0 4236.4 4646.5

Total Operating Exp. 18,736.2 19,400.6 20,819.0 23,534.9

EBITDA 3,915.3 4,350.2 5,175.2 5,975.3

Growth (%) 8.3 11.1 19.0 15.5

Depreciation 1,133.1 1,289.0 1,399.1 1,456.5

Interest 547.5 506.9 502.9 257.3

Other Income 651.5 519.3 685.3 685.3

PBT 2,886.3 3,073.6 3,958.5 4,946.8

Total Tax 871.5 884.1 1195.0 1528.6

PAT 2,014.7 2,189.5 2,763.4 3,418.2

Growth (%) -6.1 8.7 26.2 23.7

Adjusted EPS (|) 73.4 79.8 100.7 124.6


Cash flow statement | Crore (Year-end March) FY15 FY16 FY17E* FY18E*

Profit after Tax 2,014.7 2,189.5 2,763.4 3,418.2

Add: Depreciation 1,133.1 1,289.0 1,399.1 1,456.5

(Inc)/dec in Current Assets -613.1 224.0 336.1 -2,227.1

Inc/(dec) in CL and Provisions 1,566.5 1,998.6 1,096.3 2,020.5

CF from operating activities 4,101.2 5,701.1 5,595.0 4,668.2

(Inc)/dec in Investments 1,206.4 495.4 0.0 0.0

(Inc)/dec in Fixed Assets -6,240.8 -2,215.6 -1,500.0 -1,500.0

Others 496.2 435.4 0.0 0.0

CF from investing activities -4,538.3 -1,284.8 -1,500.0 -1,500.0

Issue/(Buy back) of Equity 0.2 0.0 0.0 0.0

Inc/(dec) in loan funds 1,638.1 -1,675.3 -1,500.0 -1,500.0

Dividend paid & dividend tax -288.5 -313.8 -658.2 -802.6

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

Others 33.7 18.4 957.7 -700.0

CF from financing activities 1,383.4 -1,970.7 -1,200.4 -3,002.6

Net Cash flow -77.0 2,050.9 2,894.5 165.6

Opening Cash 277.5 200.5 2,251.4 5,145.9

Closing Cash 200.5 2,251.4 5,145.9 5,311.5


Balance sheet | Crore (Year-end March) FY15 FY16 FY17E* FY18E*

Liabilities

Equity Capital 274.4 274.4 274.4 274.4

Reserve and Surplus 18,583.3 20,477.3 23,540.3 25,455.9

Total Shareholders funds 18,857.7 20,751.8 23,814.8 25,730.4

Total Debt 6,513.2 4,837.9 3,337.9 1,837.9

Deferred Tax Liability 2,792.0 3,227.4 3,227.4 3,227.4

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 28,162.8 28,817.0 30,380.0 30,795.6

Assets

Gross Block 31,558.1 35,812.1 37,312.1 38,812.1

Less: Acc Depreciation 10,575.4 11,864.4 13,263.5 14,720.0

Net Block 20,982.7 23,947.7 24,048.6 24,092.0

Capital WIP 2,038.4 0.0 0.0 0.0

Total Fixed Assets 23,021.2 23,947.7 24,048.6 24,092.0

Investments 5,208.8 5,108.1 5,108.1 5,108.1

Inventory 2,751.4 2,426.1 3,271.3 3,358.4

Debtors 1,203.2 1,414.9 1,433.8 1,800.2

Loans and Advances 2,800.5 2,676.0 1,483.1 3,238.5

Other Current Assets 29.4 43.5 36.2 54.3

Cash 200.5 2,251.4 5,145.9 5,311.5

Total Current Assets 6,985.0 8,811.9 11,370.3 13,763.0

Creditors 5,749.1 7,924.1 8,455.8 10,139.6

Provisions 1,303.0 1,126.7 1,691.2 2,027.9

Total Current Liabilities 7,052.1 9,050.7 10,147.0 12,167.5

Net Current Assets -67.1 -238.8 1,223.3 1,595.4

Others Assets 0.0 0.0 0.0 0.0

Application of Funds 28,162.8 28,817.0 30,380.0 30,795.6


Key ratios (Year-end March) FY15 FY16 FY17E* FY18E*

Per share data (|)

EPS 73.4 79.8 100.7 124.6

Cash EPS 114.7 126.8 151.7 177.7

BV 687.2 756.3 867.9 937.7

DPS 9.0 9.5 20.5 25.0

Cash Per Share 7.3 82.0 187.5 193.6

Operating Ratios (%)

EBITDA Margin 17.3 18.3 19.9 20.2

PBT / Total Operating income 12.7 12.9 15.2 16.8

PAT Margin 8.9 9.2 10.6 11.6

Inventory days 41.2 39.8 40.0 41.0

Debtor days 20.0 20.1 20.0 20.0

Creditor days 82.7 105.1 115.0 115.0

Return Ratios (%)

RoE 10.7 10.6 11.6 13.3

RoCE 11.0 12.0 13.9 16.4

RoIC 11.9 12.5 16.3 19.3

Valuation Ratios (x)

P/E 48.3 44.5 35.3 28.5

EV / EBITDA 25.8 22.5 18.1 15.4

EV / Net Sales 4.5 4.1 3.6 3.1

Market Cap / Sales 4.3 4.1 3.7 3.3

Price to Book Value 5.2 4.7 4.1 3.8

Solvency Ratios

Debt/EBITDA 1.7 1.1 0.6 0.3

Debt / Equity 0.3 0.2 0.1 0.1

Current Ratio 1.0 1.0 1.1 1.1

Quick Ratio 1.0 0.7 0.6 0.7



ICICIdirect.com coverage universe (Cement)

CMP M Cap(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E

ACC* 1629 1550 Hold 30,615 31.3 58.4 69.9 25.1 17.2 15.2 160 140 138 6.0 11.7 12.2 7.0 12.1 13.1Ambuja Cement* 264 236 Hold 40,920 5.2 7.5 8.4 25.0 19.4 17.4 164 173 175 7.9 12.2 13.3 7.8 10.8 11.4UltraTech Cem 3550 4000 Buy 97,357 79.8 100.7 124.6 22.5 18.1 15.4 241 225 221 12.0 13.9 16.4 10.6 11.6 13.3Shree Cement 16240 14,800 Buy 56,515 131.4 287.5 609.1 43.8 24.0 14.3 459 352 324 5.3 12.1 24.5 7.4 14.1 23.4Heidelberg Cem 127 105 Hold 2,379 1.7 4.2 6.0 17.2 11.3 9.4 112 109 107 7.1 12.5 14.7 4.3 9.7 12.2India Cement 116 105 Buy 3,564 4.5 7.3 6.2 8.3 7.1 7.2 70 67 65 8.4 9.8 8.7 4.2 5.8 4.7JK Cement 705 625 Hold 4,930 14.5 47.6 60.3 14.5 8.3 7.7 102 97 96 8.8 15.1 15.5 5.9 16.5 17.6JK Lakshmi Cem 416 405 Buy 4,896 0.5 3.6 14.3 24.1 17.6 11.2 131 110 97 3.4 6.1 12.0 0.5 3.2 11.2Mangalam Cem 300 310 Buy 801 0.0 12.3 29.2 32.3 10.1 6.1 58 49 46 1.3 9.6 16.1 NA 6.5 13.4SFCL 115 135 Buy 2,553 4.1 6.1 8.7 8.3 6.9 5.3 176 174 132 12.0 14.4 19.0 12.3 15.7 18.9

RoCE (%) RoE (%)Company

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

*CY15E, CY16E CY17E


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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

UltraTech Cement (ULTCEM) - ICICI Directcontent.icicidirect.com/mailimages/IDirect_UltraTech...UltraTech Cement 6.2 3.0 32.9 8.8 Research Analyst Rashesh Shah [email protected]