acc (acc) | 1,562 -...

April 24, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Operationally good performance…

ACC’s Q1CY17 numbers were above our estimates due to a higher-

than-expected topline. The beat on the topline was led by 3.8% YoY

increase in volumes to 6.6 MT, which came in as a positive surprise

against 15.0% YoY decline in pan-India production volumes in the

first two months of CY17 as per core industry data

Revenues increased 7.9% YoY to | 3,099.7 crore (above I-direct

estimate of | 2,631.7 crore) led by 3.8% YoY increase in volumes to

6.6 MT (above I-direct estimate of 5.6 MT) due to commissioning of

the Jamul plant and 4.0% YoY increase in realisation to | 4,696/tonne

(vs. I-direct estimate of | 4,718/tonne)

EBITDA margin declined 213 bps YoY to 11.0% (vs. I-direct estimate

of 7.2%) due to higher freight (up 13.4% YoY) and power & fuel cost

(up 14.1% YoY). EBITDA/tonne declined 12.8% YoY to | 519/t (better

than our estimate of | 338/t due to operating leverage benefit)

Expansion in east, improving government demand to boost growth

Over the past few years, ACC has reported subdued volume growth

(1.3% CAGR in CY10-16) led by a poor macro environment and absence

of new capacity addition. However, going forward, we expect cement

demand to improve on the back of higher infra spend by the government

especially in roads and housing. Consequently, cement demand is

expected to reach 323 MT by FY19E (i.e. at 7.0% CAGR) vs. (5.4% CAGR

in last five years). Apart from improving macro demand, the company’s

expansion in the eastern region by ~5 MT is expected to drive volumes

over the next few years (13.7% CAGR in CY16-18E).

ACC acquisition by Ambuja to drive cost synergies…

The acquisition of ACC by Ambuja is expected to reduce cost through

consolidation of shared services (like finance, HR and marketing) vendor

consolidation and swapping of plants (to reduce lead distance). The

proposed restructuring is expected to result in synergy benefits of ~| 900

crore resulting in long term benefits for ACC and Ambuja. We expect the

benefits of synergies to start flowing in from CY17E.

…cost rationalisation to further improve margins

ACC has one of the oldest manufacturing plants in the industry, resulting

in higher operating costs for the company. However, ACC is taking steps

to rationalise cost by increasing usage of low cost fuels. Similarly, usage

of alternative fuel is expected to rise from the current 3% to 5% over the

next 12 months. The company is also focusing on increasing the volume

of premium products and higher ex factory sales to reduce lead distance,

resulting in higher margins.

Improving fundamentals; maintain BUY

Cement demand is expected to improve over the next few years led by a

revival in the rural economy and increased infrastructure spends by the

government. Apart from improving macro, capacity expansion of 5 MT

(i.e. 16% of capacity) is expected to result in 13.7% CAGR in revenues in

CY16-18E. Further, cost control initiatives such as use of alternative fuels,

better sales mix and reduction of employees is expected to help ACC in

margin expansion, going forward. We expect the OPM to improve from

11.0% to 13.9%in CY18E. Further, ACC is trading at an EV/tonne of $130,

far below the replacement cost of $150.Hence, we maintain our BUY

rating with a revised target price of | 1,850/share (i.e. valuing the stock at

CY18E EV/tonne of $150/tonne on CY18E capacity of 35 MT).

Rating matrix

Rating : Buy

Target : | 1850

Target Period : 12-15 months

Potential Upside : 18%

What’s Changed?

Target Changed from | 1680 to | 1850

EPS CY17E Changed from | 61.2 to | 63.7

EPS CY18E Changed from | 65.2 to | 67.5

Rating Unchanged

Quarterly Performance

Q1CY17 Q1CY16 YoY (%) Q4CY16 QoQ (%)

Revenue 3,099.7 2,872.7 7.9 2,634.6 17.7

EBITDA 342.4 378.6 -9.5 224.5 52.5

EBITDA (%) 11.0 13.2 -213 bps 8.5 253 bps

PAT 211.1 231.7 -8.9 129.5 63.0

Key Financials

| Crore CY15 CY16 CY17E CY18E

Net Sales 11432.8 10945.6 13447.5 14640.0

EBITDA 1173.0 1266.3 1849.8 2040.8

PAT 587.6 668.6 1196.6 1269.1

EPS (|) 31.3 35.6 63.7 67.5

Valuation summary

CY15 CY16 CY17E CY18E

PE (x) 39.0 41.5 24.5 23.1

Target PE (x) 59.2 52.0 29.1 27.4

EV to EBITDA (x) 24.0 22.3 14.9 13.1

EV/Tonne(US$) 153 153 131 128

Price to book (x) 3.5 3.4 3.1 2.9

RoNW (%) 7.0 7.7 12.7 12.4

RoCE (%) 6.0 6.9 11.4 11.5

Stock data

Amount

Mcap | 29350 crore

Debt (CY16) | 740 crore

Cash & Invest (CY16) | 1877 crore

EV | 28213 crore

52 week H/L | 1738 / 1257

Equity cap | 187.8 crore

Face value | 10

Particular

Price performance (%)

1M 3M 6M 12M

ACC 7.3 13.9 -6.1 3.0

Ambuja Cement 2.9 10.7 -4.7 6.6

Shree Cement 9.2 13.7 1.6 35.5

UltraTech Cement 0.2 15.4 0.0 19.0

ACC (ACC) | 1,562

Research Analyst

Rashesh Shah

[email protected]

Devang Bhatt

[email protected]

mailto:[email protected]


Variance analysis

Q1CY17 Q1CY17E Q1CY16 YoY (%) Q4CY16 QoQ (%) Comments

Net Sales 3,099.7 2,631.7 2,872.7 7.9 2,634.6 17.7

The increase in revenues was mainly due to 3.8% YoY increase in volumes and 4.0%

YoY increase in realisation

Other Incomes 106.5 125.0 105.9 0.5 93.9 13.4

Raw Material Expenses 460.7 412.8 436.8 5.5 379.8 21.3

Employee Expenses 195.8 212.0 182.8 7.1 200.0 -2.1

Change in stock 4.2 0.0 8.3 -49.1 15.8 NM

Power and fuel 648.3 566.2 568.0 14.1 532.4 21.8

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

consumption increased from 48.0% in Q1CY16 to 65.0% in Q1CY17)

Freight 826.4 638.7 728.5 13.4 663.3 24.6

Higher lead distance to procure fly ash and hike in diesel prices led to increase in

freight cost

Others 621.9 613.6 569.9 9.1 618.8 0.5

Rise in packaging cost and higher maintenance cost for klin shutdown led to rise in

other expenses

EBITDA 342.4 188.5 378.6 -9.5 224.5 52.5

EBITDA Margin (%) 11.0 7.2 13.2 -213 bps 8.5 253 bps Increase in power & fuel cost and freight expenses led to lower margins

Interest 24.2 17.6 18.0 35.0 19.8 22.5

Depreciation 165.9 159.0 144.4 14.9 168.8 -1.7 The increase in depreciation was due to commissioning of Jamul plant

PBT 258.8 136.9 322.1 -19.7 129.8 99.4

Total Tax 49.8 41.1 94.4 -47.3 5.0 897.4

Adjusted PAT 211.1 99.3 231.7 -8.9 129.5 63.0 The decline in PAT was mainly due to higher depreciation expenses

Key Metrics

Volume (MT) 6.6 5.6 6.4 3.8 5.5 21.1 Volumes improved due to commissioning of Jamul Plant

Realisation (|) 4,696 4,718 4,517 4.0 4,834 -2.8 Better pricing scenario in north and central led to higher realisation

EBITDA per Tonne (|) 519 338 595 -12.8 412 25.9 EBITDA/tonne declined due to higher power & fuel cost/tonne

Source: Company, ICICIdirect.com Research

Change in estimates

CY17E CY18E

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

Revenue 13,122.9 13,447.5 2.5 14,286.9 14,640.0 2.5 Revenues to improve led by capacity expansion

EBITDA 1,777.0 1,849.8 4.1 1,955.2 2,040.8 4.4

EBITDA Margin (%) 13.5 13.8 21 bps 13.7 13.9 24 bps Cost rationalisation to drive margins

PAT 1,149.1 1,196.6 4.1 1,225.7 1,269.1 3.5

EPS (|) 61.2 63.7 4.1 65.2 67.5 3.6


Assumptions

Comments

CY13 CY14 CY15 CY16 CY17E CY18E CY17E CY18E

Volume (MT) 23.9 24.2 23.6 23.0 27.6 29.8 27.0 29.1 Capacity expansion and improving demand scenario to drive volumes

Realisation (|) 4,556 4,742 4,838 4,717 4,872 4,921 4,869 4,918

EBITDA per Tonne (|) 572 518 496 538 670 686 659 673 We expect EBITDA/t of | 686/t in CY18E

EarlierCurrent



Annual Report Analysis

Loss in market share leads to volume decline: In CY16, the company

expanded its capacity by 2.8 MT, taking total capacity to 33.4 MT from

30.6 MT in CY15. The new capacity was commissioned in the second half

of the calendar year. The new capacity comprises a new clinkering line of

capacity 2.79 MT at Jamul and cement grinding units of capacity 1.10 MT

at Jamul and 1.35 MT at Sindri. However, despite capacity expansion,

ACC registered 2.7% YoY decline in volumes vs. industry growth of 5.0%,

which we believe is mainly due to loss in market share.

Cost rationalisation helps maintain stable margins: On the cost side, the

company undertook various cost saving measures like renegotiation of fly

ash contracts (fly ash cost declined 5.9% YoY), changes in mix

optimisation and lower landed cost of gypsum (cost of gypsum declined

10.8% YoY), increased usage of pet coke (increased from 18.0% in CY15

to 62.0% in CY16). Further, ACC was able to reduce cost of generation at

its captive power plant by 2.4% YoY to | 4.56 per kWh in CY16 mainly

due to better efficiencies. The average cost of purchased power declined

3.1% YoY to | 6.3 per kWh in CY16. In addition, rationalisation of

advertising expenses (declined by | 29.6 crore to | 80.6 crore in CY16

mainly due to reduction in various promotional activities) and 10.0% YoY

decline in packaging cost per tonne led to 2.4% YoY decline in cost per

tonne. The cost structure may further improve in coming years mainly led

by better operating cost parameters at newly commissioned Jamul/Sindri

plant coupled with higher volumes, reduction in employees (reduced by

535 people to 7,833) and expected synergy benefit for ACC-ACEM over

the next three years.

Depreciation on downward trajectory: During the year, depreciation cost

declined 7.2% YoY to | 615.1 crore mainly led by full depreciation of a

few fixed asset. However, it was partly offset by capitalisation of Jamul

project in Q3CY16 and Sindri project in Q4CY16.

Poor return ratio continues: In the past two years, ACC clocked average

RoE of 7.0%, which is the lowest in the past 10 years mainly due to low

utilisation (~71%), higher fixed cost and capacity expansion.

Better working capital management: Although there was a marginal

increase in inventory days (from 39 days to 40 days) and increase in

payable days (from 96 days to 110 days) enabled the company to register

an improvement in working capital cycle. As a result, the company was

able to register | 565.3 crore improvement in operating cash flow.

Technical know how fees continue to rise: The company paid | 107.9

crore (increased from nil in CY12 to ~18% of PAT in CY16) as technology

know-how fees to Holcim Technology for technical support received by it.

In addition, remuneration, severance to top management, independent

directors and non-executive directors accounted for 3% of PAT.

Dividend payout remained stable: The company declared a dividend of

| 17 per share (dividend payout ratio of 53%) in CY16, same as last year

(| 17 per share and dividend payout of 54% in CY15).

Technical know how fees trend

0.0

107.7112.91 112.76

107.9

0.0

20.0

40.0

60.0

80.0

100.0

120.0

CY12 CY13 CY14 CY15 CY 16

0.00

5.00

10.00

15.00

20.00

25.00

Technology know how fees as % of PAT

Dividend payout ratio

53

51

53

5554

48

49

50

51

52

53

54

55

56

CY12 CY13 CY14 CY15 CY16

Dividend payout ratio


Company Analysis

Pan-India presence to reduce regional risk

ACC is a pan-India player with an installed capacity of 30.5 MTPA

distributed across all regions, thereby insulating the company from any

weakness in a particular region. Out of the total capacity, the company

has ~10 MTPA capacity in the southern region, ~6.2 MTPA capacity in

the eastern region, ~6 MTPA capacity in the northern region, ~4.5 MTPA

capacity in the central region and ~4 MTPA capacity in the western

region.

Higher government spending to drive growth

Over the long term, the demand environment looks healthy, owing to an

increase in government focus on infrastructure and higher budgetary

allocation to the roads & housing sector. The company has also indicated

7-8% YoY growth in volumes over the next three years mainly led by

higher government spending.

Recovery in southern region to benefit company

ACC has a third of its total capacity in the southern region. With the

resolution of political problems in the region along with expectations of

an overall recovery in the demand environment, going forward, ACC

should benefit from its presence in the southern market.

To increase capacity to ~35 MT by CY17E

ACC’s capacity will be 35 MT by CY17E mainly led by commissioning of

Jamul clinker (2.8 MT) & grinding unit (1.1 MT) and Sindri grinding unit

(1.4 MT). Further one more expansion of 2.7 MT is expected in

Kharagpur.

Higher free operating cash flow sufficient for expansion plans

The company has consistently been generating healthy operating cash

flows for many years. Higher operating cash flow has ensured that the

company does not require debt for further expansion. At the end of CY13,

ACC was a totally debt-free company. Going by the present scenario, the

company will not need to raise debt for the planned expansion of 5 MT

given strong cash flows.

Exhibit 1: Healthy operating cash flow

1343

934

1987

936825

2139 2132

-300

200

700

1200

1700

2200

CY12 CY13 CY14 CY15 CY16 CY17E CY18E

| C

rore

Operating Cashflow


Regional presence

Central

14%

East

22%

West

13%

South

32%

North

19%


Old, inefficient plants lead to higher cost of production…

ACC has one of the oldest manufacturing plants in the industry, resulting

in higher operating costs for the company. As can be seen from the chart

below, its other costs per tonne, which includes maintenance costs of the

plants, as percentage of industry average, is much higher than ‘total costs

except other costs’, on a per tonne basis. For example, for CY07, if the

industry’s ‘average costs per tonne after deduction of other costs’ was

| 100, the same for ACC was | 91. The industry’s ‘average other costs per

tonne’ was | 100 while that for ACC was | 143.3. Higher other costs are

the result of older machinery of the company.

Exhibit 2: Costs as percentage of industry average costs

102.2

106.9

143.3

139.9

136.3

124.6

115.9

129.8

126.0124.1

90.590.1

90.0 89.9

103.7102.5

107.7

114.0

80

90

100

110

120

130

140

150

CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15

Total Costs except Other cost Other Costs


…but efforts on to improve efficiency and reduce cost

To improve efficiency and reduce overall cost, the company has adopted

a two-pronged approach. One is phasing out of old and inefficient plants.

As a result, ACC has reduced power usage per tonne from 85 kWh in

CY07 to 80 kWh in CY14. The second approach is to reduce dependency

on power purchase from outside. The captive power plant capacity of the

company has increased from ~237 MW in CY08 to ~384 MW till CY12.

The company met ~69% of its power requirement through captive

sources in CY07 and the remaining through the state grid while the

contribution of captive source increased to ~77% in CY15. This helped

reduce the overall cost per tonne for the company. Further, with

proposed synergies from the Holcim restructuring, we expect efficiencies

to improve, going ahead.

Exhibit 3: Fuel mix

5644

2

5

1617

2530

1 3

0

20

40

60

80

100

120

CY14 CY15

Linkage Coal E-Auction Coal Petcoke

Imported Coal Alternative Fuels


Exhibit 4: Purchased power share stands at 23.0% in CY15

31.4 30.424.7 25.1 28.2 25.6 23.5 24.5 23.0

68.6 69.675.3 74.9 71.8 74.4 76.5 75.5 77.0

0

20

40

60

80

100

CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15*

(%

)

Purchased Own Generation



Expect revenue CAGR at ~16.2% during CY16-18E

Going forward, we expect revenue CAGR of 16.2% in CY16-18E with

volume growth at 13.7% CAGR. Realisation growth is expected at 2.1%

CAGR in the same period. The company is well on track on the capacity

expansion front and will likely achieve its target of 35 MT by CY17E.

Exhibit 5: Expect revenue CAGR of 16.2% during CY16-18E

9594

11010 1090411480 11433

10850

13447

14640

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

CY11 CY12 CY13 CY14 CY15 CY16 CY17E CY18E

Sales (| crore)


Exhibit 6: Capacity addition plans

Existing Capacity (MT) 33

Planned capacity addition

Kharagpur 2.7

Total 2.7

Total Capacity by CY17E (MT) 35.7


Exhibit 7: Volume to grow at 13.7% CAGR during CY16-18E

24.1 23.924.2

23.6

23.0

27.6

29.8

20.0

22.0

24.0

26.0

28.0

30.0


MT

Sales Volumes


Exhibit 8: Realisation to grow at 2.1% CAGR during CY16-18E

4566 4556

47424838

4717

48724921

3500

4000

4500

5000

5500


| /

tonne

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

(%

)

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


Exhibit 9: Q1CY17 volume increases 3.8% YoY

5.826.20

5.616.00

6.366.12

5.075.45

6.60

0.0

6.0

Q1C

Y15

Q2C

Y15

Q3C

Y15

Q4C

Y15

Q1C

Y16

Q2C

Y16

Q3C

Y16

Q4C

Y16

Q1C

Y17

In M

T

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

(%

)

Sales volumes -LHS Growth (%) -RHS


Exhibit 10: Realisation during Q1CY17 up 4.0% YoY

4958

47764884

4744

4517

4689

4877 4834

4696

3500

4000

4500

5000

5500

Q1C

Y15

Q2C

Y15

Q3C

Y15

Q4C

Y15

Q1C

Y16

Q2C

Y16

Q3C

Y16

Q4C

Y16

Q1C

Y17

|

-10.0

0.0

10.0

20.0

30.0(%

)

Realisation-LHS Growth (%) -RHS



Margins to improve but high operating cost to limit its expansion

Despite an expected recovery in demand, we expect ACC’s operating

margins expansion to be limited due to higher operating costs on account

of freight costs and legacy plants.

Exhibit 11: Expect EBITDA/tonne of | 686 in CY18E

825

572518 496

538

670 686

0

200

400

600

800

1000


EBITDA/Tonne


Exhibit 12: Margins to improve led by operating leverage benefit

16.917.7

12.6

10.910.3

11.6

13.8 13.9

10

15

20

25

CY11 CY12 CY13 CY14 CY15 CY16 CY17E CY18E

(%

)

EBITDA Margin (%)


Exhibit 13: Q1CY17 EBITDA/tonne at | 519/t

713

453 469

356

595670

444 412

519

0

100

200

300

400

500

600

700

800

Q1C

Y15

Q2C

Y15

Q3C

Y15

Q4C

Y15

Q1C

Y16

Q2C

Y16

Q3C

Y16

Q4C

Y16

Q1C

Y17

| p

er t

onne


Exhibit 14: Margin trend (%)

9.5 9.18.5

11.614.4

9.6

7.5

13.2

14.3

0

2

4

6

8

10

12

14

16

Q1C

Y15

Q2C

Y15

Q3C

Y15

Q4C

Y15

Q1C

Y16

Q2C

Y16

Q3C

Y16

Q4C

Y16

Q1C

Y17

(%

)

EBITDA Margin


Expect net profit CAGR of 34.0% in CY16-18E

After witnessing a sharp decline in profit in CY15, we expect net margins

to improve to 8.7% in CY18E from 6.1% in CY16. Overall, we expect net

profit to grow at a CAGR of 34.0% during CY16-18E.

Exhibit 15: Profitability trend

1094.61161.8

587.6

1196.61269.1

707.2

10.0 10.1

5.1

6.1

8.9 8.7

0

200

400

600

800

1000

1200

1400

CY13 CY14 CY15 CY16 CY17E CY18E

| c

rore

0

4

8

12

(%

)

Net profit - LS Net profit margin -RS



Outlook and valuation

With a capacity expansion of 2.8 MT in Jamul (Chhattisgarh) and 1.4 MT

in Sindri (Jharkhand), we expect CY16 to witness an improvement in the

volume growth. We expect sales volume and realisation CAGR of 13.7%

and 2.1%, respectively, during CY16-18E.

Cement demand is expected to improve over the next few years led by a

revival in the rural economy and increased infrastructure spends by the

government. Apart from improving macro, capacity expansion of 5 MT

(i.e. 16% of capacity) is expected to result in 13.7% CAGR in revenues in

CY16-18E. Further, cost control initiatives such as use of alternative fuels,

better sales mix, reduction of employees are expected to help ACC in

margin expansion, going forward. We expect OPM to improve from

11.0% to 13.9%in CY18E. Further, ACC is trading at an EV/tonne of $130,

far below the replacement cost of $150 .Hence, we maintain our BUY

rating with a revised target price of | 1,850/share (i.e. valuing the stock at

CY18E EV/tonne of $150/tonne on CY18E capacity of 35 MT).

Exhibit 16: Key assumptions

| per tonne CY13 CY14 CY15E CY16 CY17E CY18E

Sales Volume (mtpa) 23.9 24.2 23.6 23.0 27.6 29.8

Net Realisation 4556 4742 4838 4717 4872 4921

Total Expenditure 3984 4224 4342 4179 4202 4235

Stock Adjustment 3 -5 0 7 2 0

Raw material 698 819 782 709 698 785

Power & Fuel 996 1010 1014 939 982 1020

Employees 277 309 327 334 297 330

Freight 963 1065 1144 1146 1252 1100

Others 1048 1026 1074 1043 972 1000

EBITDA per Tonne 572 518 496 538 670 686

Source: ICICIdirect.com Research


Exhibit 17: One year forward EV/EBITDA

2000

12000

22000

32000

42000

52000

62000

72000

82000

Apr-09

Oct-09

Apr-10

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

(|

crore)

EV 30.0x 25.0x 20.0x 15.0x 5.0x 10.0x


Exhibit 18: One year forward EV/tonne

1000

2000

3000

4000

5000

6000

7000

Apr-09

Oct-09

Apr-10

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

Million $

EV $172 $151 $131 $111 $91 $70


Exhibit 19: Valuation

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

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

CY15 11432.8 2.7 31.3 3.3 39.0 152.7 24.0 7.0 6.0

CY16 10945.6 -4.3 35.6 13.8 41.5 153.2 22.3 7.7 6.9

CY17E 13447.5 22.9 63.7 79.0 24.5 131.0 14.9 12.7 11.4

CY18E 14640.0 8.9 67.5 6.1 23.1 127.7 13.1 12.4 11.5



Recommendation history vs. Consensus estimate

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

Apr-17Jan-17Oct-16Jul-16May-16Feb-16Nov-15Aug-15May-15

(|

)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

(%

)

Price Idirect target Consensus Target Mean % Consensus with Hold

Source: Bloomberg, Company, ICICIdirect.com Research

Key events

Date Event

Feb-12 The company looks to set up a new clinker production facility of 2.79 MTPA and allied grinding facility at Jamul. The existing clinkering and grinding lines at Jamul

will be phased outMay-12 CCI completes probe into alleged cartilsation by 39 cement companies and finds these companies, including ACC, guilty of cartelisation

Jun-12 CCI passes an order against several cement manufacturers including ACC and imposes a penalty of 0.5 times the profit for 2009-10 and 2010-11. For ACC, the

penalty works out to | 1147.59 crore

Oct-12 The company's wholly-owned subsidiary company, ACC Concrete Ltd amalgamated with the company

Nov-12 Files petition with COMPAT against CCI order that imposed penalty of | 1,147.6 crore on ACC

Dec-12 Holcim hikes royalty payment to 1% of sales with effect from January 1, 2013

Jul-13 Holcim Group to consolidate its holding in ACC through Ambuja Cements. The transaction will result in Ambuja holding 50% stake in ACC, in which Holcim India

currently holds 50.01%

Sep-13 To expand its capacity by nearly 4 MTPA in the eastern region in the next three years with an investment of over | 3000 crore

Oct-14 Suspension of limestone mining operations at Chaibasa and Bargarh

Feb-15 Resumption of limestone mining at Chaibasa Plant in Jharkhand

Jun-15 Resumption of limestone mining at Bargarh Plant in Odhisa

Jul-16 Commisions 2.79 MT clinker facility at Jamul

Aug-16 ACC becomes subsidiary of Ambuja

Oct-16 Commisions 1.4 MT grinding unit at Sindri, Jharkhand


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Holcim Group 31-Dec-16 54.5 102.4 94.0

2 Life Insurance Corporation of India 31-Dec-16 11.3 21.2 0.0

3 JPMorgan Asset Management U.K. Limited 31-Dec-16 2.3 4.3 -0.1

4 J.P. Morgan Asset Management (Hong Kong) Ltd. 28-Feb-17 2.3 4.3 0.0

5 Aberdeen Asset Management (Asia) Ltd. 31-Dec-16 2.0 3.7 0.3

6 Capital Research Global Investors 31-Dec-16 1.2 2.3 0.0

7 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-17 1.1 2.1 0.2

8 The Vanguard Group, Inc. 28-Feb-17 0.8 1.4 0.0

9 BlackRock Institutional Trust Company, N.A. 31-Mar-17 0.7 1.4 0.1

10 ICICI Prudential Asset Management Co. Ltd. 28-Feb-17 0.7 1.3 -0.3

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

Promoter 50.30 50.34 50.34 54.53 54.53

FII 14.84 15.71 16.83 14.36 14.26

DII 18.38 17.69 18.39 16.65 16.68

Others 16.48 16.26 14.44 14.46 14.53

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value Shares

Holcim Group 1841.18 93.98 ICICI Prudential Asset Management Co. Ltd. -5.85 -0.28

Aberdeen Asset Management (Asia) Ltd. 5.47 0.28 FIL Investment Management (Hong Kong) Limited -4.01 -0.20

Franklin Templeton Asset Management (India) Pvt. Ltd. 5.33 0.24 Lyxor Asset Management -3.76 -0.17

Mirae Asset Global Investments (Hong Kong) Limited 3.12 0.16 L&T Investment Management Limited -2.52 -0.12

Birla Sun Life Asset Management Company Ltd. 2.77 0.12 JPMorgan Asset Management U.K. Limited -1.47 -0.08

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore

(Year-end March) CY15 CY16 CY17E CY18E

Total operating Income 11,432.8 10,945.6 13,447.5 14,640.0

Growth (%) -0.4 -4.3 22.9 8.9

Raw material 1848.1 1647.6 1930.6 2335.4

Power & Fuel 2396.7 2159.9 2711.1 3034.5

Employees 772.2 769.2 818.7 981.8

Freight 2704.2 2636.1 3455.7 3272.5

Others 2538.6 2466.5 2681.4 2975.0

Total Operating Exp. 10,259.7 9,679.3 11,597.6 12,599.1

EBITDA 1,173.0 1,266.3 1,849.8 2,040.8

Growth (%) -6.5 7.9 46.1 10.3

Depreciation 662.6 615.1 689.0 784.2

Interest 64.6 73.8 79.7 79.9

Other Income 484.2 344.0 425.9 550.0

Exceptional items 164.5 38.6 0.0 0.0

PBT 765.5 882.8 1,507.1 1,726.7

Total Tax 190.0 223.6 318.2 457.6

PAT 587.6 668.6 1,196.6 1,269.1

Adjusted PAT 752.0 707.2 1,196.6 1,269.1

Growth (%) -35.3 -6.0 69.2 6.1

EPS (|) 31.3 35.6 63.7 67.5


Cash flow statement | Crore


Profit after Tax 587.6 668.6 1,196.6 1,269.1

Add: Depreciation 662.6 615.1 689.0 784.2

(Inc)/dec in Current Assets -300.1 4.5 -1,553.9 1,352.5

Inc/(dec) in CL and Prov. -14.3 -462.9 1,807.5 -1,273.5

CF from operating activities 935.8 825.3 2,139.2 2,132.3

(Inc)/dec in Investments 73.6 -371.4 0.0 0.0

(Inc)/dec in Fixed Assets -773.5 -654.8 -1,000.0 -1,000.0

Others -67.6 193.6 0.0 0.0

CF from investing activities -767.5 -832.7 -1,000.0 -1,000.0

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

Inc/(dec) in loan funds 0.0 640.0 0.0 0.0

Dividend paid & dividend tax -376.6 -376.7 -439.7 -439.7

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

Others -7.5 -71.7 0.0 0.0

CF from financing activities -384.1 191.7 -439.7 -439.7

Net Cash flow -215.8 184.3 699.5 692.6

Opening Cash 309.9 94.1 278.4 977.9

Closing Cash 94.1 278.4 977.9 1,670.5


Balance sheet | Crore


Liabilities

Equity Capital 187.9 188.0 188.0 188.0

Reserve and Surplus 8,233.2 8,453.5 9,210.4 10,039.8

Total Shareholders funds 8,421.2 8,641.5 9,398.4 10,227.8

Total Debt 100.0 740.0 740.0 740.0

Other Liabilities 373.1 562.2 562.2 562.2

Total Liabilities 8,894.2 9,943.7 10,700.6 11,530.0

Assets

Gross Block 11,782.3 12,437.1 14,686.9 16,186.9

Less: Acc Depreciation 5,820.8 6,435.9 7,124.8 7,909.0

Net Block 5,961.5 6,001.3 7,562.1 8,277.9

Capital WIP 1,749.8 1,749.8 500.0 0.0

Total Fixed Assets 7,711.4 7,751.1 8,062.1 8,277.9

Investments+Goodwill 1,329.7 1,696.7 1,696.7 1,696.7

Inventory 1,189.4 1,224.6 1,744.9 1,488.0

Debtors 484.4 466.4 705.2 570.2

Loans and Advances 1,935.9 1,908.4 2,663.7 1,728.3

Other Current Assets 55.1 61.0 100.4 75.3

Cash 94.1 278.4 977.9 1,670.5

Total Current Assets 3,758.9 3,938.8 6,192.1 5,532.3

Creditors 3,146.6 2,704.1 4,487.5 3,341.9

Provisions 759.2 738.7 762.9 635.0

Total Current Liabilities 3,905.8 3,442.9 5,250.4 3,976.8

Net Current Assets -146.8 495.9 941.8 1,555.4

Application of Funds 8,894.2 9,943.7 10,700.6 11,530.0


Key ratios


Per share data (|)

EPS 40.0 37.6 63.7 67.5

Cash EPS 66.5 68.3 100.3 109.3

BV 448.1 459.8 500.2 544.3

DPS 17.0 17.0 20.0 20.0

Cash Per Share 5.0 14.8 52.0 88.9

Operating Ratios (%)

EBITDA Margin 10.3 11.6 13.8 13.9

PAT Margin 5.1 6.1 8.9 8.7

Inventory days 39.0 40.3 40.3 40.3

Debtor days 14.3 15.9 15.9 15.9

Creditor days 96.0 97.6 97.6 97.6

Return Ratios (%)

RoE 7.0 7.7 12.7 12.4

RoCE 6.0 6.9 11.4 11.5

RoIC 8.8 10.3 15.2 15.2

Valuation Ratios (x)

P/E 50.0 43.9 24.5 23.1

EV / EBITDA 24.0 22.3 14.9 13.1

EV / Net Sales 2.5 2.6 2.0 1.8

Market Cap / Sales 2.6 2.7 2.2 2.0

Price to Book Value 3.5 3.4 3.1 2.9

Solvency Ratios

Debt/EBITDA 0.1 0.6 0.4 0.4

Debt / Equity 0.0 0.1 0.1 0.1

Current Ratio 1.0 1.1 1.2 1.4

Quick Ratio 0.9 1.1 1.0 1.0



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* 1562 1850 Buy 29,356 31.3 35.6 63.7 24.0 22.3 14.9 153 153 131 6.0 6.9 11.4 7.0 7.7 12.7

Ambuja Cement* 248 280 Buy 49,244 5.2 4.9 5.7 30.8 29.7 28.6 170 175 172 7.9 3.8 5.1 7.8 5.1 5.8

UltraTech Cem 4,108 4300 Buy 112,724 79.3 90.1 63.9 26.7 24.6 32.1 286 272 273 10.8 11.8 7.5 10.5 10.5 7.2

Shree Cement 17,820 17000 Hold 62,014 202 366 565 45.7 26.9 17.9 386 359 359 6.5 12.3 18.5 10.9 16.8 20.8

Heidelberg Cem 137 135 Hold 3,059 1.7 1.8 3.6 13.4 19.7 18.7 124 120 113 8.4 6.0 6.2 6.8 4.3 4.4

India Cement 203 175 Buy 6,236 4.3 5.9 8.5 11.7 11.3 9.4 99 98 95 8.5 8.8 10.4 4.0 4.8 6.5

JK Cement 950 990 Hold 6,643 15.4 32.7 31.4 18.1 14.3 14.9 127 124 125 8.9 12.2 11.4 6.3 12.6 10.6

JK Lakshmi Cem 474 550 Buy 5,579 2.0 6.9 12.3 20.2 26.4 18.4 144 123 88 7.8 5.4 9.0 7.2 1.8 5.8

Mangalam Cem 377 340 Buy 1,006 -7.8 13.0 25.2 39.5 12.1 7.9 69 55 53 1.7 9.4 15.2 NA 6.8 11.8

SFCL 140 115 Hold 3,114 4.1 4.5 4.4 9.7 10.3 8.8 173 173 170 12.0 11.8 12.3 12.3 12.0 11.0

Company

EV/Tonne ($)EV/EBITDA (x)EPS (|) RoCE (%) RoE (%)

Source: Company, ICICIdirect.com Research *December year ending


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Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

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