cement sector report

RESEARCH & INNOVATION LAB

ROYAL CAPITAL LIMITED

CEMENT SECTOR REPORT

Cement Sector Report

R E S E A R C H & I N N O V A T I O N L A B ( R I L ) K N O W B E F O R E Y O U I N V E S T

Page 1

CEMENT SECTOR OF BANGLADESH

Bangladesh’s economic growth is reflected by an acceleration in urban development, with the

construction of houses, apartment blocks, road infrastructures and public facilities. The country’s

increasing urbanization has stimulated the building materials sector and has generated considerable

needs for cement.

Since the eighties and early nineties the country experienced the establishment of cement industries in

the private sector. Before that, the country had to import almost 95 per cent of the construction materials

including cement from outside of the country. The country experienced huge demand for construction

materials including the cement at the beginning of the 21st century.

Currently, there are more than 125 companies

incorporated as cement manufacturers in Bangladesh

among these, 45 cement manufacturers are in

operation, including 5 multinationals, along with 63

grinding plants all over the country, created a

domestic market of more than 18 million metric tons

a year. Many of these cement factories are fairly

small as 85 per cent of total market share is held by

top ten manufacturers. The Bangladesh cement

industry enjoys the participation of the top four

global cement producers: Lafarge, Holcim, Cemex

and HeidelbergCement. The cement sector of

Bangladesh has been considered as the 40th largest

market in the world.

Out of total production, 73 per cent cement is

consumed in Dhaka & Chittagong divisions and

the rest in other divisions. The Governmental

projects through ADP consume around 43 per

cent of the total cement production. Around 85

per cent of cement is transported by road and the

remainder by barge. Moreover every month on

an average 15,000-20,000 MT of cement is

being exported by the industry.

REVENUE

PEAK FALL NOVEMBER – APRIL MAY - OCTOBER



Page 2

The total installed capacity of cement production of the industries of the

country is about 33-35 million metric tons per year and the effective capacity is

around 25-27 million metric tons per year Most of the cement manufacturing

plants in Bangladesh operate at 60-65 per cent efficiency. On the other hand the

current annual demand for cement in the country is around 18-20 million

metric tons indicating the country has a surplus cement production capacity.

Though there is over-capacity in the sector, the market demand is almost equal

to the effective capacity during peak season. Peak season is considered during

the winter season while demand for cement goes slow during the rainy seasons.

Revenue peaks from November to April while it falls from May to October in

each calendar year. Local cement manufacturing companies needed to import

almost all the raw materials for cement manufacturing from outside of the

country, including clinker, gypsum, fly ash and iron slag etc. Bangladesh

remained as the largest importer of clinker globally in FY 2014. Due to lower

requirement of clinker, the core material, Portland Composite Cement (PCC),

is widely produced around 95 per cent, substituting Ordinary Portland Cement

(OPC) which is 5 per cent of current availability in the industry.

Though in the short run the cement sector’s

capacity is underutilized but it has been

forecasted that the entire capacity might fall short

of supply if the demand increases in line with the

expected big infrastructural public projects of the

country to be implemented in the future.

TOP 10

CEMENT

MANUFAC

-TURERS

HOLD

85% OF

TOTAL

MARKET

SHARE

COUNTRY PER-CAPITA

CONSUMPTION

Bangladesh 105 kg

India 217 kg

Malaysia 570 kg

S. Korea 705 kg

China 1700 kg

Pakistan 265 kg

Sri Lanka 310 kg

World Avg. Above 500 kg



Page 3

CEMENT SECTOR IN DHAKA STOCK EXCHANGE

Monthly Average Sector Capitalization to Average Market Capitalization:

Individual Company's Accumulated Share in Sector Capitalization:

6.33%

6.10%5.96%

5.72%5.72%

6.10%6.03% 5.97%

5.70%

5.33%

4.99%4.83%

JANU FEB MAR APR MAY JUNE JULY AUG SEP OCT NOV DEC

C E ME N T S E C TOR C A P. TO MA R KE T C A P.

ARAMITCEM0.63%

CONFIDCEM2.21%

HEIDELBCEM17.11%

LAFSURCEML68.47%

MEGHNACEM1.34%

MICEMENT6.08%

PREMIERCEM4.16%

INDIVIDUAL COMPANY'S SHARE IN SECTOR CAPITALIZATION

AVERAGE OF JANUARY'15 - DECEMBER'15



Page 4

Individual Company's Month-wise Share in Sector Capitalization:

STOCK AVERAGE JANU FEB MAR APR MAY JUNE JULY AUG SEP OCT NOV DEC

ARAMITCEM 0.63% 0.61% 0.59% 0.55% 0.46% 0.49% 0.45% 0.56% 0.62% 0.76% 0.78% 0.79% 0.88%

CONFIDCEM 2.21% 2.28% 2.32% 2.32% 2.09% 2.16% 1.98% 1.95% 2.07% 2.12% 2.30% 2.41% 2.57%

HEIDELBCEM 17.11% 13.68% 14.49% 14.64% 14.73% 15.42% 16.05% 17.88% 17.26% 18.69% 20.18% 21.46% 20.80%

LAFSURCEML 68.47% 72.81% 72.41% 72.38% 72.31% 70.91% 71.14% 69.21% 69.00% 66.46% 63.02% 61.87% 60.17%

MEGHNACEM 1.34% 1.35% 1.37% 1.35% 1.24% 1.26% 1.29% 1.28% 1.24% 1.37% 1.41% 1.38% 1.56%

MICEMENT 6.08% 5.29% 5.14% 5.16% 5.64% 6.24% 5.87% 5.75% 5.85% 6.12% 6.73% 6.63% 8.54%

PREMIERCEM 4.16% 3.99% 3.69% 3.62% 3.52% 3.52% 3.22% 3.36% 3.96% 4.48% 5.58% 5.46% 5.48%

Please note that,

Gray color indicates Market Capitalization above average and no color indicates Market Capitalization below average.

Cement Sector Return: Cement Sector Risk:


-0.12%-4.13%

-3.04%

-6.57%

10.88%

17.26%

7.79%

-18.97%-18.05%-17.65%

-2.57%-3.78%

-2.88%

0.88%

-4.95%-11.17%

12.75%

-0.02%

4.50%

-0.47%-5.73% -6.06%

0.42% 1.09%

RETURN

CEMENT MARKET


1.80%

1.43%

2.78%

0.89%

1.98%

4.08%

1.98%

2.40% 2.30% 2.26%

1.01%

1.53%

0.79%0.76% 0.74%

0.87%

1.42%

0.80%0.64% 0.51%

0.68%0.67%

0.75%0.54%

RISK

CEMENT MARKET



Page 5

Cement Sector Return to Risk:

Cement sector holds 4.83% share of DSE market

capitalization which has been in downtrend since July. Reason behind the

trend is 35.63% fall the price of LAFSURCEML over the period holding 68.47% of

sector capitalization. Due to seasonality of the sector,

most of the stocks performs better in the first half of

calendar year. Sector return remains in negative zone with higher volatility than

that of the market resulting underperformed relative to

the market. MICEMENT is the most liquid stock in the sector whereas liquidity of

PREMIERCEM and ARAMITCEM is above the

sector average.

Cement Sector Liquidity:

JANU FEB MAR APR MAY JUNE JULY AUG SEP OCT NOV DEC-0.07

-2.89 -1.09

-7.36

5.514.23 3.94

-7.90 -7.85 -7.81

-2.55 -2.47

-3.65

1.16

-6.67

-12.88

8.96

-0.03

7.09

-0.91

-8.37 -9.09

0.562.00

RETURN TO RISK

CEMENT MARKET

ARAMITCEM, 1.21%

CONFIDCEM, 0.16%

HEIDELBCEM, 0.15% MEGHNACEM, 0.34%

MICEMENT, 1.25%

PREMIERCEM, 1.11%

LAFSURCEML, 0.22%

SECTOR, 0.35%

LIQUIDITY



Page 6

FUNDAMENTAL CHARACTERISTICS

Management and Shareholding:

Stock Mkt.

Category

Co. Com.

Op.

Year

End Major Products

Shareholding (%) Management

Dir. Govt. Inst. Fore. Pub.

ARAMIT CEMENT A 1999 31-Dec Ordinary Portland Cement (OPC) and Portland

Composite Cement (PCC)

42.83 0.00 25.75 0.00 31.42 Chairman – S. M. Jamal Ahmed,

MD – Rukhmila Zaman

CONFIDENCE

CEMENT

A 1991 31-Dec Ordinary Cement and CCL Cement 23.47 0.00 29.10 0.00 47.43 Chairman - Engr. Rezaul Karim, MD - Ln. Rupam Kishore Barua

HEIDELBERG

CEMENT BD.

A 1974 31-Dec Ordinary Portland Cement (OPC) and Portland Composite Cement (PCC)

60.67 0.00 23.43 0.00 15.90 Chairman - Dr. Albert Scheuer, MD - Jose Marcelino Ugarte

LAFARGE SURMA

CEMENT

A 1997 31-Dec Clinker, Portland Limestone Cement (PLC) and Portland Composite Cement (PCC)

64.64 0.00 12.67 0.00 22.69 Chairman - Thomas Gerard Farrell, CEO - Tarek Samir Ahmed Elba

MEGHNA CEMENT A 1996 31-Dec Ordinary Portland Cement (OPC) and Portland Composite Cement (PCC)

50.12 0.00 10.42 0.00 39.46 Chairman - Ahmed Akbar Sobhan, MD - Sayem Sobhan

M.I. CEMENT

FACTORY

A 2000 30-Jun Ordinary Portland Cement (OPC) and Portland

Composite Cement (PCC)

67.08 0.00 0.00 0.00 32.92 Chairman - Md. Jahangir Alam,

MD - Al-haj Md. Khabiruddin Molla

PREMIER CEMENT A 2004 30-Jun Ordinary Portland Cement (OPC) and Portland Composite Cement (PCC)

88.62 0.00 7.74 0.00 3.64 Chairman - Mohammad Mustafa Haider , MD - Mohammed Amirul Haque

Financial Health:

Stock SGR ROA ROE NPM NAVPS (A & R)

EPS (A & R)

EPS (Cu) EPS (F) NOCFPS

(A)

PE

(A) PE (Cu) Payout

P Cap

(mn) RS (mn) DE CUR

ARAMITCEM -3.66% 0.88% 3.81% 2.44% 15.49 0.51 0.37 0.47 -11.8 83.53 86.35 196.08% 339.00 101.30 2.00 48.13%

CONFIDCEM 4.44% 5.00% 8.37% 6.58% 64.41 5.32 3.98 7.00 -2.12 17.12 17.17 46.99% 450.00 1,790.20 0.48 66.00%

HEIDELBCEM -13.80% 11.29% 16.83% 11.23% 115.46 20.88 14.97 28.92 29.99 26.77 22.09 181.99% 565.00 5,959.00 0.02 64.13%

LAFSURCEML 13.66% 14.45% 23.21% 24.34% 11.41 2.43 1.48 3.23 3.07 31.07 38.26 41.15% 11,613.70 1,641.80 0.13 117.92%

MEGHNACEM 8.61% 2.49% 12.94% 2.69% 36.1 4.48 3.76 5.32 6.48 24.11 21.54 33.48% 225.00 587.20 3.05 77.00%

MICEMENT 4.06% 6.38% 11.97% 8.44% 38.22 4.54 0.98 4.78 0.81 18.95 21.12 66.08% 1,485.00 1,233.90 0.82 68.63%

PREMIERCEM 5.83% 4.11% 12.20% 5.05% 31.45 3.83 0.81 4.02 3.73 20.13 23.8 52.22% 1,054.50 1,609.60 1.71 41.00%



Page 7

Dividend History:

Stock 2014 2013 2012 2011 2010

ARAMITCEM 10.00% 10.00% 10.00% 10%B 10%B

CONFIDCEM 25.00% 27.50% 20.00% 20%, 20%B 25%, 15%B

HEIDELBCEM 380.00% 380.00% 50.00% 45% 43%

LAFSURCEML 10.00% - - - -

MEGHNACEM 15.00% 15.00% 25.00% 25% 25%

MICEMENT 30.00% 40.00% 35%, 10%B 15%, 35%B n/a

PREMIERCEM 30.00% 40.00% n/a n/a n/a

Please note that,

LAFSURCEML paid 5% interim dividend on May 31, 2015. MICEMENT and PREMIERCEM paid

25% and 20% dividends respectively on June 30, 2015.

Fundamental Review:

Stock Fundamental Review

ARAMITCEM

Long history of business, focusing on Chittagong region, one of the top ten cement manufacturers

in Chittagong, exporting, 22% of total production, its "Camel Brand" cement to Tripura, India,

and abating fundamental strength.

CONFIDCEM First private sector cement manufacturing company in Bangladesh, moderate fundamentals,

especially high NAVPS and low debt equity ratio, with long history of business.

HEIDELBCEM

Strong fundamentals, especially high ROE, NPM and NAVPS, and very low debt equity ratio,

with long history of business, member of HeidelbergCement Group, Germany, reputed brands

“Ruby Cement” and “Scan Cement”, and experienced management team.

LAFSURCEML

One of the largest foreign investments in Bangladesh, strong fundamentals, especially high SGR,

ROE and NPM, with long history of business, member of Lafarge Group, and experienced

management team.

MEGHNACEM

Very low NPM indicating the company following cost leadership strategy but highest debt equity

ratio and low ROA indicating abating fundamental strength, reputed brand "King Brand",

member of Bashundhara Group, and experienced management team.

MICEMENT

Pioneer and the largest cement exporter in Bangladesh, consistent growth in EPS and

comparatively high NAVPS, reputed brands "Crown Cement", and experienced management

team.

PREMIERCEM

Consistent growth in NAVPS and NOCFPS but high debt equity ratio and abating EPS,

manufacture European Standard Cement, export to India and Myanmar and experienced

management team.



Page 8

Concluding Remark:

In stiff competition, the companies with a lower production capacity and low level of

affiliation are likely to remain satisfied with the local market. But the companies with

huge production capacity, multinational origin, and internal and external political linkage

are likely to grab big contracts like Padma Bridge, Metro Lane etc.

Acronyms:

SGR: Sustainable Growth Rate Cu: Current

NOCFPS: Net Operating Cash Flow Per

Share

Co. Com. Op.: Commencement of

Commercial Operation

NPM: Net Profit Margin Dir.: Directors

RS: Reserve & Surplus Govt.: Government

DE: Debt-Equity Inst.: Institutions

A & R: Audited & Restated Fore.: Foreign

P Cap: Paid-up Capital Pub.: Public

CUR: Capacity Utilization Rate

Disclaimer

All data and information contained herein are collected from Annual Reports of the listed cement companies, The Financial Express, The Daily Star, The

Daily Bonik Barta and RIL’s own storage and resources. RIL cannot ensure the accuracy of the data and information except for its own resources. Moreover,

this publication is produced by Research and Innovation Lab at Royal Capital Limited RCL) solely for the information of Clients of RCL. Clients are

expected to make their own investment decisions using any information contained herein. The contained info in the report do not be interpreted as an offer to

sell, or a solicitation of any offer to buy any investment. Projections of potential risk is based on published information but does not guarantee of any actual

risk or return to be materialized.

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