ultratech cement (ultcem) | 4,136static-news.moneycontrol.com/static-mcnews/2017/10/ultra... ·...

October 23, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Operationally sound performance…

UltraTech Cement’s results were broadly in line with our estimates.

While revenues, PAT were in line with our estimate, EBITDA remained

above our estimate mainly due to lower than anticipated raw material

Revenues increased 20.4% YoY to | 6,571.3 crore (vs. I-direct estimate

of | 6,691.9 crore) mainly led by 17.5% YoY increase in volumes to 13.1

MT (vs. I-direct estimate of 13.6 MT) and 2.4% YoY increase in

realisation to | 5,001 (vs. I-direct estimate of | 4,922)

Despite one-time cost due to consolidation of Jaypee and increase in

operating cost, the company was able to keep EBITDA/tonne over

| 1,000/tonne (above I-direct estimate of | 874/tonne)

The board has approved an investment of | 194 crore for putting up 0.4

MT of wall care putty capacity. The plant is expected to be

commissioned during Q2FY20

Cement demand to outpace supply thereby boosting utilisation…

Over FY08-17, utilisation in the cement sector witnessed a decline from 83%

in FY08 to 63% in FY17 mainly due to capacity addition (incremental supply

of 222 MT) outpacing demand (incremental demand of 101 MT). As a result,

industry capacity doubled from 198 MT in FY08 to 420 MT in FY17 vs.

demand, which increased from 164 MT in FY08 to 265 MT in FY17. However,

we expect the demand-supply balance to improve in the next few years with

slower pace of capacity addition and likely improvement in demand

positively impacting utilisation levels. Cement sector utilisation is expected

to improve from 63% in FY17 to 71% in FY19E leading to higher margins for

cement players (driven by operating leverage benefits).

Government’s infra push to drive growth for pan India player like UltraTech

A pick-up in housing on the back of healthy demand from first home buyers,

better monsoons and revival in rural economy will play a key role in driving

cement demand in the next few years. Apart from this, the company will be

a key beneficiary of improving cement demand on account of higher

budgetary allocation towards development of roads & highways along with

government focus on rural development & affordable housing. We expect

cement demand to reach 306 MT by FY19E (i.e. at CAGR of 7.5%) vs. (4.4%

CAGR in last five years). Also, we believe a stable pricing scenario will

positively impact revenues and margins over the next three years.

Synergy benefits from Jaypee acquisition to materialise in long term

The consolidation of 21.2 MT cement assets of Jaiprakash Associates

(Jaypee) will take the company’s total capacity to ~93 MT. This will enable

UltraTech to further strengthen its leadership in India, going forward, with a

market share of over ~22% and become the fourth largest player globally.

We believe the transaction will be cash break even by Q1FY19 and be EPS

accretive by Q1FY20E.

Operational efficiency, market leadership key positives; maintain BUY!

The government’s focus on low cost housing and roads is expected to drive

cement demand in the coming years. In addition, revival in the rural

economy (accounts for 40% of total sales), slowdown in capacity addition

and consolidation in the industry augurs well for UltraTech (a pan India

player). This, coupled with acquisition of Jaypee and capacity expansion at

Madhya Pradesh may result in revenue CAGR of 22.2% in FY17-19E. In

addition, improving realisation and the company’s focus on cost

rationalisation is expected to aid margins. Hence, we maintain our BUY

rating with a target price of | 4,750/share (i.e. at 17.0x FY19E EV/EBITDA).

UltraTech Cement (ULTCEM) | 4,136

Rating matrix

Rating : Buy

Target : | 4750

Target Period : 9-12 months

Potential Upside : 15%

What’s changed?

Target Price Unchanged

EPS FY18E Changed from | 90.8 to 97.0

EPS FY19E Changed from | 130 to |136

Rating Unchanged

Quarterly performance

Q2FY18 Q2FY17 YoY (%) Q1FY18 QoQ (%)

Revenue 6,571.3 5,457.6 20.4 6,626.5 -0.8

EBITDA 1,351.3 1,154.8 17.0 1,560.1 -13.4

EBITDA (%) 20.6 21.2 -60 bps 23.5 -298 bps

PAT 431.2 601.0 -28.3 890.6 -51.6

Key financials

| Crore FY16 FY17 FY18E FY19E

Net Sales 23708.8 23891.4 28952.5 35651.7

EBITDA 4626.6 4969.0 6148.4 8301.2

Net Profit 2370.2 2627.7 2660.7 3732.5

EPS (|) 86.4 95.8 97.0 136.0

Valuation summary

FY16 FY17 FY18E FY19E

PE (x) 47.7 43.0 42.5 30.3

EV to EBITDA (x) 25.2 22.5 20.7 15.2

EV/Tonne(US$) 287 260 229 219

Price to book (x) 5.4 4.8 4.4 4.0

RoNW (%) 11.3 11.1 10.4 13.2

RoCE (%) 11.7 12.4 10.2 13.4

Stock data

Amount

Mcap | 113025 crore

Consolidated Debt (FY17) | 20470 crore

Cash & Invest (FY17) | 8345 crore

EV | 125150 crore

52 week H/L | 4531 / | 3052

Equity cap | 274.2 crore

Face value | 10

Particular

Price performance

1M 3M 6M 12M

ACC -1.7 2.0 19.8 9.1

Ambuja Cement -1.6 6.8 14.1 10.6

Shree Cement 0.9 1.2 6.3 10.6

UltraTech Cement -4.9 -5.2 -0.4 -0.8

Ramco Cement -8.3 -3.3 2.0 4.1

Research Analyst

Rashesh Shah

[email protected]

Devang Bhatt

[email protected]

mailto:[email protected]


g with a target price of | 4,750/share (i.e. at 17.5x FY19E EV/EBITDA).

Variance analysis

Q2FY18 Q2FY18E Q2FY17 YoY (%) Q1FY18 QoQ (%) Comments

Net Sales 6,571.3 6,691.9 5,457.6 20.4 6,626.5 -0.8

The increase in revenues was driven by rise in volumes (due to acquisition of

Jaypee)

Other Incomes 168.0 233.5 172.5 -2.6 165.2 1.7

Raw Material Expenses 915.3 983.0 860.9 6.3 954.7 -4.1

The rise in RM cost was mainly led by higher slag prices and higher additive usage

partly offset by improved clinker to cement conversion (up 2.0% YoY)

Employee Expenses 444.0 441.9 357.2 24.3 380.3 16.8

Power and fuel 1,334.8 1,271.2 879.7 51.7 1,217.4 9.6

The increase in power & fuel cost was mainly due to higher pet coke prices (up

70.0% YoY to US$95/t), partly offset by enhanced WHRMS share (up 8.0% YoY) and

higher usage of alternative fuels (up from 2.0% to 3.0% in Q2FY18)

Freight 1,555.3 1,665.5 1,274.9 22.0 1,588.0 -2.1

Rise in diesel prices (up 7.0% YoY) and changes in sales pattern (from ex-works to

FOR post-GST) led to higher freight cost during the quarter

Others 970.7 1,142.0 930.1 4.4 926.1 4.8

EBITDA 1,351.3 1,188.4 1,154.8 17.0 1,560.1 -13.4

EBITDA Margin (%) 20.6 17.8 21.2 -60 bps 23.5 -298 bps

Despite high power and freight cost EBITDA margins remained better than our

estimates

Depreciation 498.8 402.9 313.9 58.9 309.8 61.0

Interest 375.9 435.7 136.7 175.0 128.5 192.5

PBT 644.7 583.3 876.7 -26.5 1,287.0 -49.9

Total Tax 213.5 145.8 275.7 -22.6 396.3 -46.1

PAT 431.2 437.5 601.0 -28.3 890.6 -51.6 Rise in interest and depreciation expenses led to decline in PAT

Key Metrics

Volume (MT) 13.14 13.60 11.18 17.5 13.20 -0.5 Consolidation of Jaypee led to increase in volumes during the quarter

Realisation (|) 5,001 4,922 4,882 2.4 5,020 -0.4 Healthy pricing in company's key markets helped in registering better realisation

EBITDA per Tonne (|) 1,028 874 1,033 -0.4 1,182 -13.0 EBITDA/t was flat during the quarter mainly due to operational efficiency

Source: Company, ICICIdirect.com Research

Change in estimates

FY19E

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

Revenue 29,081.0 28,952.5 -0.4 35,166.9 35,651.7 1.4

We expect revenues to increase at a CAGR of 22.2% over FY17-

19E led by Jaypee acquisition and healthy demand environment

EBITDA 5,912.1 6,148.4 4.0 8,107.7 8,301.2 2.4

EBITDA Margin (%) 20.3 21.2 91 bps 23.1 23.3 23 bps

We believe operational efficiency and ramp up in Jaypee assets

will boost margins

PAT 2,490.3 2,660.7 6.8 3,567.3 3,732.5 4.6

EPS (|) 90.8 97.0 6.8 130.0 136.0 4.6

FY18E

Source: Company, ICICIdirect.com Research, * We have incorporated financials of Jaypee hence previous estimates are not comparable

Assumptions

Comments

FY14 FY15 FY16 FY17 FY18E FY19E FY18E FY19E

Volume (MT) 42.6 45.3 48.4 48.9 57.6 68.6 58.7 68.5

We expect volumes to increase at a CAGR of 18.4% over FY17-19E

led by Jaypee acquisition and higher infra spend

Realisation (|) 4,713 4,995 4,894 4,883 5,024 5,198 4,953 5,131

EBITDA per Tonne (|) 849 863 952 1,015 1,067 1,210 1,007 1,183

We expect EBITDA/t to continue to remain robust over the coming

years

EarlierCurrent



Annual Report Analysis

The company’s domestic cement capacity during the year increased

2.0% YoY to 66.3 MT. However, capacity utilisation declined from

76.0% to 72.0% mainly led by miniscule increase in volumes (from 47.6

MT in FY16 to 47.9 MT in FY17) and a higher capacity base

Going forward, the company intends to set up 3.5 MT capacity in Dhar,

Madhya Pradesh at a cost of | 2600 crores. Capacity is expected to be

operational by Q4FY19. Apart from organic growth, acquisition of 21.2

MT capacity of Jaiprakash Associate will take total domestic capacity to

~93 MT enabling UltraTech to maintain its leadership position

In FY17, the company undertook various cost saving measures, which

led to 1.9% YoY decline in cost/tonne. In terms of power & fuel cost the

company reported a decline of 8.3% YoY mainly due to increase in the

usage of petcoke (from 70.0% in FY16 to 74.0% in FY17), industrial

waste and efficiency improvements. Besides petcoke, increase in share

of waste heat recovery to 7% of the total power requirement of the

company led to reduced consumption of coal and petcoke (by ~0.25

MT). In addition, logistic cost/t declined 2.5% YoY mainly led by

reduction in the average lead distance, improved utilisation of new

cement grinding capacities, rationalisation of road freight rates and

increased coastal movement. However, employee cost increased 5.2%

YoY due to annual increments and commissioning of new plants

Finance cost during the year increased by | 59 crore to | 571 crore

mainly led by provision for interest on entry tax pertaining to earlier

years and lower benefit of interest subsidy due to the completion of the

government grant period

Cash from operations of the company increased 11.5% YoY mainly led

by higher margins and a reduction in working capital requirement.

Inventory days of the company declined from 40 days to 36 days mainly

due to a reduction in inventory of stores and spares

During the year, the company incurred a capex of ~| 1,200 crore for

completion of new grinding capacity commissioned during the year and

meeting regulatory requirements, plant upkeep & improving efficiencies.

For FY18E, the company plans to incur capex of | 2,200 crore for

capacity expansion projects, regulatory requirements and plant

infrastructure

Exhibit 1: Fuel mix trend

Fuel mix FY12 FY13 FY14 FY15 FY16 FY17

Petcoke (%) 26 38 48 52 70 74

Imported coal (%) 44 35 26 26 20 14

Indigenous coal and others (%) 30 27 26 22 10 12

Total 100 100 100 100 100 100


Exhibit 2: Transport mix trend

Transport mix FY12 FY13 FY14 FY15 FY16 FY17

Rail (%) 36 34 34 29 28 25

Road (%) 61 63 63 67 69 72

Sea (%) 3 3 3 4 3 4

Total 100 100 100 100 100 100


WHRMS capacity and share

10.5

33.2

59 59

0

20

40

60

80

FY14 FY15 FY16 FY17

0

2

4

6

8

WHRMS capacity WHRMS share


Improving industry dynamics indicate long term up cycle in cement

Exhibit 3: Demand supply scenario

198216

276304

319

357 368392

409 420 424 430

306

164178

203214

229241

247255

264 265 284

0

100

200

300

400

500

FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18E FY19E

0

20

40

60

80

100

Capacity Demand Utilisation (%)

Source: ICICIdirect.com Research

Demand expected to register strong growth in FY17-19E

The company has indicated that demand will improve in the south mainly

led by an improvement in infrastructure, irrigation especially in Andhra

Pradesh, Telangana and Amaravati. Further, the western region is expected

to witness healthy growth led by a pick-up in demand from Mumbai (mainly

led by metro projects and coastal roads). In addition, demand in the north is

expected to be driven by higher infra spends. However, demand in the

urban region is expected to remain subdued due to RERA compliance and

high unsold inventory.

Key takeaways in Q2FY18 from conference call

Demand in Q2FY18 was impacted by RERA, floods and sand mining

ban in UP, Bihar, Tamil Nadu and Maharashtra. Sand availability is

expected to improve from October 2017 in Bihar due to opening of

some pits while the company is hopeful that sand availability will

improve in the rest of India in October 2017

The capacity utilisation region wise was North 70%, West 60%, East

70%, South 50% and Central 50%

The company expects to ramp up Jaypee capacity utilisation to 60%

by Q1FY19. The company has re-branded Jaypee Cement to

UltraTech Cement in key markets. Jaypee Super plant - 2.3 MT

clinker capacity and 4 MT cement capacity at Bara are expected to

be commissioned by September 2019

Pet coke prices have increased to US$105/t from US$95/t in Q2FY18.

The company indicated that switching to domestic coal in some

plants has now become more lucrative

The company generates 40% of its revenues from rural areas

In terms of transport mix, 74.0% was through road, 23.0% was via

rail and the rest through sea

In terms of fuel mix, pet coke accounts for 76.0% of the overall fuel

mix while industrial waste is 3.0%, imported coal is 11.0% and

others is 11.0%

The company optimised lead distance by 3.0% YoY and reduced

power consumption by 5.0% YoY

Low cost housing is a key driver of cement growth in coming years


Exhibit 4: Region-wise demand trend


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 ~74/kwh.

Further, the company is taking various cost saving initiatives like increasing

WHRMS capacity (from 59 MW to 68 MW), increased usage of pet coke,

which will further help lower power cost. Apart from this, the company has

set up various grinding units, which will help reduce freight cost. Further,

higher utilisation of grinding unit will further aid margins.

Exhibit 5: Gradual reduction in power requirement

Power mix FY12 FY13 FY14 FY15 FY16 FY17

TPP 78.0 79.0 81.0 82.0 82.0 80.0

WHRS 0.4 0.3 0.3 2.0 5.0 7.0

Others 22.0 21.0 19.0 16.0 13.0 13.0

Total 100.4 100.3 100.3 100.0 100.0 100.0

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

Exhibit 6: Higher EBITDA/tonne vis-à-vis peer group

882

832

894 1,0

12

1,0

78

978

982

931

1,1

82

662

687

673 800 9

61

830

743

727

972

-

200

400

600

800

1,000

1,200

1,400

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

EB

ITD

A/tonne (

|)

Ultratech Industry


Peer set includes ACC, Ambuja, Shree Cement and India Cement


Expect revenue CAGR of 22.2% during FY17-19E

Revenues have grown at a CAGR of 5.6% in FY12-17 mainly led by moderate

growth in volumes of 3.3% CAGR and realisation growth of 2.2% CAGR in

FY12-17. However, in FY17-19E, we expect volume CAGR of 18.4% in FY17-

19E mainly led by higher infra spend by the government and acquisition of

Jaypee Assets. Further, we expect realisation to increase at 3.2% CAGR in

FY17-19E led by a pick-up in demand. Consequently, revenues are expected

to grow at 22.2% CAGR in the next two years.

Exhibit 7: Expect volume led revenue CAGR of 21.3% in FY17-19E

20021 20078

2265223709 23891

28952

35652

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Sales (| crore)


Exhibit 8: Capacity addition plans (standalone)

Unit Grey Cement

Opening FY16 66.3

Additions Q1FY17 Bihar 1.6

Q2FY17 Jaypee 21.2

Q4FY19 Dhar, MP 3.5

Closing FY20 92.6


Exhibit 9: Volume to grow at CAGR of 18.4% in FY17-19E

42.645.3

48.4 48.9

57.6

68.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

FY14 FY15 FY16 FY17 FY18E FY19E

Sales Volumes


Exhibit 10: Realisation to pick up led by uptick in demand

4713

4995

4894 4883

5024

5198

4400

4500

4600

4700

4800

4900

5000

5100

5200

5300

FY14 FY15 FY16 FY17 FY18E FY19E

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

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


Exhibit 11: Volume was flat in Q2FY18…

12.4

11.1

11.6

13.6

13.2

11.211.3

13.7

13.2 13.1

0

2

4

6

8

10

12

14

16

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Million T

onne

Sales Volume


Exhibit 12: Quarterly realisation trend

4984

4872

4708

4719

4882

4946

4801 5

020

5001

4000

4250

4500

4750

5000

5250

5500

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

(|

)

Realisation



Margins to improve led by operating efficiency

Going forward, cost/tonne is expected to increase led by acquisition of

Jaypee Cement. However, a pick-up in demand, improving utilisation and

EBITDA/tonne at Jaypee in coming quarters will lead to an improvement in

margins in FY19E.

Exhibit 13: Expect EBITDA/tonne of | 1,183 in FY19E

1084

849 863952

10151067

1210

0

200

400

600

800

1000

1200

1400


EBITDA/Tonne


Exhibit 14: Margins to improve led by improvement in realisations

22.6

18.017.3

19.5

20.821.2

23.3

10.0

15.0

20.0

25.0

30.0


EBITDA Margin (%)


Exhibit 15: Q2FY18 EBITDA per tonne at | 1,028/t

832894

10121078

1033982

931

1182

1028

0

200

400

600

800

1000

1200

1400

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

| p

er t

onne


Exhibit 16: Quarterly margin trend

16.718.3

21.5 22.8 21.2

19.9

19.4 23.5

20.6

0

5

10

15

20

25

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

(%

)

EBITDA Margin


Expect net profit CAGR of 16.3% during FY17-19E

In FY18E, we expect a dip in net margins mainly due to higher interest and

depreciation expenses (mainly led by acquisition of Jaypee). However, we

expect margins to improve in FY19E led by higher utilisation at Jaypee and a

better operational performance.

Exhibit 17: Profitability trend

2370.22655.6

2144.52014.7

2627.72660.7

3732.513.3

10.7

8.9 10.0

11.0

9.2

10.5

0

1000

2000

3000

4000

FY13 FY14 FY15 FY16 FY17E FY18E FY19E

| c

rore

0.0

5.0

10.0

15.0

(%

)

Net profit - LS Net profit margin -RS



Outlook and valuation

We believe the industry’s capacity utilisation bottomed at ~64% in FY17.

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 FY17-19E to reach 311 MT by FY19E (i.e.

at CAGR of 7.5%) vs. (CAGR of 4.7% over last five years). The company

expects government infra spends to gain momentum, especially on

construction of concrete roads and creation of new capital city of Amaravati

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. Hence, we

continue to maintain our positive view on the stock with a BUY

recommendation and a target price of | 4,750/share (i.e. at 17.0x FY19E

EV/EBITDA).

Exhibit 18: Key assumptions

| per tonne FY15 FY16 FY17 FY18E FY19E

Sales Volume* 45 48 49 58 69

Net Realisation* 4995 4894 4883 5024 5198

Total Expenditure 4132 3939 3867 3957 3987

Raw material 785 820 822 717 720

Power & Fuel 1046 875 802 1010 1030

Freight 1190 1225 1195 1188 1192

Employees 269 277 289 315 315

Others 842 741 759 727 730

EBITDA per Tonne 863 952 1015 1067 1210

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


Exhibit 19: One year forward EV/EBITDA

10000

30000

50000

70000

90000

110000

130000

Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

(|

Crore)

EV 21.5x 18.5x 16.5x 14.5x 10.5x


Exhibit 20: One year forward EV/Tonne

0

5000

10000

15000

20000

25000

Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Million $

EV $270 $225 $175 $125 $80


Exhibit 21: Valuation

Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) ($) (x) (%) (%)

FY15 22651.5 12.8 73.4 -6.1 56.1 310 30.1 10.7 10.6

FY16 23708.8 4.7 86.4 17.6 47.7 287 25.2 11.3 11.7

FY17 23891.4 0.8 96.3 11.4 43.0 260 22.5 11.1 12.4

FY18E 28952.5 22.1 97.0 0.7 42.5 229 20.7 10.4 10.2

FY19E 35651.7 49.2 136.0 40.3 30.3 219 15.2 13.2 13.4



Recommendation History vs Consensus Estimates

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Oct-17Sep-17Jul-17Jun-17Apr-17Mar-17Jan-17Dec-16Oct-16Sep-16Aug-16Jun-16May-16

(|

)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

(%

)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events

Date Event

Sep-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 MTPA

Jun-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.

Jan-17 The board approves setting up of 3.5 mt integrated plant at Dhar, Madhya Pradesh and is expected to be operational by Q4FY19

Jun-17 Completion of acquisition of Jaypee assets (~21.2 MT)


Top 10 Shareholders Shareholding Pattern

Rank Name Last filing date % O/S Position (m) Change (m)

1 Aditya Birla Group 30-Sep-17 60.2 165.3 0.00

2 Life Insurance Corporation of India 30-Sep-17 2.20 6.04 0.00

3 Aberdeen Asset Management (Asia) Ltd. 31-Aug-17 1.66 4.55 0.00

4 OppenheimerFunds, Inc. 31-Aug-17 1.63 4.47 (0.00)

5 Aberdeen Asset Managers Ltd. 31-Aug-17 1.17 3.20 (0.04)

6 Capital World Investors 30-Sep-17 1.03 2.84 (0.91)

7 Capital Research Global Investors 30-Sep-17 1.03 2.84 (0.91)

8 The Vanguard Group, Inc. 31-Aug-17 1.02 2.81 0.06

9 Franklin Advisers, Inc. 31-Aug-17 0.98 2.68 0.00

10 BlackRock Institutional Trust Company, N.A. 30-Sep-17 0.95 2.60 (0.02)

(in %) Sep-16 Dec-16 Mar-17 Jun-17 Sep-17

Promoter 62.26 62.26 62.16 62.14 62.13

FII 20.61 20.83 21.87 21.89 22.14

DII 6.06 6.27 5.51 5.53 5.55

Others 11.07 10.64 10.36 10.44 10.18

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor Name Value Shares Investor Name Value Shares

Trapti Trading & Investments Pvt. Ltd. 43.41 0.67 Capital World Investors -53.80 -0.91

Fidelity Management & Research Company 16.21 0.26 Capital Research Global Investors -53.80 -0.91

The Vanguard Group, Inc. 4.04 0.06 Lyxor Asset Management -20.22 -0.31

HSBC Global Asset Management (Hong Kong) Limited 1.90 0.03 Amundi Asset Management -9.19 -0.15

Reliance Nippon Life Asset Management Limited 1.44 0.02 Morgan Stanley Investment Management Inc. (US) -5.67 -0.09

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17 FY18E FY19E

Total operating Income 23,708.8 23,891.4 28,952.5 35,651.7

Growth (%) 4.7 0.8 21.2 23.1

Raw material cost 3972.8 4024.5 4131.8 4938.5

Power & Fuel cost 4240.8 3926.6 5821.3 7064.8

Freight cost 5934.9 5845.2 6846.0 8176.0

Employees cost 1343.0 1413.4 1818.0 2164.0

Others 3590.7 3712.8 4186.8 5007.1

Total Operating Exp. 19,082.2 18,922.5 22,804.1 27,350.5

EBITDA 4,626.6 4,969.0 6,148.4 8,301.2

Growth (%) 18.2 7.4 23.7 35.0

Depreciation 1,297.0 1,267.9 1,663.0 2,022.2

Interest 511.7 571.4 1,256.0 1,498.6

Other Income 480.7 660.0 704.0 741.0

PBT 3,298.6 3,789.6 3,933.4 5,521.4

Total Tax 928.4 1148.2 1272.6 1788.9

PAT 2,370.2 2,641.4 2,660.7 3,732.5

Growth (%) 17.6 11.4 0.7 40.3

Adjusted EPS (|) 86.4 96.3 97.0 136.0


Cash flow statement | Crore


Profit after Tax 2,370.2 2,627.7 2,660.7 3,732.5

Add: Depreciation 1,297.0 1,267.9 1,663.0 2,022.2

(Inc)/dec in Current Assets 224.0 1,016.0 -2,153.7 -482.7

Inc/(dec) in CL and Provisions 70.6 -490.8 2,766.5 -526.6

CF from operating activities 3,961.8 4,420.7 4,936.5 4,745.4

(Inc)/dec in Investments 495.4 -3,378.3 2,500.0 0.0

(Inc)/dec in Fixed Assets -2,379.0 -1,274.9 -19,663.0 -2,621.6

Others 435.4 111.2 0.0 0.0

CF from investing activities -1,448.3 -4,542.0 -17,163.0 -2,621.6

Issue/(Buy back) of Equity 0.0 0.1 0.0 0.0

Inc/(dec) in loan funds 252.7 -1,396.3 12,230.0 0.0

Dividend paid & dividend tax -313.8 -320.9 -802.6 -866.8

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

Others -23.1 422.2 0.0 0.0

CF from financing activities -84.1 -1,294.9 11,427.4 -866.8

Net Cash flow 2,034.7 -338.3 -799.1 1,257.0

Opening Cash 200.5 2,235.2 1,896.9 1,097.8

Closing Cash 2,235.2 1,896.9 1,097.8 2,354.7


Balance sheet | Crore


Liabilities

Equity Capital 274.4 274.5 274.5 274.5

Reserve and Surplus 20,616.5 23,345.6 25,203.7 28,069.3

Total Shareholders funds 20,890.9 23,620.1 25,478.2 28,343.8

Total Debt 7,667.9 6,271.6 18,501.6 18,501.6

Deferred Tax Liability 3,227.4 3,338.6 3,338.6 3,338.6

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 31,786.2 33,230.3 47,318.4 50,184.0

Assets

Gross Block 34,551.9 36,364.0 56,027.0 59,527.0

Less: Acc Depreciation 11,864.4 13,132.3 14,795.3 16,817.5

Net Block 22,687.6 23,231.7 41,231.7 42,709.5

Capital WIP 1,415.6 878.4 878.4 0.0

Total Fixed Assets 24,103.1 24,110.1 42,110.1 42,709.5

Investments 5,108.1 7,408.7 4,908.7 4,908.7

Inventory 2,426.1 2,225.0 3,406.9 3,528.1

Debtors 1,414.9 1,276.2 1,991.9 2,032.4

Loans and Advances 2,676.0 643.9 803.7 907.6

Other Current Assets 43.5 1,399.5 1,495.8 1,712.9

Cash 2,235.2 1,896.9 1,097.8 2,354.7

Total Current Assets 8,795.7 7,441.4 8,796.0 10,535.6

Creditors 5,094.1 1,713.8 6,535.7 3,622.6

Provisions 1,126.7 4,016.1 1,960.7 4,347.2

Total Current Liabilities 6,220.7 5,729.9 8,496.4 7,969.8

Net Current Assets 2,574.9 1,711.5 299.6 2,565.9

Others Assets 0.0 0.0 0.0 0.0

Application of Funds 31,786.2 33,230.3 47,318.4 50,184.0


Key ratios


Per share data (|)

EPS 86.4 96.3 97.0 136.0

Cash EPS 133.6 142.0 157.6 209.7

BV 761.3 860.8 928.5 1,032.9

DPS 9.5 10.0 25.0 27.0

Cash Per Share 81.5 69.1 40.0 85.8

Operating Ratios (%)

EBITDA Margin 19.5 20.8 21.2 23.3

PBT / Total Operating income 13.9 15.8 13.6 15.5

PAT Margin 10.0 11.0 9.2 10.5

Inventory days 39.9 35.5 35.5 35.5

Debtor days 20.2 20.6 20.6 20.6

Creditor days 76.5 52.0 52.0 52.0

Return Ratios (%)

RoE 11.3 11.1 10.4 13.2

RoCE 11.7 12.4 10.2 13.4

RoIC 12.8 14.8 10.6 14.0

Valuation Ratios (x)

P/E 47.7 43.0 42.5 30.3

EV / EBITDA 25.2 22.5 20.7 15.2

EV / Net Sales 4.9 4.7 4.4 3.5

Market Cap / Sales 4.8 4.7 3.9 3.2

Price to Book Value 5.4 4.8 4.4 4.0

Solvency Ratios

Debt/EBITDA 1.7 1.3 3.0 2.2

Debt / Equity 0.4 0.3 0.7 0.7

Current Ratio 1.4 1.3 1.0 1.3

Quick Ratio 1.1 1.0 0.9 1.0



ICICIdirect.com coverage universe (Cement)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

ACC* 1,776 2100 Buy 33,378 40.2 60.3 71.1 24.0 17.7 14.9 171 149 148 11.3 16.1 17.2 8.7 12.0 12.9

Ambuja Cement* 280 305 Buy 55,797 4.9 5.2 6.9 24.0 21.9 16.1 197 184 184 3.8 5.0 8.1 5.1 5.3 6.8

UltraTech Cem 4,136 4750 Buy 113,492 96.3 97.0 136.0 22.6 20.8 15.3 260 229 219 12.4 10.2 13.4 11.1 10.4 13.2

Shree Cement 18,270 19700 Hold 63,580 384.8 442.6 576.3 25.8 22.6 16.8 370 356 285 12.3 14.1 16.9 17.4 16.9 18.4

Heidelberg Cem 121 140 Hold 2,742 3.4 3.8 6.0 14.4 13.5 10.3 111 107 103 8.2 8.5 12.7 7.9 8.5 13.2

India Cement 180 232 Buy 5,530 5.4 7.8 10.1 9.8 8.6 8.1 91 88 85 7.5 8.3 8.7 3.3 4.5 5.6

JK Cement 960 1265 Buy 6,713 37.1 44.7 53.3 13.9 11.9 10.2 123 114 112 12.6 13.9 15.7 14.5 14.4 15.1

JK Lakshmi Cem 408 495 Hold 4,802 7.0 9.6 20.0 17.5 13.6 9.6 92 82 75 7.5 9.5 14.1 5.9 7.7 13.8

Mangalam Cem 361 425 Buy 964 12.9 11.7 38.2 11.6 10.6 5.6 55 52 50 10.2 10.3 20.0 6.8 5.9 16.3

Star Cement 106 135 Hold 5,393 4.1 6.2 5.7 14.8 11.1 11.1 215 209 194 13.8 18.3 16.8 14.0 18.1 14.8

Ramco Cement694 822 Buy 16,523 27.3 25.9 30.1 15.1 15.3 13.3 179.9 182.2 169.6 12.7 11.2 12.0 17.4 15.2 15.6

RoCE (%) RoE (%)

Company

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

*CY16, CY17E CY18E



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]


ANALYST CERTIFICATION

We /I, Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately

reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this

report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities

Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has

its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which

are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking

and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts

and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and

meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without

prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.

Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended

temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this

company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This

report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their

receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific

circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate

the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any

loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the

risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to

change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment

in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in

respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned

in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any

compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts

and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding

twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month

preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject

company/companies mentioned in this report.

It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities

described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and

to observe such restriction.

ultratech cement (ultcem) | 4,136static-news.moneycontrol.com/static-mcnews/2017/10/ultra... ·...

Documents