thematic note on east and central cement industrymailers.sparkcapital.in/uploads/girish/cement...

Thematic Note on East and Central

Cement Industry

September 2015

Cement Sector India Cement Sector

Market data

BSE SENSEX 26,218

NIFTY 7,982

Date Sep 21, 2015 We analyze the East and Central India cement industry in detail through this note. East and Central account for 35% of

India’s FY15 cement consumption and 28% of India’s FY15 capacity. While the per capita cement consumption is well

below national average, the demand has outpaced national average in the last five years. We remain positive on the regions

demand prospects led by government spend on housing, big ticket infrastructure projects and low per capita consumption.

We expect East and Central region demand to continue to outpace All-India growth. Central is the best placed region in

terms of demand supply dynamics given nil capacity additions over the next three years, hence we expect companies to

enjoy pricing power. East will see utilisations at healthier levels despite significant influx of capacities over FY15-FY17E.

Further given the consolidated nature of east region, demand growth prospects, and healthy utilisations, we see low risk of

pricing disruption, contrary to market expectations.

We present below our key takeaways on Eastern and Central region.

Demand – Expect the region to outpace national average: East and Central India’s demand growth has been relatively higher

with a 6% CAGR over FY11-FY15 vs. All India’s 4% growth. We have done a detailed study of various state budgets, big ticket

central government projects, and other infrastructure projects to analyze demand drivers in the region. Cumulatively we see a

demand potential of ~75-85mt from these projects. Some of the key demand drivers in the region in our view would be (1) Housing

for All by 2022; (2) Dedicated freight corridor; (3) Roads from NHAI and State projects; (4) Metros; and (5) Irrigation.

Supply – Large additions coming up in East and nil in Central: East region is seeing significant capacity additions over

FY15-FY17E. On a cumulative basis, the region will see ~17.9mt of new capacities over FY15-FY17E, which is ~37% of FY14 base.

While utilisations are expected to trend down in the eastern region on a consolidated basis, adjusting for North East capacities, the

utilisations in the Mainland eastern states are at relatively healthier levels of 85-88%. At these levels, we see very low chance of

pricing disruptions in the end markets. Nil additions in the Central region over the next three years is a welcome relief for the East

manufacturers. On a consolidated basis (East and Central), utilisations are at ~83% steady over FY15-FY17E.

Pricing – Expect pricing stability; Low chance of pricing pressure despite capacity additions: We expect pricing stability in

the eastern markets despite large capacity additions driven by (1) strong demand recovery, (2) utilisations at healthy levels despite

dip; (3) consolidated market structure (85% capacity held by five players), and (4) strong utilisations in Central.

Stock calls – Amongst the Pan-India players. ACC, UltraTech and Ambuja have 42%, 31%, and 28% of its capacities in East and

Central markets. UltraTech has a leading capacity market share of ~20% in East and Central region, as a result remains our

preferred pick amongst the large cap names. Amongst the large regional players, Dalmia Bharat and Shree Cement have 52% and

28% of its capacities in East and Central markets. We maintain BUY on Dalmia Bharat as its a play on both operating and financial

leverage. With increased scale of operations, efficient assets, strong management team, and robust earnings growth, we believe

Dalmia Bharat is a structural multi-year play on the cement upcycle. While we like Shree Cement’s cost, balance sheet, and regional

exposure, we prefer to ADD only on dips given the current expensive valuations. The other regional players who have meaningful

presence in the region are OCL India, Prism Cement, Heidelberg Cement and Birla Corp. We like OCL India for its market

leadership in Odisha, quality assets, healthy balance sheet, and attractive valuations. While we like Prism Cement’s presence in the

favorable Central markets, turnaround in its Tiles business, and balance sheet de-leveraging, the stock at current prices looks fairly

valued. Hence would wait for better entry price for a favourable risk reward. Birla Corporation’s recent acquisition of Lafarge’s

5.15mt highly profitable East capacities will result in higher exposure to East and Central markets. While the operations at its

Chanderia unit are hampered due to limestone mining ban, the successful completion of the Lafarge deal will improve visibility on

volume growth and margins. This can lead to gradual re-rating of the stock.

Performance (%)

1M 3M 6M 12M

Sensex -6% -4% -7% -3%

ACC -5% -4% -12% -9%

ACEM -9% -7% -18% -2%

UTCEM -7% 5% 3% 11%

SRCM 8% 11% 9% 39%

TRCL -10% -2% 3% 0%

ICEM -12% -10% -19% -36%

BCORP -13% 11% 9% -12%

DBL -2% 10% 54% 44%

ORCMNT -9% -7% -4% 24%

JKLC 0% 17% -3% 9%

PRSC -9% -15% -14% 23%

OCL 19% 34% 73% 35%

HEID 1% 17% -8% -11%

GIRISH CHOUDHARY [email protected] +91 44 4344 0021

VIJAYARAGHAVAN SWAMINATHAN [email protected] +91 44 4344 0022

SRIVIDHYA M [email protected] +91 44 4344 0054

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

Cement Sector Strategy: Look East and Central – Key beneficiary of government and infrastructure spend


Comparative valuations

Company

Revenues (Rs. mn) EBITDA (Rs. mn) PAT (Rs. mn) EPS (Rs.) FY15-FY17E CAGR

FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E Revenue EBITDA PAT

ACC 1,14,811 1,14,529 1,33,119 12,501 14,260 23,041 11,683 9,349 14,753 62.2 49.7 78.5 7.7% 35.8% 12.4%

ACEM 99,109 96,136 1,12,133 18,612 14,333 24,259 14,964 9,613 16,406 9.7 6.2 10.6 6.4% 14.2% 4.7%

BCORP 31,523 34,525 37,836 2,440 3,191 4,182 1,754 2,593 3,668 22.8 33.7 47.6 9.6% 30.9% 44.6%

DBL 35,141 63,280 76,224 6,025 14,313 17,401 30 1,093 3,107 0.4 13.5 38.3 47.3% 69.9% 909.2%

ICEM 44,236 44,764 51,402 6,826 8,749 10,291 295 1,536 2,563 1.0 5.0 8.3 7.8% 22.8% 195.0%

TRCL 35,939 37,681 44,445 6,622 9,590 11,434 2,424 5,026 6,133 10.2 21.1 25.8 11.2% 31.4% 59.1%

ORCMNT 15,470 15,284 20,863 3,067 2,945 5,003 1,948 300 1,829 9.5 1.5 8.9 16.1% 27.7% -3.1%

JKLC 23,071 27,553 34,289 3,495 4,419 7,249 956 691 2,755 8.1 5.9 23.4 21.9% 44.0% 69.7%

SRCM 64,536 79,950 97,249 13,439 19,266 26,031 4,263 8,770 15,109 122.4 251.7 433.7 22.8% 39.2% 88.3%

UTCEM 2,29,362 2,51,824 2,92,342 41,950 47,587 62,690 20,147 23,005 33,161 73.4 83.8 120.9 12.9% 22.2% 28.3%

Company

EBITDA margins % EBITDA/t (Rs/t) RoCE RoAE Net Debt to Equity (x)

FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

ACC 10.9% 12.5% 17.3% 502 591 884 16.0% 13.3% 17.7% 14.5% 11.2% 16.8% -0.2 -0.1 -0.1

ACEM 18.8% 14.9% 21.6% 840 647 1,014 15.8% 10.0% 16.2% 15.3% 9.5% 15.7% -0.4 -0.4 -0.4

BCORP 7.7% 9.2% 11.1% 321 400 499 6.4% 7.9% 10.0% 6.8% 9.5% 12.4% -0.2 -0.2 -0.3

DBL 17.1% 22.6% 22.8% 768 1,052 1,124 13.8% 4.1% 6.9% 0.1% 3.5% 9.4% 2.0 2.0 1.7

ICEM 15.4% 19.5% 20.0% 657 921 998 6.9% 6.6% 7.9% 0.8% 4.2% 6.8% 1.0 0.9 0.8

TRCL 18.4% 25.5% 25.7% 819 1,255 1,312 6.9% 11.7% 12.9% 9.5% 17.5% 18.3% 1.0 0.7 0.6

ORCMNT 19.8% 19.3% 24.0% 748 756 988 12.7% 6.0% 12.2% 21.6% 3.1% 17.3% 1.1 1.2 1.0

JKLC 15.1% 16.0% 21.1% 587 646 921 7.4% 6.8% 11.8% 7.3% 5.1% 18.4% 1.2 1.4 1.2

SRCM 20.8% 24.1% 26.8% 755 934 1,103 9.8% 14.6% 20.9% 8.5% 15.5% 22.4% -0.2 -0.2 -0.3

UTCEM 18.3% 18.9% 21.4% 910 984 1,181 13.5% 12.9% 16.7% 11.2% 11.6% 14.8% 0.1 0.1 0.1

ACC and Ambuja are Dec-ending; Shree – June ending and the rest March ending


Comparative valuations

ACC and Ambuja are Dec-ending; Shree – June ending and the rest March ending

Company CMP Shares MCAP EV/EBITDA EV/t (Rs/t) PE Target

price

(Rs.)

Rating Rs. mn Rs. mn FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

ACC 1,370 188 2,57,492 17.6x 17.3x 10.2x 7,328 7,329 7,021 22.0x 27.5x 17.5x 1,490 Add

ACEM 210 1,546 3,24,631 14.7x 18.8x 10.9x 9,513 9,142 7,759 21.7x 33.8x 19.8x 230 Add

BCORP 450 77 34,655 11.8x 8.4x 5.8x 3,075 2,860 2,573 19.8x 13.4x 9.4x 520 Buy

DBL 660 81 53,592 18.7x 8.0x 6.4x 5,550 5,666 5,442 1,757.1x 49.0x 17.3x 820 Buy

ICEM 74 307 22,737 8.2x 6.3x 5.2x 3,932 3,886 3,802 77.2x 14.8x 8.9x 75 Add

TRCL 320 238 76,185 14.6x 9.7x 7.8x 7,726 6,897 6,599 31.4x 15.2x 12.4x 380 Buy

ORCMNT 160 205 32,779 9.9x 15.3x 8.8x 6,043 5,618 5,500 16.8x 109.3x 17.9x 160 Add

JKLC 370 118 43,549 16.0x 12.6x 8.0x 6,678 5,948 5,565 45.6x 63.0x 15.8x 380 Add

SRCM 11,500 35 4,19,788 30.4x 21.0x 15.0x 17,167 15,413 13,581 98.5x 47.9x 27.8x 11,450 Add

UTCEM 2,920 274 8,01,248 19.1x 16.9x 12.5x 13,322 12,354 11,734 39.8x 34.8x 24.2x 3,200 Add


Snapshot of views on stocks

Company View Rating

UltraTech

Cement

(UTCEM)

UTCEM is India’s largest cement company with a domestic capacity of ~65mt with a well diversified regional spread. The company will be

the biggest beneficiary of pan-India demand recovery and structural improvement in industry utilisations.

Due to its consistent capacity additions, UTCEM’s volume growth will outpace the industry growth. The company’s strong cash flow

generation and balance sheet can support further capacity additions.

Earnings trajectory & Valuations – We expect revenue and EBITDA CAGR of 13% and 22% respectively over FY15-FY17E. We factor in

volume and realisations growth of 7% and 5% CAGR over FY15-FY17E respectively. UTCEM deserves premium valuations due to

superior volume growth, margin expansion led by cost saving initiatives and balance sheet strength.

ADD

TP: Rs. 3,200

Shree

Cement

(SRCM)

• SRCM has a capacity of 21.6mt in FY15end, of which 17mt will be present in North. As a result we expect SRCM to be one of the biggest

beneficiary within the North India cement industry. SRCM’s foray into Eastern markets will aid regional diversification.

The company is a cost leader in the industry led by all-round efficiencies in operations. Given company’s consistent capacity additions and

low cost operations, we expect the company to continue to post industry leading volume growth and margins.

Earnings trajectory & Valuations – We expect SRCM’s revenue and EBITDA CAGR of 23% and 39% respectively over FY15-FY17E. We

factor in volume and realisations growth of 15% and 6% CAGR over FY15-FY17E respectively. The company has seen a substantial

multiple re-rating over the last few years driven by its cost leadership, strong balance sheet, and industry leading volume growth and

return metrics. At CMP, the stock is trading at 15x FY17E EBITDA. We believe the stock is factoring most of the positives and as a result

we would wait for a better entry point.

ADD

TP: Rs.

11,450

Ambuja

Cement

(ACEM)

ACEM has a capacity of ~29mt with a strong presence in North and Western region. The company’s volume CAGR of 2% over CY10-

CY14 has lagged the industry due to combination of weak demand scenario and moderate capacity expansions.

ACEM has efficient operations reflecting in above average industry margins. ACEM’s balance sheet remains healthy despite Rs. 35bn of

cash outflow expected to fund for ACC’s 50% stake. The company had a net cash of Rs. 45bn as of CY14. We expect ACEM to generate

cumulative operating cash flows to the tune of Rs. 28-30bn over CY15-CY16E.

Valuations – We value ACEM based on 12x CY16E EBITDA, which is ~15% premium to last five year average. We believe ACEM to trade

at premium to historicals on favorable regional mix, balance sheet strength, and potential cost savings post merger with ACC. However, at

CMP the stock trades at 11x CY16E EBITDA and hence would wait for a better entry point.

ADD

TP: Rs. 230

ACC ACC is still one of the highest cost producers of cement due to high fixed cost structure and leagacy plants. However, with the propsed

synergies from the Holcim restructuring, we expect efficiencies to improve going ahead.

The company is further expected to see near term cost pressure in the form (1) higher clinker costs at its Chaibasa unit due to halt of

limestone mining; and (2) auction of linkage coal from July-16 (55% of it fuel mix). ACC’s 5mt expansion at Chhattisgarh has been delayed

by a quarter and is likely commission in 1QCY16 (phase-1). The company will have 33.6mt of capacity by end of CY16E

Valuations: We value ACC based on 11x CY16E EBITDA, which is ~20% premium to last eight year average. At the CMP, the stock trades

at 10.2x CY16E EBITDA. Hence maintain ADD rating.

ADD

TP: Rs. 1,490



Company View Rating

Dalmia

Bharat

Limited

(DBL)

Dalmia Bharat Limited (DBL) is amongst the top five cement manufacturers in India with a group capacity of ~24mt. We are bullish on

DBL’s prospects due to (1) Increased scale of operations with diversified and efficient assets; (2) Expansionary phase behind and asset

sweating will drive operating and financial leverage; (3) Strong and experienced management team; and (4) Strong earnings growth

With the completion of capex cycle for DBL in FY15, Net debt has peaked out ~Rs. 61bn. And with expected cumulative operating cash

flow generation to the tune of ~Rs. 24bn over FY16-FY17E, we expect balance sheet pressure to ease over the next two years.

Valuations – The stock trades at $85/t and 6.4x FY17E EBITDA, which is at a discount of 40-50% to large caps and 15-20% to similar

sized mid-caps. We believe this discount is unwarranted given the increasing scale of operations, efficient cost structure and leading

market position in its key markets. We value DBL at 8.5x FY17E EBITDA. Maintain BUY.

BUY

TP: Rs. 820

The Ramco

Cement

(TRCL)

TRCL is one of the largest cement producers in South India. The company is among the best plays on the Southern market demand

recovery. Ramco is an established in the South resulting in premium pricing across most markets in the South

We expect TRCL to generate cumulative free cash flows (FCF) of ~Rs. 7-8bn over FY16-17E. With no major capex over the next two

years, we believe TRCL to reduce debt. Net debt to equity to trend down from 1.2x in FY14 to 0.6x in FY17E

We expect EBITDA margins to recover from 18.4% in FY15 to 26% in FY16E led largely by realisation growth and lower cost inflation.

Valuations – We believe company has multiple earnings lever heading into FY16 led by (1) sustenance of cement prices in South led by

tight production discipline; (2) volume recovery from 2HFY16E led by pick up of demand in Andhra Pradesh; and (3) cost savings from

lower imports of limestone and decline in fuel prices. The stock trades at 8x FY17E EBITDA vs. last seven year average of 7.5x. Given

improving profitability and deleveraging, we attribute premium valuations of 9x

BUY

TP: Rs. 380

Orient

Cement

(ORCMNT)

ORCMNT currently has a operating capacity of 5mt split across Devapur (3mt) in AP and Jalgaon (2mt) in Maharashtra. The company is

working on a 3mt greenfield expansion in Gulbarga, Karnataka, which is scheduled to be commissioned in FY16

We like ORCMNT’s low cost operations. The company ranks second best to SRCM. Cost advantage is mainly due to proximity to raw

material sources. Proposed expansion to impact the balance sheet quality. Net debt to equity to touch 1.2x in FY16E from 0.3x in FY14

Earnings trajectory and valuations – We expect revenue and EBITDA CAGR of 16% and 28% over FY15-17E . We factor in volume and

realisations growth of 11% and 5% CAGR over FY15-17E respectively. With delay in commissioning of the new plant and weak demand

profile in its core market of Maharashtra, we expect earnings pressure in the near term. Hence would wait for a better entry price.

ADD

TP: Rs. 160

India

Cements

(ICEM)

ICEM is one the largest cement producers in South India with a capacity of 14.2mt.

We remain skeptical on balance sheet quality given mis-allocation of capital and higher loans to related parties and subsidiaries

Earnings trajectory and valuations: We expect revenue and EBITDA CAGR of 8% and 23% respectively over FY15-17E. The stock trades

at 5.2x FY17E EBITDA. Re-structuring of its balance sheet and clarity on non-core businesses would be a key trigger for the stock.

ADD

TP: Rs. 75



Company View Rating

Birla

Corporation

(BCORP)

BCORP is a diversified cement producer with presence in three regions, North, East, and Central. The company has a capacity of 9.4mt

with clinker units in Satna (Madhya Pradesh) and Chanderia (Rajasthan).

Birla Corporation’s recent acquisition of Lafarge’s 5.15mt highly profitable East capacities will result in higher exposure to East and Central

markets. The enterprise of the deal is Rs. 50bn, implying an EV/t of Rs. 9,700/t or $150/t.

While the operations at its Chanderia unit are hampered due to limestone mining ban, the successful completion of the Lafarge deal will

improve visibility on volume growth and margins. This can lead to gradual re-rating of the stock. The stock currently trades at $40/t pre

Lafarge deal and $80/t post incorporating the Lafarge deal.

BUY

TP: Rs. 520

JK Lakshmi

Cement

(JKLC)

JKLC has a capacity of 8.4mt with presence in North, West, and East. The company has in the recent past scaled up its capacities

aggressively from 4.75mt capacity in FY12.

The company continues to be in expansion mode, with additions in all its existing markets over the next two years. The company’s

capacity is expected to touch ~12mt by end of FY17E.

JKLC is amongst the lowest producer in the industry driven by power and fuel efficiencies.

Earnings trajectory – We expect JKLC’s revenue and EBITDA CAGR of 22% and 44% respectively over FY15-FY17E. We factor in

volume and realisations growth of 15% and 6% CAGR over FY15-FY17E respectively

Valuations – While we like JKLC’s well spread capacities, low cost operations, and volume growth visibility. At the CMP, the stock trades

at 8x FY17E EBITDA of 8x factoring in most positives. We would wait for a better entry price for favorable risk reward.

ADD

TP: Rs. 380

OCL India

(OCL)

OCL India Limited (OCL) is a Dalmia group company having presence in Cement and Refractory business with 6.7mt cement capacity split

across two locations in Odisha and one in West Bengal and refractory capacity of 1,31,000MTPA.

OCL has a strong presence with a dominant market share of ~23% in Odhisa markets.

We like OCL due to (1) their strong presence in East, where we expect strong demand (2) potential for volume growth as current

utilizations at ~70% and (3) strong balance sheet. At CMP of Rs. 510, OCL is trading at ~6.0x FY17E EV/EBITDA and EV/t of $65/t. Given

its strong positioning in the Eastern markets coupled with healthy balance sheet, we believe it looks attractive at current prices.

No Rating

Prism

Cement

(PRSC)

PRSC has a saleable capacity of 7mt in Central India, where we expect favorable demand supply equation versus All-India. The company

sells around 78% of its volumes in Central and 22% in the Eastern states. : PRSC’s TBK (Tiles, Bath, Kitchen) division is one of the

leading manufacturer of ceramic tiles (installed capacity of 54msm, Johnson brand) with a market share of 18%.

We like PRSC given its favorable regional exposure in cement business. In its TBK business, the worst is behind with installation of coal

gassifiers which will help increase utilizations and margins. However, growth will remain challenged in FY16E as a result we expect margin

recovery to be delayed as well in the TBK business. With minimal capex over the next two years, we expect leverage to trend down for

PRSC. However at 8x FY16E EV/EBITDA most of these positives have been factored in the stock price. We would wait for a better entry

price for a better risk reward.

No Rating


Demand break up of states in Central – ~42mt consumed in FY15

Source: Spark Capital

Snapshot of East and Central cement markets

Around 85% of East India’s capacity is held by five players

Source: Spark Capital, Birla Corp includes the acquired 5.15mt Lafarge capacity

Demand break up of states in East – ~46mt consumed in FY15


Around 60% of Central India’s capacity is held by five players


Holcim 12%

UltraTech Cement

21%

Heidelberg 10%

Prism Cement 13%

Birla Corp 6%

Others 38%

Odisha 20%

West Bengal 25%

Jharkhand 9%

Chhattisgarh 12%

Bihar 20%

North East 14%

Holcim 29%

Dalmia group 20%

UltraTech 18%

Birla Corp 12%

Star Cement 6%

Others 15%

Uttar Pradesh 70%

Madhya Pradesh

30%


Snapshot of East and Central cement markets – Main production centres in Madhya Pradesh and Chhattisgarh

North

East

West

South

Central

East and Central limestone Cluster

East states receive volumes from

Satna cluster and Nalgonda cluster in AP

North and western UP receive volumes

from North, which is Chanderia cluster

Limestone Clusters

Jammu &

Kashmir

Himachal

Pradesh Punjab

Uttarakhand

Haryana

Delhi

Rajasthan Uttar Pradesh

Bihar

Sikkim

Assam

Nagaland Meghalaya

Manipur

Mizoram Tripura

West

Bengal Madhya Pradesh Gujarat

Maharashtra

Andhra

Pradesh

Odisha

Karnataka

Tamil Nadu

Goa

Chanderia

Bilaspur Chandrapur

Gulbarga

Yerraguntla

Nalgonda

Chhattisgarh

Satna

Telangana

State wise Capacities and Demand (FY16)

CENTRAL (in mt) Capacity Demand

UP 15.4 31.5

MP 35.7 13.5

Total 51.1 45.0

EAST (in mt) Capacity Demand

Bihar 4.6 10.0

West Bengal 9.4 12.5

Chhattisgarh 21.7 6.0

Odisha 10.7 9.5

North East 9.5 6.5

Jharkhand 9.8 4.5

Total 65.7 49.0


Low per capita cement consumption vs. National average; Scope for increase going ahead

Per Capita cement demand - East and Central below National average


Central Demand growth


East Demand growth


129

302 315

220

143

205

-

50

100

150

200

250

300

350

East North West South Central All India

Per capita cement consumption (kgs/year)

In terms of per capita cement consumption, East and Central region are

well below the All-India average. However, East and Central states

demand growth has been relatively higher versus national average. East

region and Central region demand has grown at a CAGR 6% over FY11-

FY15 vs All India growth of 4%. This has been led by low base and a

change in political and investment scenario.

East region consumes ~18% and Central region consumes ~16% of

India’s cement consumption.

6%

3%

13%

18%

6%

11%

5% 5%

8% 9%

8% 8%

10%

6% 7%

5% 4% 4%

0%

3%

6%

9%

12%

15%

18%

21%

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

East demand growth % All India demand growth %

8%

4%

10%

18%

10%

7%

3%

5%

7%

9% 8% 8%

10%

6% 7%

5% 4% 4%

0%

3%

6%

9%

12%

15%

18%

21%

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Central region demand growth% All India demand growth %


Key demand drivers in the East and Central states – Housing for All

Government’s “Housing for All” to fuel demand over the next 7 years

Source: Spark Capital, Government

41% of the Rs. 40bn allocated towards East and Central states for

FY16 for “Housing for All” project

Source: Spark Capital, Government

Urban housing shortage high in East and Central states

Source: Ministry of Urban Housing

2.78

4.59 2.99

4.15 4.17

18.68

-

2

4

6

8

10

12

14

16

18

20

North East West South Central India

Housing shortages in Urban areas (mn units)

The central government aims to provide housing for all by the year

2022. As per the government estimates, this would entail building

~60mn houses over the next seven years

In terms of cement demand, we estimate cumulative consumption of

~90mt over the seven year period. This implies an annual cement

demand of ~12mt, which is ~5% of FY15 consumption

Of the ~60mn houses, ~40mn pertains to rural areas and the rest 20mn

houses pertains to urban areas. As per the report on urban housing

shortage, ~46% is in East and Central states. Assuming this trend to be

similar in rural areas, East and Central states will consume ~45mt of

cement over the next 7 years, which is ~50% of their FY15 consumption

East and Central States

₹16 Bn 41%

Non East and Central Sates

₹24 Bn 59%

The Ministry of Housing and Urban Poverty Alleviation (MHUPA)

recently released details on the government’s “Housing for all by 2022”

initiative. The scheme aims to construct ~20mn houses for the urban

poor. The scheme will cover entire urban area consisting of 4041

statutory towns with initial focus on 500 class I cities in three phases.

MHUPA has allocated Rs. 40mn for FY16 towards to scheme, of which

~41% is for East and Central based states

Odisha government has recently launched projects to build 700 houses

as part of Housing for All project. - Odisha to become first state to

launch housing for all project

Housing For All: States queue up for PM Narendra Modi's project

http://www.ibnlive.com/news/india/odisha-to-become-first-state-to-launch-housing-for-all-project-1047866.html





















http://economictimes.indiatimes.com/articleshow/49006270.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst























Key demand drivers in the East and Central states – Roads and irrigation

NHAI road projects awarded in FY15 and FY16 (including pipeline) is 26% and 53% in East and Central states

Source: Spark Capital Research

North, 49%

South, 19%

East, 9%

West, 6%

Central, 17%

North, 12%

South, 11%

East, 23%

West, 25%

Central, 30%

Central Demand: Lucknow-Agra Expressway (Project cost Rs.150 bn)


# Project kms Winning Bidder Status

1 Agra-Firozabad 55 PNC Infrastructure

Limited The project requires 8,500

acres of which ~85% has

already been acquired.

Work on two major bridges

on Yamuna and Ganga river

started. The project to be

operational by Oct 2016.

2 Firozabad-Etawah 62 Afcons Infrastructure

3 Etawah-Kannauj 57 Nagarjuna Construction

Company

4 Kanauj-Unnao 64 Afcons Infrastructure

5 Unnao-Lucknow 63 Larsen & Toubro

Total 301

3025 kms. awarded in FY15 859 kms. awarded in FY16YTD. Expect ~3,000kms to be

awarded in FY16

Irrigation projects sanctioned in FY16 - State budget


# States (in Rs. bn)

1 Chhattisgarh 21

2 Jharkhand 34

3 Madhya Pradesh 17

4 Odisha 11

5 West Bengal 20

Total 103


Key demand drivers in the East and Central states – Metros

Construction of metros in the Eastern and Central states is expected to

add to the cement demand over the next four to five years. Metros are

high cement intense projects, esp. underground projects. Currently,

Lucknow (Phase 1) and Kolkata (EW corridor) are in early stages of

construction. Further metros for Kanpur, Indore, Bhopal, and Patna are

in planning stages. Once approved, these projects can add to the

demand materially.

Demand from Metro projects expected to come from 2017

Source: Spark Capital, State Metro Projects website

Metro Name Cost (In Rs. bn) Start Date Completion time Comments

Lucknow - Phase I 69 Sep-14 Dec-16 Phase 1 project got clearance on Aug-15; expected to be operational by Dec-16. Phase 2

project will be launched in 2018. The total distance of both the phases is 35 kms. Lucknow - Phase II 55 2018 2020

Kanpur 95 DPR submitted To be decided DPR (Detailed project report) has been sent for approval. The project will be completed by

2020 if it is started in Jan-16. The projects has 2 phases covering a total distance of 32 kms.

Kolkata - EW Corridor 56 Mar-09 Jun-18 The project commissioning has been pushed to Jun-18 due to land acquisition, slum

relocation and route alignment. Total distance of the corridor is 15 kms.

Indore 150 DPR to be submitted To be decided Indore consists of 6 corridors covering a distance of ~107 kms. The Govt. expects the project

to be launched before 2018 and complete it by 2021.

Bhopal 80 DPR to be submitted To be decided Bhopal consists of 5 corridors covering distance of ~85 kms. The Govt. expects the project to

be launched before 2018 and complete by 2021.

Patna 115 Awaiting approval from

State cabinet To be decided

After the approval from Chief Minister on the DPR, the proposal is sent to State cabinet for

approval. The project has 2 phases covering a total distance of 31 kms.

Guwahati 18 DPR to be submitted To be decided The project consists of 3 corridors, phase 1 covering 65 kms. Work on the metro rail will start

next year as DPR is expected to be ready by Oct- 15

TOTAL 638

Indicative cost break up of metro rail projects - ~47-50% is towards

construction costs

Source: Spark Capital, Chennai Metro Rail Corporation

Construction, 47%

MEP/HVAC, 3%

Signalling, 4%

Coaches, 10%

Others, 4% Land, 16% IDC, 16%


Key demand drivers in the East and Central states – DFC

Dedicated freight corridor will add meaningful demand

Source:

Estimated Demand consumption from DFC


Project costs Rs. bn

Total Project costs (Rs. bn) 810

Civil construction intensity 50%

Cement intensity 20%

Spending in Cement (Rs. bn) 80

Cost/tonne assuming 275/bag 5500

Total cement volumes (mt) 15

Annual Demand (mt) 3

Eastern Freight Corridor – Current Status

Section Length

(Km)

Expected

Completion Funded by Cost of project and Funding Contractor

Land Required

(hectares)

Land in

possession

Dadri - Khurja -

Ludhiana 450 Dec'19 World Bank Total Cost of Rs. 267bn

Financed by the Ministry of

Railways through Debt and Equity

(3:1). Loan for this section is

arranged through World Bank

which is providing debt of US$

2.725 bn.

Not awarded 678 568

Khurja – Bhaupur/

Kanpur 342 Mar'18 World Bank Alstom India 1,408 1,351

Bhaupur -

Mughalsarai 402 Dec'18 World Bank

GMR–SEW

Consortium 1,465 1,398

Mughalsarai -

Sonnagar 123 Dec'17 Govt. of India N.A. Not awarded 254 236

Sonnagar -

Dhankuni 522 N.A. PPP model N.A. Not awarded 1,002 82

Total 1,839 4,807 3,635

Source: DFCCIL website, Spark Capital Research

The Indian Railway’s marquee Dedicated Freight Corridor (DFC) project

involves construction of two corridors, one each on the west and east

routes, spanning a total length of 3,300kms at a cost of Rs. 810bn

As far as land acquisition is concerned, more than 80% is acquired in

both the stretches. DFC aims to award ~95% of the contracts for entire

length by FY16E. DFC aims to complete the western corridor by 2018

and eastern corridor by 2019

The Eastern corridor consists of five stretches, of which two have been

already awarded. For two stretches awarding will be done by FY16end

as 85% of land has already been acquired. The Sonnagar-Dhankuni

section is facing land acquisition issues and as a result might see project

delays


East region is seeing large capacity additions over FY15-FY17E; Lower capacity additions in Central provides a relief

East capacity additions pipeline - ~17.9mt additions over FY15-FY17E


Central region will see zero capacity additions going ahead


List of cement capacities coming up in East India


East region is seeing significant capacity additions over FY15-FY17E.

The region has added 4.6mt capacity in the FY15 and further 13.3mt of

capacity is slated to commission over FY16-FY17E. On a cumulative

basis, the region will see ~17.9mt of new capacities over FY15-FY17E,

which is ~37% of FY14 base

East region receives ~10% of its consumption from the Central region’s

Satna Cluster in Madhya Pradesh. The Satna cluster supplies to Eastern

States of Bihar, Jharkhand and West Bengal

Nil additions in the Central region over the next three years is a welcome

relief for the East manufacturers. With no additions in Central, East

markets can be an exporter to Central in future

Further, East region receives ~8% of its consumption from South’s

Nalgonda cluster. And with no capacity additions and expected demand

recovery in South, we expect Eastern markets to see restricted inflow of

materials from Southern markets.

Company Location FY15 FY16E FY17E

JK Lakshmi Durg, Chhattisgarh 1.7 -

Shree Cement Bihar 2.0 - -

Calcom Cement Assam 0.9 - -

Shree Cement Chhattisgarh, Raipur - 2.6 -

JK Lakshmi Odisha - 1.0 -

UltraTech Chhattisgarh, Raipur - 3.2 -

ACC Jamul, Chhattisgarh - 3.5 -

Emami Risda, Chhattisgarh - - 3.0

Total 4.6 10.3 3.0

39 42 44 46 48 52 63 66 66

28%

6% 5% 5% 3% 10%

20% 5% 0%

0%

5%

10%

15%

20%

25%

30%

0

10

20

30

40

50

60

70

FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Total capacity (mt) YoY change in capacity%

33 38 40

46 51 51 51 51 51

0

10

20

30

40

50

60

FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Total Central capacity (mt)


East demand supply (excluding

North East)FY15 FY16E FY17E FY18E

East capacity (mt) 52 63 66 66

East demand (mt) 46 49 54 59

East Utilisations % 85% 83% 78% 82%

North East Capacity (mt) 10 10 10 10

North East Demand (mt) 6 6 7 8

North East Utilisations % 63% 67% 74% 81%

Mainland East capacity (mt) 43 53 56 56

Mainland East demand (mt) 40 43 47 52

Mainland East Utilisations % 94% 89% 86% 92%

87% 81% 81% 81% 81% 85% 83% 78% 82%

20%

40%

60%

80%

100%

FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18EEast Capacity Utilization %

Utilisations in East to drop in FY16-FY17E; And recover in FY18E

Source: Company, Spark Capital

97% 93% 86% 82% 80% 84% 91% 97%

20%

40%

60%

80%

100%

120%

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18ECentral region utilisations

Utilisations in Central to increase in FY16-FY18E


88% 87% 83% 82% 83% 83% 84% 89%

20%

40%

60%

80%

100%

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18EEast + Central consolidated utilisations%

Utilisations in Central region will be on a structural uptrend


Headline utilisations in East to dip; However excluding North East capacities, utilisations are at healthy levels;

Pricing disruption unlikely

While utilisations are expected to trend down in the eastern region on a

consolidated basis, we believe the region should be analysed into two

parts, (1) Mainland Eastern states; and (2) North East states. The reason

is North East region has become self sufficient in cement consumption

over the years (only 10% is imported from Mainland Eastern states) and

they operating at low utilisation of ~60-65% is skewing the numbers on a

consolidated basis. Adjusting for North East capacities, the utilisations in

the Mainland eastern states are at relatively healthier levels of 85-88%. At

these levels, despite higher capacity additions, we see a very low chance

of pricing disruptions in the end markets. Further, Eastern region receives

~10% of its demand from the Central region’s Satna Cluster in Madhya

Pradesh. Nil additions in the Central region over the next three years is a

welcome relief for the East manufacturers. On a consolidated basis,

utilisations are steady over FY15-FY17E. We expect pricing stability in

the eastern markets despite large capacity additions driven by (1)

strong demand recovery, (2) utilisations at healthy levels despite

dip; (3) consolidated market structure (85% capacity held by five

players), and (4) strong utilisations in Central.

East + Central utilizations on a consolidated basis looks steady



Region-wise demand supply model

North

FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Total capacity 62.4 63.6 67.2 73.7 78.7 83.6 88.0 88.0

Additions 3.0 1.2 3.6 6.5 5.0 4.9 4.4 0.0

Effective Capacity 58.2 60.4 63.5 67.0 72.9 77.7 81.6 86.0

Production 47.7 52.5 55.6 58.4 61.3 63.2 66.9 72.3

Consumption 41.5 45.7 48.4 50.8 53.3 54.9 58.2 62.9

Demand growth 8.4% 10.0% 6.0% 5.0% 5.0% 3.0% 6.0% 8.0%

Utilisation 82% 87% 88% 87% 84% 81% 82% 84%

East


Total capacity 41.9 44.0 46.2 47.8 52.4 62.7 65.7 65.7

Additions 2.5 2.1 2.2 1.6 4.6 10.3 3.0 0.0


Production 31.3 33.8 35.5 37.2 41.3 43.8 48.6 53.5

Consumption 35.0 38.9 40.8 42.8 46.3 49.0 53.9 59.3

Demand growth 6% 11% 5% 5% 8% 6% 10% 10%

Utilisation 81% 81% 81% 81% 85% 83% 78% 82%

West


Total capacity 49.4 49.4 49.4 49.4 52.2 53.4 53.4 57.4

Additions 6.4 0.0 0.0 0.0 2.8 1.2 0.0 4.0


Production 36.8 41.9 42.3 43.6 44.7 45.7 46.9 48.8

Consumption 45.2 50.7 51.2 52.7 55.9 57.5 61.0 65.9

Demand growth 4.0% 12.0% 1.0% 3.0% 6.0% 3.0% 6.0% 8.0%

Utilisation 83% 85% 86% 88% 88% 86% 88% 90%

South


Total capacity 115.4 123.9 131.7 136.1 138.6 141.6 141.6 141.6

Additions 15.6 8.5 7.8 4.4 2.5 3.0 0.0 0.0


Production 62.2 64.6 66.2 67.8 64.4 63.2 70.4 78.4

Consumption 56.0 54.9 57.6 57.6 54.7 53.1 58.4 64.3

Demand growth 0.9% -2.0% 5.0% 0.0% -5.0% -3.0% 10.0% 10.0%

Utilisation 61% 55% 52% 51% 47% 45% 50% 55%

Central


Total capacity 38.1 40.4 45.9 50.9 50.9 50.9 50.9 50.9

Additions 5.3 2.3 5.5 5.0 0.0 0.0 0.0 0.0


Production 33.0 35.3 35.7 37.8 40.9 42.9 46.3 49.6

Consumption 34.0 36.4 37.5 39.3 42.1 45.0 49.6 54.5

Demand growth 10.4% 7.0% 3.0% 5.0% 7.0% 7.0% 10.0% 10.0%

Utilisation 97% 93% 86% 82% 80% 84% 91% 97%

All India

All India FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Total capacity 307.5 321.6 340.6 358.1 373.0 392.4 399.8 403.8

Additions 32.8 14.1 19.1 17.5 14.9 19.4 7.4 4.0


Production 210.9 224.6 234.1 243.5 253.2 260.8 281.7 307.0

Consumption 210.4 224.0 234.1 243.5 253.2 260.8 281.7 307.0

Demand growth 5.5% 6.5% 4.5% 4.0% 4.0% 3.0% 8.0% 9.0%

Utilisation 75% 73% 71% 71% 70% 69% 72% 77%


Pricing to remain steady despite dip in utilisations

Will the premium pricing in the East region hold vs. All India? No.

Premium pricing in the Eastern region is largely driven by a function of

better demand growth (low-base) and logistics bottlenecks. As

Chhattisgarh and Odisha are the only states having large scale clinker

facilities, the freight costs in transporting the cement adds up to the

overall cost keeping the cement prices higher. In our opinion, minimum

incremental freight cost is ~Rs. 50/bag assuming an average lead

distance of 500kms from cement supplying states. Given the large influx

of capacities in the region, cement will be more readily available locally.

Hence we believe the premium which the region is enjoying will

continue to wade off once the new capacities commission. However,

given (1) strong demand prospects; (3) high utilisations in Central; and

(3) higher lead distances, we expect prices to hold in the eastern

region despite dip in utilisations.

Pricing premium in the eastern markets have narrowed


0%

5%

10%

15%

20%

25%

30%

35%

200

250

300

350

400

Ju

n-1

3

Aug

-13

Oct-

13

De

c-1

3

Feb

-14

Apr-

14

Ju

n-1

4

Aug

-14

Oct-

14

De

c-1

4

Feb

-15

Apr-

15

Ju

n-1

5

Aug

-15

Cem

ent

Price (

Rs/b

ag)

All India East % pricing premium in east over other regions (RHS)

OCL India realizations vs. All India realization growth


5% 2%

-4% -7%

-2%

0%

3%

8% 5%

6%

0%

10%

14%

1%

0%

7%

-4%

0% -1% -1%

0%

-2%

-10%

0%

10%

20%

3Q

FY

13

4Q

FY

13

1Q

FY

14

2Q

FY

14

3Q

FY

14

4Q

FY

14

1Q

FY

15

2Q

FY

15

3Q

FY

15

4Q

FY

15

1Q

FY

16

Average realsations (% y-o-y growth) OCL Realsations (% y-o-y growth)

Prism Cement realizations vs. All India realization growth


5% 2%

-4%

-7%

-2% 0%

3%

8%

5% 6%

0%

1%

10%

-17%

-6%

6%

3%

10%

5%

8%

-9%

-2%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

3Q

FY

13

4Q

FY

13

1Q

FY

14

2Q

FY

14

3Q

FY

14

4Q

FY

14

1Q

FY

15

2Q

FY

15

3Q

FY

15

4Q

FY

15

1Q

FY

16

Average realsations (% y-o-y growth) Prism Cement Realsations (% y-o-y growth)


Cement companies exposure to East and Central markets

EAST

Capacity (FY16)

% of

company's

capacity

% of

regions

capacity

ACC 28.3% 15.1%

Ambuja 23.0% 10.8%

UltraTech 16.0% 18.2%

Shree Cement 19.5% 7.3%

Ramco Cement 14.5% 3.1%

Birla Corp 51.3% 11.9%

Dalmia Bharat 51.9% 19.8%

Prism Cement 0.0% 0.0%

Heidelberg 0.0% 0.0%

JK Lakshmi 18.2% 2.7%

Star Cement 100.0% 5.4%

OCL India 100.0% 10.7%

CENTRAL

Amongst the Pan-India players. ACC, UTCEM, and ACEM have 35%, 31%, and 28% of its capacities in East and Central markets.

Amongst the large regional players, Dalmia Bharat and Shree Cement have 52% and 28% of its capacities in East and Central markets.

Amongst the other regional payers, Prism Cement, OCL India, Heidelberg Cement, and Birla Corp have 100% or majority of its capacities in East and

Central markets.

* Dalmia Bharat’s capacity includes 6.7mt of OCL India, where it has a 75% stake.

EAST + CENTRAL

+ =

Capacity (FY16)

% of

company's

capacity

% of

regions

capacity

ACC 13.4% 8.9%

Ambuja 5.1% 2.9%










OCL India 0.0% 0.0%

Capacity (FY16)

% of

company's

capacity

% of

regions

capacity

ACC 41.7% 12.3%

Ambuja 28.0% 7.3%










OCL India 100.0% 5.9%

Detailed profile of East & Central States with their key demand drivers


State of Assam

Profile:

Assam has the single largest tea growing area in the world, constituting around

one seventh of the global tea production. The state has high oil reserves

accounting ~50% of India’s total onshore gas production

Assam is rich in rubber and minerals like granite, limestone and kaolin

Assam’s GSDP has registered a growth of 6% CAGR over FY05-15

Assam’s cement consumption in FY15 was ~3 mt

Assam’s per capita cement consumption is ~93kg/year, which is well below

India’s per capita cement consumption of 205kg/year

The state has adequate limestone reserves, potential to supply to all North

Eastern States. Assam has three cement plants currently

Demand drivers in place

In May 2015, the State government sanctioned an investment of Rs. 53bn for the

construction of four-lane highway in Assam

Guwahati metro has been proposed at an estimated cost of Rs. 18bn

In July 2015, the State government announced plans to establish one Greenfield

project at Kokrajhar and plans to up-grade existing airports anticipating the future

increase in demand of airports

In FY16 budget, the State government sanctioned Rs. 8bn for the construction of

0.6mn individual household toilets in the state and proposed to cover 300 gram

panchayats with solid liquid waste management schemes along with the

construction of 270 community sanitary complexes in the state

Assam Gross State Domestic Product

Assam economic parameters

Assam per capita income

Economy - FY 2014-15 Assam All States

GSDP as a percentage of all states’ GSDP 1.5 100.0

GSDP growth rate (%) 13.0 7.3

Per capita GSDP (US$) 955.4 1,389.6

Percentage distribution of GSDP FY 2004-05 FY 2014-15

Primary 26% 21%

Secondary 27% 22%

Tertiary 47% 57%

2% 3% 3% 4% 8% 4% 3% 4% 6% 4%

4%

0%

4%

8%

12%

-

10,000

20,000

30,000

40,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05-1

5

Assam Per Capita Income (Rs.) % change

3%5% 5% 6%

9%5% 5% 5%

8%6%

6%

0%

4%

8%

12%

400

600

800

1,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

Assam GSDP (Rs. bn) % change

Source: RBI Database and Spark Capital Research


State of Bihar

Profile of the State:

Bihar has the highest agricultural production in India. About 80% of the state’s

population is employed in agriculture sector. Bihar is the largest producer of

vegetables and second largest producer of fruits in India

Bihar’s GSDP has registered a strong growth of 9% CAGR over FY05-15

Bihar’s cement consumption in FY15 was ~9 mt

Bihar’s per capita cement consumption is ~88kg/year, which is well below India’s

per capita cement consumption

The state’s demand is met primarily from the Satna cluster in MP. The state also

receives supplies from plants in Odisha and Chhattisgarh. Bihar has three

cement plants all being grinding units


In May 2015, the Central government sanctioned an investment of Rs. 500bn for

the construction of roads in Bihar. The construction activity is expected to begin

by the end of 2015

In FY16 budget, Rs. 50bn has been sanctioned for the construction of roads and

highways in the state

Government allocated Rs. 52bn for rural development in FY16 budget

The State Investment Promotion Board (SIPB) has approved 1891 project

proposals till September 2014 with total investment of ~Rs. 2,866bn. This will

create job opportunities for 0.21mn people in the state

Bihar Gross State Domestic Product

Bihar economic parameters

Bihar per capita income

Economy - FY 2014-15 Bihar All States





Primary 32% 23%

Secondary 14% 20%

Tertiary 55% 57%

-2%

16%

6%

15%

5%

15% 10% 11% 9%9%

9%

-4%

2%

8%

14%

20%

-

500

1,000

1,500

2,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

Bihar GSDP (Rs. bn) % change

-3%

14%

4%

13%

4%

13%

9% 9%8%

8%8%

-8%

-2%

4%

10%

16%

-

5,000

10,000

15,000

20,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05-1

5

Bihar Per Capita Income (Rs.) % change



State of Chhattisgarh


Chhattisgarh is the sole producer of Tin in India. The state is the largest producer

of minerals like coal, iron ore and dolomite. Korba district is known as power

capital of India

Chhattisgarh's GSDP has registered a strong growth of 8% CAGR over FY05-15

Chhattisgarh's cement consumption in FY15 was ~6 mt

Chhattisgarh’s per capita cement consumption is ~204kg/year, which is on par

with India’s per capita cement consumption

Chhattisgarh is the net exporter of cement to other states given its adequate

limestone reserves


Allocation to the road sector has been increased by 43% in FY16 budget to Rs.

51bn. Around 2000kms of roads to be upgraded in Public-Private partnership

(PPP) mode with an investment of Rs. 100bn

The State government has allocated Rs. 7bn for rural road connectivity

The State also plans to develop a 300-km Rail Corridor through a joint-venture

with Sothern Eastern Coalfields and IRCON with an investment of Rs. 50bn

Chhattisgarh has most slum dwellers. Government plans to provide 40,000

housing units under Mukhya Mantri Awas Yojana

The Central government identified 36 cities/towns in Chhattisgarh for the

construction of houses for the urban poor under the scheme Housing and Urban

Poverty Alleviation (HUPA)

In FY16 Budget, Rs. 21bn has been allocated towards irrigation projects by the

State government

Chhattisgarh Gross State Domestic Product

Chhattisgarh economic parameters

Chhattisgarh per capita income

Economy - FY 2014-15 Chhattisgarh All States



Per capita GSDP (US$) 1,285 1,389.6


Primary 32% 31%

Secondary 33% 29%

Tertiary 35% 40%

3%

19%

9% 8% 3%11% 6%

9% 5% 6%8%

0%

5%

10%

15%

20%

-

500

1,000

1,500

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

Chhattishgarh GSDP (Rs. bn) % change

1%

16%

7%6% 2% 8% 4% 7% 3% 4%

6%

0%

6%

12%

18%

-

10,000

20,000

30,000

40,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05-1

5

Chhattishgarh Per Capita Income (Rs.) % changeSource: RBI Database and Spark Capital Research


State of Jharkhand


Jharkhand is the largest producer of tussar silk and sole producer of minerals like

coking coal, uranium & pyrite in India. The state is also one of the richest mineral

zones in India

Jharkhand’s GSDP has registered a growth of 7% CAGR over FY05-15

Jharkhand’s cement consumption in FY15 was ~4 mt

Jharkhand’s per capita cement consumption is ~121kg/year, which is well below

India’s per capita cement consumption

The state’s demand is met primarily from the Satna cluster in MP. Jharkhand has

4 cement plants; majority being grinding units


Allocation to the road and buildings sector in FY16 budget is ~Rs. 90bn. The

Government plans to construct 15 bridges, upgrade to two-lane roads and

expand highways

Allocation to the rural development in FY16 budget is ~Rs. 55bn

Allocation of Rs. 34bn has been made towards irrigation projects in the current

budget

The Road Ministry of India has announced plans to expand highways in

Jharkhand under the PPP model with an investment of Rs. 54bn. In order to

expand the railway network project – 1507 kms, the State government proposed

an investment of Rs. 5bn

The Central government identified 15 cities/towns in Jharkhand for the

construction of houses for the urban poor under the scheme HUPA

Jharkhand Gross State Domestic Product

Jharkhand economic parameters

Jharkhand per capita income

Economy - FY 2014-15 Jharkhand All States



Per capita GSDP (US$) 1,111.2 1,389.6


Primary 26% 26%

Secondary 41% 32%

Tertiary 33% 42%

-3% 2%

21%

-2% 10%

16%4% 7% 9% 7%

7%

-6%0%6%12%18%24%

-

500

1,000

1,500

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

Jharkhand GSDP (Rs. bn) % change

-5% 1%

19%

-3%9%

14% 3% 6% 7%6%

5%

-6%0%6%12%18%24%

-

10,000

20,000

30,000

40,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05-1

5

Jharkhand Per Capita Income (Rs.) % changeSource: RBI Database and Spark Capital Research


State of Madhya Pradesh


Madhya Pradesh (MP) is rich in natural resources like fuels, minerals, agriculture

and bio-diversity. The state has significant reserves of limestone, manganese

and dolomite

The state has the largest reserves of diamond and copper in India

MP’s GSDP has registered a strong growth of 8% CAGR over FY05-15

MP’s cement consumption in FY15 was ~12 mt

MP’s per capita cement consumption is ~163kg/year, which is slightly below


The state is net exporter of cement as it has adequate limestone reserves. MP

has 13 cement plants


The state has allocated Rs. 17bn towards irrigation projects in the FY16 budget,

an increase of 37%

Allocation to Rural Development has increased by 1% to Rs. 126bn in the current

budget

The state has sanctioned for the construction of 0.18mn individual and 634

community toilets in 218 urban bodies under Mukhya Mantri Shahri Swacch

Mission

Government allocated Rs. 23bn for the construction of 75,000 houses for urban

poor. In addition, 0.15mn houses to be built in rural areas with an investment of

Rs. 111bn. The state targets to provide 0.5mn houses in city areas by year 2018

The Road Ministry of India has announced plans to expand roads and highways

in MP under the PPP model with an investment of Rs. 330bn

The Government targets to build 2,500kms roads and construct 50 bridges in

FY16. Allocation to the road and buildings works has increased by 39% to Rs.

59bn

Madhya Pradesh Gross State Domestic Product

Madhya Pradesh economic parameters

Madhya Pradesh per capita income

Economy - FY 2014-15 MP All States





Primary 33% 39%

Secondary 22% 19%

Tertiary 45% 42%

5%

9%

5%

12%

10% 6%9% 9% 9% 10%

8%

0%

4%

8%

12%

16%

-

1,000

2,000

3,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

Madhya Pradesh GSDP (Rs. bn) % change

3%

7%3%

11%

8% 5%7% 7% 8%

9%7%

0%

4%

8%

12%

-

10,000

20,000

30,000

40,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05-1

5

Madhya Pradesh Per Capita Income (Rs.) % change



State of Odisha


Odisha is a hub for mineral-based industries, largest iron and steel producer and

has the highest aluminum production capacity. The state is amongst the top ten

states for the highest number of Micro Small and Medium Enterprises (MSMEs)

Odisha’s GSDP has registered a growth of 7% CAGR over FY05-15

Odisha’s cement consumption in FY15 was ~9 mt

Odisha’s per capita cement consumption is ~205kg/year, which is on par with


The state’s supplies comes primarily from within the state from plants of OCL,

UltraTech, Lafarge and ACC. The state also receives supplies from Telangana’s

Nalgonda cluster


Allocation of Rs. 11bn has been made towards irrigation projects in FY16 budget,

an increase of 22%

Allocation to Rural Development is up by 67%, provision of Rs. 24bn is made for

improving infrastructure in rural areas

Allocation to Housing & Urban Development has increased by 2% to Rs. 29bn in

FY16 budget

Allocation of Rs. 7bn has been made for the construction of roads and 34 bridges

in FY16 budget, an increase of 21% to Rs. 42bn

The State government allocated Rs. 15bn in FY16 budget for infrastructure

development, an increase of 11%

Odisha Gross State Domestic Product

Odisha economic parameters

Odisha per capita income

Economy - FY 2014-15 Odisha All States





Primary 23% 29%

Secondary 24% 23%

Tertiary 53% 48%

6%

13%11%

8% 5% 8% 4% 4% 2% 8%7%

0%

4%

8%

12%

16%

-

500

1,000

1,500

2,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

Orissa GSDP (Rs. bn) % change

4%

11% 9%

6% 3% 7% 3% 2% 0% 7%

5%

0%

4%

8%

12%

-

10,000

20,000

30,000

40,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05

-15

Orissa Per Capita Income (Rs.) % change



Uttar Pradesh economic parameters

State of Uttar Pradesh


Uttar Pradesh (UP) is one of the leading tourist destinations, second largest

producer of vegetables and largest wheat & milk producing state in India. UP is a

hub of IT/ITeS services and semiconductor industry. The state is also the third

largest hub for MSMEs in India

UP’s GSDP has registered a growth of 7% CAGR over FY05-15

UP’s cement consumption in FY15 was ~28 mt

UP’s per capita cement consumption is ~135kg/year, which is well below India’s

per capita cement consumption

The state’s demand is met primarily from the Satna cluster in MP and Chanderia

cluster in Rajasthan. UP has 11 cement plants; majority being grinding units


Budget expenditure for FY 2015-16 increased by 10%

In the FY16 budget, the State government plans to invest Rs. 30bn for the

construction of Lucknow to Agra Expressway. The construction work has already

been started in this year

In order to expand the metro network in Ghaziabad and Lucknow metro rail, the

State government has sanctioned Rs. 18bn and Rs. 4bn in FY16 budget

Under the Swachh Bharat Mission, the Government had allocated Rs. 15bn in

the current budget

The Government has allocated Rs. 26bn for the construction and upgradation of

roads in rural areas and Rs. 30bn for rural housing under the scheme Indira

Awas Yojna

Uttar Pradesh Gross State Domestic Product

Uttar Pradesh per capita income

Economy - FY 2014-15 UP All States



Per capita GSDP (US$) 755 1,389.6


Primary 31% 22%

Secondary 22% 21%

Tertiary 47% 57%

7%8% 7% 7%

7%8% 6% 6%

5% 6%7%

0%

4%

8%

12%

-

2,000

4,000

6,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

Uttar Pradesh GSDP (Rs. bn) % change

4%6% 5% 5% 5% 6% 4% 4% 3%

4%

5%

0%

4%

8%

-

10,000

20,000

30,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05-1

5

Uttar Pradesh Per Capita Income (Rs.) % changeSource: RBI Database and Spark Capital Research


State of West Bengal

West Bengal Gross State Domestic Product

West Bengal economic parameters

West Bengal per capita income


West Bengal (WB) state is the sixth largest economy in India. The state is the

leading exporter of leather which accounts for 55% of India’s leather good export.

WB is largest producer of jute, tea, potato, rice and fish. WB is the third largest

state of mineral production

WB’s GSDP has registered a growth of 7% CAGR over FY05-15

WB’s cement consumption in FY15 was ~11 mt

WB’s per capita cement consumption is ~119kg/year, which is well below India’s

per capita cement consumption of 205kg/year

The state’s demand comes primarily from the Satna cluster in MP and Bilaspur

cluster in Odisha. WB state has only grinding units


In FY16 budget, the State government allocated Rs. 8bn for the construction of

60,000 houses, five working women hostels and three night shelters

Allocation of Rs. 20bn has been made towards Irrigation and Waterways in the

current budget

In FY16 budget, the Government lays emphasis on infra and road projects, major

ones being:

− Construction of two lane roads between Ghatakpukur to Sarberia, Chanditala

to Champadanga road, Adisaptagram to Guptipara and Barjora to Mejhia.

Project cost is Rs. 5.7bn

− WB Highway Development Corporation has started the four-laning of Dankuni

to Kalyani via Mogra. Project cost is ~Rs. 6.4bn

− Construction of Asia Highway 2, connecting Nepal Border (Kakarbhita) to

Bangladesh Border (Banglabandha) with an investment of Rs. 6bn. In addition,

Asian Highway connecting Bangladesh Border (Brumaire) to Bhutan Border

(Pasakha) is built with project cost of ~Rs. 9.7bn

Economy - FY 2014-15 WB All States





Primary 25% 25%

Secondary 21% 15%

Tertiary 54% 60%

6%8% 8%

5%8% 6% 5%

8% 7% 7%7%

0%

4%

8%

12%

-

2,000

4,000

6,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

F

Y05-1

5

West Bengal GSDP (Rs. bn) % change

5%7% 7%

4%

7%

5% 4%

7% 6% 6%6%

0%

4%

8%

-

20,000

40,000

60,000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

CA

GR

FY

05-1

5

West Bengal Per Capita Income (Rs.) % changeSource: RBI Database and Spark Capital Research


States Sectors

Housing Roads Irrigation Rail Others

Assam

Investment: Rs. 8bn

Project: Construction of 0.6mn toilets and 270

community sanitary complex

Investment: Rs. 53bn

Project: 4-lane highway N.A.


Project: Guwahati Metro Rail is

proposed

Project: Construct airport in

Kokrajhar and upgrade existing

airports

Bihar N.A.

Investment: Rs. 50bn + Rs. 500 bn

Project 1: Construction of roads and highways

Project 2: Central government allocation for the

construction of roads

N.A. N.A. Investment: Rs. 52bn

Project: Rural development

Chhattisgarh

Project 1: 40,000 housing units to be provided under

Mukhya Mantri Awas Yojana

Project 2: 36 cities/towns identified for the construction

of houses for the urban poor under the scheme HUPA

Investment: Rs. 13bn + Rs. 100bn

Project 1: Construction and upgradation of roads

Project 2: Road upgradation through PPP mode


Project: Irrigation


Project: Development of 300km

Rail corridor

Investment: Rs. 7bn

Project: Rural road connectivity

Jharkhand Project: 15 cities/towns identified for the construction of

houses for the urban poor under the scheme HUPA


Project 1: Construction of 15 bridges, 2-lane roads

and expansion of highways. Allocation is also made

for the construction of buildings

Project 2: Expansion of highways through PPP

mode


Project: Irrigation

Investment: Rs. 5bn

Project: Expansion of railway

network - 1507kms



Madhya

Pradesh


Project 1: Construction of 75,000 houses for urban

poor.

Project 2: Construction of 0.15mn houses in rural areas

Project 3: Construction of 0.18mn individual and 634

community toilets under Mukhya Mantri Shahri Swacch

Mission


Project 1: Construction of 2,500kms roads and 50

bridges

Project 2: Expansion of roads and highways through

PPP mode


Project: Irrigation N.A.

Investment: Rs. 1.7bn


Odisha Investment: Rs. 0.61bn

Project: Housing and Urban development


Project 1: Construction of roads and 34 bridges

Project 2: Infrastructural development


Project: Irrigation N.A.



Uttar Pradesh


Project: Rural housing under the scheme Indira Awas

Yojna


Project 1: Lucknow-Agra Expressway. Rs. 30bn

allocated for FY15-FY16

Project 2: Construction and up gradation of roads in

rural areas

N.A.

Investment: Rs. 18bn + Rs.

4bn

Project 1: Expansion of

Ghaziabad metro netwrok

Project 2: Construction of

Lucknow metro

N.A.

West Bengal

Investment: Rs. 8bn

Project: Construction of 60,000 houses, five women

hostels and three night shelters

Investment: Rs. 6bn + Rs. 6bn + Rs. 16bn

Project 1: Construction of two lane roads in many

localities

Project 2: Construction of four lane roads from

Dankuni to Kalyani

Project 3: Construction of Asia highway connecting

Nepal border to Bangladesh border to Bhutan

border

Investment: 20bn

Project: Irrigation N.A. N.A.

Summary of drivers from State budgets FY16


Madhya Pradesh (in Rs.)

Source: RBI Database, Spark Capital Research

Bihar (in Rs.)


Assam (in Rs.)


West Bengal (in Rs.)


Uttar Pradesh (in Rs.)


Average Daily Wage Rates in Rural India; Eastern and Central States outpacing All-India wage growth

All India (in Rs.)


19%

12%

26% 25%

5%

0%

5%

10%

15%

20%

25%

30%

-

50

100

150

200

250

300

FY12 FY13 FY14 FY15 UptoMay-15

Assam y-o-y growth %

13%

26%

21%

11%

7%

0%

5%

10%

15%

20%

25%

30%

-

50

100

150

200

250

300


Bihar y-o-y growth %

19% 20%

25%

15%

7%

0%

5%

10%

15%

20%

25%

30%

-

20

40

60

80

100

120

140

160

180

200


Madhya Pradesh y-o-y growth %

11%

22%

19%

8%

4%

0%

5%

10%

15%

20%

25%

-

50

100

150

200

250


Uttar Pradesh y-o-y growth %

22%

17%

24%

9%

4%

0%

5%

10%

15%

20%

25%

30%

-

50

100

150

200

250

300

350


West Bengal y-o-y growth %

19% 18%

23%

12%

2%

0%

5%

10%

15%

20%

25%

-

50

100

150

200

250

300


All India y-o-y growth %

Company Notes on OCL India and Prism Cement

OCL India CMP

Rs. 500

Financial summary (Standalone)

Year Revenues (Rs. mn) EBITDA (Rs. mn) PAT (Rs. mn) EPS (Rs.) EV/EBITDA(x) EV/t (Rs/t)

FY15 22,149 3,432 1,137 20.0 8.3 4226

FY16E 25,639 4,034 1,340 23.5 6.9 4157

FY17E 27,619 4,504 1,709 30.0 5.9 3936

Pure play on the Eastern markets

Stock performance (%)

1m 3m 12m

OCL -5 2 57

Sensex -6 -4 -3

Update date Sep 21, 2015

Market Data

SENSEX 26219

Nifty 7982

Bloomberg OSC IN

Shares o/s 57mn

Market Cap Rs. 29bn

52-wk High-Low Rs. 685-295

3m Avg. Daily Vol Rs. 6mn

Index member BSE 500

Latest shareholding (%)

Promoters 74.9

Institutions 0.7

Public 24.4

OCL India Limited (OCL) is a Dalmia group company having presence in Cement and Refractory business with

6.7mt cement capacity split across two locations in Odisha and one in West Bengal and refractory capacity of

1,31,000MTPA. OCL has a strong presence with a dominant market share of ~23% in Odhisa markets. We like

OCL due to (1) their strong presence in East, where we expect strong demand (2) potential for volume growth as

current utilizations at ~70% and (3) strong balance sheet. At CMP of Rs. 510, OCL is trading at ~6.0x FY17E

EV/EBITDA and EV/t of $65/t. Given its strong positioning in the Eastern markets coupled with healthy balance

sheet, we believe it looks attractive at current prices.

Investment Thesis:

Strong East presence and lower lead distance to Odisha are the key positives: OCL sells ~50% of its production in

Odisha (lead distance of ~200kms) and the remaining in other Eastern states under the brand name “Konark”. OCL

primarily sells slag cement. Slag is being procured from Rourkela Steel, Adhunik Steel, Bhusan Steel and Tata Steel.

“Konark” brand has a strong brand image in Eastern India, resulting in premium pricing. The company recently launched

a premium brand “Konark DSP”, which is currently ~15% of its trade sales.

Cement business volumes and profitability: Cement business comprises of 86% of revenues and 93% of EBITDA.

The company sold 4.27mt in FY15, implying an utilisation of 70%. OCL India reported a volume and realisation CAGR of

5% and 6% respectively over FY11-FY15. Total costs/t grew at a CAGR of 8% over FY11-FY15 driven by 19% increase

in freight costs (increasing lead distance due to entering new markets and diesel price hikes). EBITDA/t in FY15 was Rs.

751/t versus peak of Rs. 1,164/t in FY10 and Rs. 1,138/t in FY13. Given falling diesel prices, lower fuel prices, and

improvement in efficiencies, we expect OCL India margins to improve from the current levels.

Refractory business: Refractory business comprises of 14% of revenues and 7% of EBITDA. Iron and Steel industry

accounts for 70% of the total demand for refractories, while the balance comes from cement, aluminum, glass, and

copper industries. The refractory market in India is ~60bn. OCL India’s refractory revenues in FY15 was Rs. 3.07bn with

an EBITDA margin of 7.3%.

Healthy balance sheet: OCL India’s net debt as on FY15 is Rs. 1.75bn, which is 0.1 net debt to equity. We expect the

company to turn net cash over the next two years led by volumes growth, efficiencies, and low capex.

OCL India CMP

Rs. 500 OCL India – Business Overview

EBITDA/t trends


OCL’s plant-wise cement and power capacity


Realization/t dropped significantly in FY15


Volume trends


3.3

3.1

3.5 3.4

4.3

11%

-7%

12%

-2%

26%

-10%

0%

10%

20%

30%

2.0

2.5

3.0

3.5

4.0

4.5

FY11 FY12 FY13 FY14 FY15

Volumes (mt) % growth

3,5

36

3,6

96

4,3

45

4,5

16

4,4

30

-4%

5%

18%

4%

-2%

-10%

0%

10%

20%

2,000

2,500

3,000

3,500

4,000

4,500

5,000


Realisations (Rs./t) % growth837

582

1,1

38

796

751

400

600

800

1,000

1,200


EBITDA (Rs./t)

Plant Location Start Cement (mt) Power

(MW)

Kapilas Odisha Jul-08 1.35 Nil

Rajganjpur Odisha Legacy

plant 4.00 54

Medinipur West Bengal Mar-14 1.35 Nil

Total 6.70 54

OCL India CMP


Dividend payout history


Refractory business performance


RoE trends


Operating cash flow trends


2,9

33

3,1

27

3,0

54

3,1

76

3,0

77

8% 9%

8%

7% 7%

0%

2%

4%

6%

8%

10%

1,000

1,500

2,000

2,500

3,000

3,500


Refractory revenues (Rs. mn) EBiTDA margins %

2.1 2.1 3.4 3.9 4.3

69%

99% 81%

132% 126%

50%

65%

80%

95%

110%

125%

140%

0.0

1.0

2.0

3.0

4.0

5.0


OCF (Rs.bn) % of EBITDA

13.6%

3.6%

16.1%

9.1% 9.9%

2%

4%

6%

8%

10%

12%

14%

16%

18%


RoE %

4.0

2.0

4.0

4.0

4.0

20%

36%

15%

23%

20%

10%

20%

30%

40%

0.0

1.0

2.0

3.0

4.0

5.0


DPS (Rs.) Payout %

OCL India CMP


Cost/t trends

Source:Spark Capital

Power consumption significantly reduced in last 4 years


State wise - Market share of Konark brand increased


Operating efficiency improved qoq


82 81

75 73

69

60

65

70

75

80

85


Power Consumption/t of cement produced (kwh/t)

Fuel Mix (on calorific

value basis) Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15

Coal 100% 92% 85% 68%

Petcoke 0% 8% 14% 31%

Alternate Fuel 0% 0% 1% 1%

Total 100% 100% 100% 100%

Market Share FY14 FY15

Odisha 22.1% 23.3%

West Bengal 6.1% 8.4%

Bihar 5.2% 6.5%

Jharkhand 7.6% 8.2%

Total 8.3% 9.9% 2,7

00

3,1

15

3,2

07

3,7

20

3,6

79 7%

15%

3%

16%

-1%

-10%

0%

10%

20%

1,500

2,000

2,500

3,000

3,500

4,000


Total Cost (Rs./t) % growth

OCL India CMP

Rs. 500 Financial Summary

Abridged Financial Statements

Rs. mn FY14 FY15 FY16E FY17E FY14 FY15 FY16E FY17E

Profit & Loss Operational metrics

Revenues 18,555 22,149 25,639 27,619 Sales volumes (mt) 3.4 4.3 4.9 5.2

EBITDA 2,910 3,432 4,034 4,504 Realisations/Tonne 4,516 4,430 4,563 4,699

Other Income 366 278 410 410 EBITDA/Tonne 796 751 778 830

Depreciation 1,264 1,389 1,386 1,434

EBIT 2,012 2,320 3,058 3,480 Revenues 2.1% 19.4% 15.8% 7.7%

Interest 681 710 1,058 930 EBITDA -30.1% 17.9% 17.5% 11.7%

PBT 1,331 1,610 2,001 2,550 PBT -41.2% 21.0% 24.2% 27.5%

Exceptionals loss/(Income) - - - - PAT -37.4% 16.2% 17.9% 27.5%

Tax 352 473 660 842 Margins Ratios

PAT after exceptionals 979 1,137 1,340 1,709 EBITDA 15.7% 15.5% 15.7% 16.3%

Balance Sheet PBT 7.2% 7.3% 7.8% 9.2%

Networth 11,099 11,962 13,037 14,481 PAT 5.3% 5.1% 5.2% 6.2%

Total Debt 7,355 13,191 11,691 10,191

Deferred Tax 1,364 1,527 1,527 1,527 Net Debt to Equity (x) 0.4 0.1 0.1 -0.1

Total Networth & Liabilities 19,819 26,680 26,255 26,199 RoAE (%) 9.1% 9.9% 10.7% 12.4%

Gross Block 23,302 24,714 26,525 27,775 RoCE (%) 8.0% 7.5% 8.2% 9.4%

Net Block + CWIP 13,924 13,583 13,447 13,264 Gross Asset Turnover (x) 0.9 0.9 1.0 1.0

Investments 3,073 11,138 11,138 11,138 Valuation metrics

Net working capital (ex cash) 1,965 1,066 1,254 1,403 Shares Outstanding (mn)

Cash 856 893 415 394 Market Cap (Rs. mn) 28,463 28,463 28,463 28,463

Net working capital 2,821 1,959 1,670 1,797 Core Enterprise Value (Rs. mn) 30,301 28,311 27,850 26,372

Total Assets 19,818 26,680 26,255 26,199 EV/EBITDA (x) 10.4 8.3 6.9 5.9

Cash Flows Core EV/t 5,664 4,226 4,157 3,936

Cash flows from operating 3,856 4,314 3,595 3,923 P/E(x) 29.1 25.0 21.2 16.7

Cash flows from investing (2,960) (9,176) (1,250) (1,250) P/B (x) 2.6 2.4 2.2 2.0

Cash flows from financing (1,538) 4,861 (2,823) (2,695) Net cash generation yield (%) -2.3% 0.0% -1.7% -0.1%

Free Cash Flows 215 (5,572) 1,288 1,743 Dividend yield (%) 0.8% 0.8% 0.8% 0.8%

Key metrics

Performance Ratios

56.9

Growth ratios

Prism Cement CMP

Rs. 90

Financial summary (Consolidated)

Year Revenues (Rs. mn) EBITDA (Rs. mn) PAT (Rs. mn) EPS (Rs.) EV/EBITDA(x) PE (Rs/t)

FY15 56,544 3,512 26 0.1 18.3 1729.1

FY16E 60,748 4,991 696 1.4 12.3 65.1

FY17E 69,994 7,663 2,690 5.3 7.7 16.8

Favourable regional exposure in cement; TBK business on the mend

Stock performance (%)

1m 3m 12m

PRSC -9 -15 23

Sensex -6 -4 -3

Update date Sep 21, 2015

Market Data

SENSEX 26219

Nifty 7982

Bloomberg PRSC IN

Shares o/s 503mn

Market Cap Rs. 47bn

52-wk High-Low Rs. 134-65

3m Avg. Daily Vol Rs. 55mn

Index member BSE 500

Latest shareholding (%)

Promoters 74.9

Institutions 16.1

Public 9.0

GIRISH CHOUDHARY [email protected] +91 44 4344 0021 VIJAYARAGHAVAN SWAMINATHAN [email protected] +91 44 4344 0022

Prism Cement is a part of Rajan Raheja Group company with diversified presence in cement, ready-mix concrete

(RMC) and tiles, bath products to kitchen (TBK). PRSC is India’s leading integrated building materials player and

as a result should benefit from all major themes of pick up in infrastructure spend, low cost housing,

urbanization/ nuclearisation and industrial infrastructure.

Investment Thesis -

Cement business (39% & 49% of FY15 revenues & EBITDA) – Favorable regional exposure is a key positive:

PRSC has a saleable capacity of 7mt in Central India, where we expect favorable demand supply equation versus All-

India. The company sells around 78% of its volumes in Central and 22% in the Eastern states. PRSC’s volumes and

realisations grew at a CAGR of 13% and 6% respectively over FY11-FY15. The company has taken several cost saving

initiatives, which are (1) increasing pet coke consumption to ~60%; (2) lower power consumption; and (3) higher blending.

We expect this to aid margin expansion in the coming quarters

TBK business (39% & 27% of FY15 revenues & EBITDA) – Turnaround post installation of coal gassifiers: PRSC’s

TBK (Tiles, Bath, Kitchen) division is one of the leading manufacturer of ceramic tiles (installed capacity of 54msm,

Johnson brand) with a market share of 18%. Johnson has lost market share do its peers due to inadequate availability of

fuel at its Andhra Pradesh plants (which account for 1/3rd of the installed capacity). PRSC has installed three coal

gassifiers in two of its plants in AP.

Leverage to peak out by FY15: PRSC’s debt has increased from Rs. 12bn in FY11 to ~Rs. 18bn in FY14 due to

combination of earnings pressure from both cement and TB business and maintenance capex. However, with the

company’s cement and TBK segment seeing a turnaround and limited capex budget, we believe PRSC’s debt has

peaked out. We expect FY14 net leverage of 1.8x to trend down to 1.5x by FY16E.

Our view on the stock: We like PRSC given its favorable regional exposure in cement business. In its TBK business, the

worst is behind with installation of coal gassifiers which will help increase utilizations and margins. However, growth will

remain challenged in FY16E as a result we expect margin recovery to be delayed as well in the TBK business. With

minimal capex over the next two years, we expect leverage to trend down for PRSC. However at 8x FY16E EV/EBITDA

most of these positives have been factored in the stock price. We would wait for a better entry price for a better risk

reward.

Prism Cement CMP

Rs. 90 Prism Cement – Business Overview

EBITDA Split


Region wise Cement Sales mix


Revenue Split


Cement Product Mix


UP, 49%

MP, 29%

Bihar, 20%

Chhattisgarh, 2%

PPC, 94% Hi-Tech, 3%

OPC, 3%

Cement, 39%

TBK, 39%

RMC, 21%

Others , 1%

Cement, 68%

TBK, 20%

RMC, 8%

Others , 4%

Prism Cement CMP


EBITDA/t trends


Volume trends


Costs/t trends


Realization trends


5.2

4.8

5.1

5.6

54%

-9%

7% 10%

-20%

0%

20%

40%

60%

4.0

4.4

4.8

5.2

5.6

6.0

FY12 FY13 FY14 FY15

Volumes (mt) y-o-y growth %

3,289

3,950 3,805 3,916 5%

20%

-4%

3%

-5%

0%

5%

10%

15%

20%

25%

2,000

2,500

3,000

3,500

4,000

4,500

FY12 FY13 FY14 FY15

Realisation (Rs./t) y-o-y growth %

3,049

3,611 3,632

3,477

16% 18%

1%

-4%

-10%

0%

10%

20%

2,900

3,000

3,100

3,200

3,300

3,400

3,500

3,600

3,700

FY12 FY13 FY14 FY15

Total Cost (Rs./t) y-o-y growth %

240

339

173

439

100

200

300

400

500

FY12 FY13 FY14 FY15

EBITDA (Rs./t)

Prism Cement CMP


Segmental RoCE (%) trends (Pre-tax)


Net Debt to Equity


RoE trends


OCF and FCF


0.70

1.37 1.67 1.79

-

0.50

1.00

1.50

2.00

FY12 FY13 FY14 FY15

Net debt to equity (x)

2,667 2,599

(147)

2,299

829 319

(2,894)

(598)

(3,000)

(2,000)

(1,000)

-

1,000

2,000

3,000

FY12 FY13 FY14 FY15

Operating cash flows (Rs. mn) Free cash flows (Rs. mn)

-1.5%

-5.3%

-7.8%

0.2%

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

FY12 FY13 FY14 FY15

RoE%

3%

4%

-2%

10%

8%

3%

0%

2%

14%

9%

4%

1%

-4%

0%

4%

8%

12%

16%

FY12 FY13 FY14 FY15

Cement TBK RMC

Prism Cement CMP


RMC EBITDA


TBK Revenues


RMC Revenues


TBK EBITDA


17.1 17.7 19.0 22.1

16% 3% 8%

16%

2%

6%

10%

14%

18%

-

5.0

10.0

15.0

20.0

25.0

FY12 FY13 FY14 FY15

TBK Revenues (Rs. bn) y-o-y growth %

1.2

0.9

0.5 0.7

-28% -25%

-39%

36%

-45%

-30%

-15%

0%

15%

30%

45%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

FY12 FY13 FY14 FY15

TBK EBITDA (Rs. bn) y-o-y growth %

11.3 11.3 11.4

12.0

24%

-1%

1%

5%

-5%

0%

5%

10%

15%

20%

25%

30%

10.8

11.0

11.2

11.4

11.6

11.8

12.0

12.2

FY12 FY13 FY14 FY15

RMC Revenues (Rs. bn) y-o-y growth %

0.6 0.5

0.4 0.3

0%

-13%

-23%

-22%

-25%

-20%

-15%

-10%

-5%

0%

0.0

0.1

0.2

0.3

0.4

0.5

0.6

FY12 FY13 FY14 FY15

RMC EBITDA (Rs. bn) y-o-y growth %

Prism Cement CMP

Rs. 90 Financial Summary

Abridged Financial Statements (Consolidated) Key metrics


Profit & Loss Segment revenues

Revenues 50,266 56,544 60,748 69,994 Cement 19,471 22,006 23,799 26,965

EBITDA 1,793 3,512 4,991 7,663 TBK 18,988 22,099 23,867 28,641

Other Income 1,573 357 425 560 RMC 11,431 12,043 12,645 13,909

Depreciation 2,004 1,649 1,592 1,552 Growth ratios

EBIT 1,362 2,221 3,824 6,671 Revenues 4.3% 12.5% 7.4% 15.2%

Interest 2,746 2,896 2,712 2,545 EBITDA -41.4% 95.9% 42.1% 53.5%

PBT (1,384) (675) 1,113 4,126 PBT 60.2% -51.2% -264.8% 270.8%

Exceptionals loss/(Income) 94 603 - - PAT 38.0% -103.0% 2554.9% 286.7%

Tax (440) (120) 367 1,362 Margins Ratios

PAT after exceptionals (862) 26 696 2,690 EBITDA 3.6% 6.2% 8.2% 10.9%

Balance Sheet PBT -2.8% -1.2% 1.8% 5.9%

Networth 10,588 10,543 13,223 15,409 PAT -1.7% 0.0% 1.1% 3.8%

Total Debt 21,053 22,377 20,858 19,858 Performance Ratios

Deferred Tax & MI 996 756 756 756 Net Debt to Equity (x) 1.7 1.8 1.2 0.9

Total Networth & Liabilities 32,637 33,675 34,836 36,023 RoAE (%) -7.8% 0.2% 5.9% 18.8%

Gross Block 38,475 39,490 40,490 41,490 RoCE (%) 2.8% 4.7% 7.6% 12.9%


Investments 2,259 2,176 2,176 2,176 Net Working Capital Days 28 35 35 32

Net working capital (ex cash) 3,898 5,358 5,789 6,189 Interest coverage (x) 0.5 0.8 1.4 2.6

Cash 1,107 1,296 2,618 3,956 Valuation metrics

Net working capital 5,005 6,654 8,406 10,144 Shares Outstanding (mn) 503 503 503 503

Total Assets 32,637 33,675 34,836 36,023 Market Cap (Rs. mn) 45,302 45,302 45,302 45,302

Cash Flows EPS -1.7 0.1 1.4 5.3

Cash flows from operating (147) 2,299 4,568 6,386 P/E(x) (52.6) 1,729.1 65.1 16.8

Cash flows from investing 95 (750) (1,000) (1,000) EV/EBITDA (x) 35.1 18.3 12.3 7.7

Cash flows from financing 135 (1,387) (2,246) (4,048) Price to book (x) 4.3 4.3 3.4 2.9

Free Cash Flows (2,799) (1,348) 856 2,842 Div yield % 0.0% 0.0% 1.1% 1.1%

Financial Summary of Coverage Companies


ACC - Financial Summary

Abridged Standalone Financial Summary

Rs. mn CY13 CY14 CY15E CY16E CY13 CY14 CY15E CY16E

Profit & Loss

Revenues 1,09,084 1,14,811 1,14,529 1,33,119 Sales volumes (mt) 23.9 24.2 23.5 25.6

EBITDA 13,683 12,501 14,260 23,041 Realisations/t 4,284 4,428 4,517 4,833

Other Income 4,843 5,254 6,675 5,285 EBITDA/t 564 502 591 884

Depreciation 5,740 5,576 6,438 8,155

EBIT 12,786 12,180 14,497 20,171 Revenues -2.0% 5.2% -0.2% 16.2%

Interest 517 828 500 500 EBITDA -30.5% -8.6% 14.1% 61.6%

PBT 12,270 11,352 13,997 19,671 PBT -31.3% -7.5% 23.3% 40.5%

Exceptionals loss/(Income) - - 1,532 - PAT -21.5% 6.6% -20.0% 57.8%

Tax 1,312 (331) 3,116 4,918

Adjusted PAT (pre exceptionals) 10,958 11,683 9,349 14,753 EBITDA 12.5% 10.9% 12.5% 17.3%

PBT 11.2% 9.9% 12.2% 14.8%

Networth 78,248 82,356 84,034 91,116 PAT 10.0% 10.2% 8.2% 11.1%

Total Debt - - - -

Deferred Tax 5,073 5,356 5,356 5,356 Net Debt to Equity (x) -0.3 -0.2 -0.1 -0.1

Total Networth & Liabilities 83,321 87,712 89,390 96,472 RoE (%) 14.4% 14.5% 11.2% 16.8%

Gross Block 1,03,996 1,09,507 1,41,507 1,45,007 RoCE (%) 15.0% 16.0% 13.3% 17.7%


Investments 21,940 15,730 11,230 9,230

Net working capital (ex cash) (10,786) (8,258) (6,435) (5,040) Shares Outstanding (mn)

Cash 5,034 3,043 836 1,178 Market Cap (Rs. mn) 2,57,492 2,57,492 2,57,492 2,57,492

Net working capital (5,752) (5,215) (5,599) (3,862) Enterprise Value (Rs. mn) 2,20,192 2,20,414 2,46,121 2,35,780


EV/t (Rs/t) 7,320 7,328 7,329 7,021


Cash flows from investing (8,521) (14,367) (1,825) (8,215) Price to Book (x) 3.3 3.1 3.1 2.8

Cash flows from financing (8,609) (8,371) (8,171) (8,171) FCF Yield (%) 0.3% -1.1% -2.2% 0.3%

Free Cash Flows after interest 776 (2,781) (5,710) 728 Dividend yield (%) 2.2% 2.2% 2.5% 2.6%

Balance Sheet

Growth ratios

Margins Ratios

Key metrics

Operational metrics

Cash Flows

Performance Ratios

Valuation metrics

188


Ambuja - Financial Summary

Abridged Standalone Financial Summary Key metrics

Rs. mn CY13 CY14 CY15E CY16E CY13 CY14 CY15E CY16E

Profit & Loss

Revenues 90,891 99,109 96,136 1,12,133 Sales volumes (mt) 21.6 22.2 22.2 23.9

EBITDA 15,796 18,612 14,333 24,259 Realisations/t 4,207 4,474 4,340 4,687

Other Income 4,649 4,962 5,604 5,605 EBITDA/t 731 840 647 1,014

Depreciation 4,901 5,095 6,227 6,357

EBIT 15,544 18,479 13,711 23,507 Revenues -6.1% 9.0% -3.0% 16.6%

Interest 651 645 720 720 EBITDA -34.7% 17.8% -23.0% 69.2%

PBT 14,893 17,834 12,991 22,787 PBT -31.7% 19.7% -27.2% 75.4%

Exceptionals loss/(Income) (248) - - - PAT -19.4% 17.8% -35.8% 70.7%

Tax 2,196 2,871 3,378 6,380

Adjusted PAT 12,698 14,964 9,613 16,406 EBITDA 17.4% 18.8% 14.9% 21.6%

PBT 16.4% 18.0% 13.5% 20.3%

Networth 94,855 1,01,033 1,01,435 1,06,922 PAT 14.0% 15.1% 10.0% 14.6%

Total Debt 292 191 - -


Total Networth & Liabilities 1,00,790 1,07,115 1,07,325 1,12,813 RoE (%) 14.2% 15.3% 9.5% 15.7%

Gross Block 1,08,262 1,14,291 1,18,791 1,23,291 RoCE (%) 14.5% 15.8% 10.0% 16.2%


Investments 17,885 21,727 21,727 21,727

Net working capital (ex cash) (8,079) (8,367) (9,590) (8,198) Shares Outstanding (mn) 1,546 1,550 1,550 1,550

Cash 23,411 24,581 24,742 25,695 Market Cap (Rs. mn) 3,24,631 3,24,631 3,24,631 3,24,631

Net working capital 15,332 16,215 15,153 17,497 Enterprise Value (Rs. mn) 2,77,723 2,73,485 2,70,133 2,64,180

Total Assets 1,00,790 1,07,115 1,07,325 1,12,813 EV/EBITDA (x) 17.6 14.7 18.8 10.9

EV/t (Rs/t) 9,936 9,513 9,142 7,759

Cash flows from operating 12,002 16,753 12,179 16,487 P/E (x) 25.6 21.7 33.8 19.8


Cash flows from financing (6,258) (7,171) (10,122) (11,639) FCF Yield (%) 1.3% 2.4% 1.2% 2.2%

Free Cash Flows 4,104 7,874 3,959 6,987 Dividend Yield (%) 1.7% 2.4% 2.4% 3.0%

Operational metrics

Performance Ratios

Balance Sheet

Cash Flows

Growth ratios

Valuation metrics

Margins Ratios


Ultratech - Financial Summary

Abridged Financial Statements Key metrics


Revenues 2,02,798 2,29,362 2,51,824 2,92,342 Total sales volumes (mt) 42.6 46.1 48.4 53.1

EBITDA 38,179 41,950 47,587 62,690 Blended realisations/t 4,756 4,978 5,205 5,507

Other Income 3,290 3,718 3,762 4,297 EBITDA/Tonne 895 910 984 1,181

Depreciation 10,523 11,331 13,016 14,350

EBIT 30,947 34,337 38,333 52,637 Revenues 1.3% 13.1% 9.8% 16.1%

Interest 3,192 5,475 5,931 5,931 EBITDA -15.5% 9.9% 13.4% 31.7%

PBT 27,755 28,863 32,401 46,706 PBT -27.4% 4.0% 12.3% 44.1%

Exceptionals loss/(Income) - - - - PAT -19.2% -6.0% 14.2% 44.1%

Tax 6,310 8,715 9,396 13,545

PAT after exceptionals 21,445 20,147 23,005 33,161 EBITDA 18.8% 18.3% 18.9% 21.4%

PBT 13.7% 12.6% 12.9% 16.0%

Networth 1,70,975 1,88,577 2,08,694 2,38,968 PAT 10.6% 8.8% 9.1% 11.3%

Total Debt 51,993 74,142 74,142 74,142

Deferred Tax 22,958 27,920 27,920 27,920 Net Debt to Equity (x) 0.00 0.14 0.13 0.03

Total Networth & Liabilities 2,45,927 2,90,639 3,10,756 3,41,030 RoE (%) 13.3% 11.2% 11.6% 14.8%

Gross Block 2,50,778 3,18,741 3,48,741 3,68,741 RoCE (%) 17.1% 13.5% 12.9% 16.7%

Net Block + CWIP 1,86,497 2,36,319 2,53,303 2,58,954 Gross Asset Turnover (x) 0.9 0.8 0.8 0.8

Investments 53,917 52,088 52,088 52,088

Net working capital (ex cash) 2,738 93 4,272 7,403 Shares Outstanding (mn)


Net working capital 5,513 2,232 5,366 29,989 Enterprise Value (Rs. mn) 7,73,602 8,01,332 8,02,377 7,80,885

Total Assets 2,45,927 2,90,639 3,10,756 3,41,030 EV/EBITDA (x) 20.3 19.1 16.9 12.5

EV/t (Rs/t) 14,339 13,322 12,354 11,734



Cash flows from financing (8,972) (22,668) (8,819) (8,819) FCF Yield (%) 0.9% 1.2% -0.2% 2.5%

Free Cash Flows 6,942 9,556 (1,920) 20,082 Dividend Yield (%) 0.4% 0.3% 0.3% 0.3%

Cash Flows

Profit & Loss

Margins Ratios

Operational metrics

Performance Ratios

Balance Sheet

274

Growth ratios

Valuation metrics


Shree Cement - Financial Summary


Operational metrics



Other Income 1,849 1,379 1,922 2,384 EBITDA/Tonne 929 755 934 1,103

Depreciation 5,499 9,248 9,182 8,484

EBIT 10,249 5,569 12,007 19,931 Revenues 5.3% 9.6% 23.9% 21.6%

Interest 1,292 1,206 1,045 1,045 EBITDA -11.0% -3.3% 43.4% 35.1%

PBT 8,957 4,363 10,962 18,887 PBT -20.1% -45.8% 105.7% 72.3%

Exceptionals loss/(Income) 805 355 - - PAT -21.6% -45.8% 105.7% 72.3%

Tax 279 (255) 2,192 3,777 Margins Ratios


PBT 15.2% 6.8% 13.7% 19.4%

Networth 47,109 52,764 60,562 74,052 PAT 13.4% 6.6% 11.0% 15.5%

Total Debt 11,999 9,164 9,164 9,164 Performance Ratios

Deferred Tax (1,429) (1,952) (1,952) (1,952) Net Debt to Equity (x) -0.3 -0.2 -0.2 -0.3


Gross Block 69,076 85,080 92,080 1,04,080 RoCE (%) 17.9% 9.8% 14.6% 20.9%


Liquid Investments 22,444 16,626 16,626 16,626 Valuation metrics

Net working capital (ex cash) 695 1,120 4,025 4,710 Shares Outstanding (mn)


Net working capital 2,288 4,195 9,175 19,149 Core Enterprise Value (Rs. mn) 3,68,768 3,70,818 3,63,743 3,54,454

Total Assets 57,679 59,976 67,774 81,264 Cement EV/EBITDA (x) 27.9 30.4 21.0 15.0

Cement EV/t (Rs.) 21,072 17,167 15,413 13,581



Cash flows from financing (1,558) (5,013) (2,016) (2,664) FCF Yield (%) -0.7% -1.0% 0.3% 2.0%

Free Cash Flows (3,131) (4,271) 1,124 8,524 Dividend yield (%) 0.2% 0.2% 0.2% 0.3%

Balance Sheet

Cash Flows

Key metricsAbridged Financial Statements

Profit & Loss

Growth ratios

35


Dalmia Bharat - Financial Summary





Other Income 1,632 933 1,133 1,133 EBITDA/Tonne 461 768 1,052 1,124

Depreciation 2,422 2,716 5,050 5,447

EBIT 2,922 4,243 10,396 13,087 Revenues 4.1% 22.7% 80.1% 20.5%

Interest 3,151 4,344 7,272 6,874 EBITDA -39.7% 62.3% 137.6% 21.6%

PBT (229) (101) 3,124 6,213 PBT -108.4% -55.9% -3189.9% 98.9%

Exceptionals loss/(Income) - (61) - - PAT -104.3% -136.2% 3484.8% 184.1%

Tax 644 469 1,562 2,175 Margins Ratios

Associates profit share 488 485 - - EBITDA 13.0% 17.1% 22.6% 22.8%

Minority Interest (302) (176) 469 932 PBT -0.8% -0.3% 4.9% 8.2%

PAT after exceptionals (84) 30 1,093 3,107 PAT -0.3% 0.1% 1.7% 4.1%

Networth 30,947 30,702 31,652 34,617 Net Debt to Equity (x) 1.2 2.0 2.0 1.7

Total Debt 42,732 82,048 80,548 77,548 RoAE (%) -0.3% 0.1% 3.5% 9.4%

Deferred Tax & MI 6,328 11,756 11,756 11,756 RoCE (%) 7.1% 13.8% 4.1% 6.9%

Total Networth & Liabilities 80,007 1,24,506 1,23,956 1,23,921 Gross Asset Turnover (x) 0.5 0.4 0.7 0.8

Net Block + CWIP + Goodwill 60,987 97,018 97,468 94,521

Investments 12,336 16,905 16,905 16,905 Shares Outstanding (mn)

Cash 844 5,281 1,426 2,975 Market Cap (Rs. mn) 53,592 53,592 53,592 53,592

Net working capital (ex cash) 5,840 5,301 8,157 9,520 Core Enterprise Value (Rs. mn) 69,441 1,12,751 1,15,106 1,10,557

Total Assets 80,007 1,24,506 1,23,956 1,23,921 EV/EBITDA (x) 18.7 18.7 8.0 6.4

Core EV/t (Rs/t) 6,923 5,550 5,666 5,442

Cash flows from operating 3,437 10,167 10,560 14,065 P/E(x) -636.5 1,757.1 49.0 17.3


Cash flows from financing 4,285 34,830 (8,915) (10,016) FCF/EV (%) -10.9% -20.0% -1.9% 4.2%

Free Cash Flows (7,592) (22,540) (2,212) 4,692 Dividend yield (%) 0.3% 0.2% 0.2% 0.2%

Growth ratios

Balance Sheet Performance Ratios

Valuation metrics

Cash Flows

Key metrics


81


Ramco Cements - Financial Summary




EBITDA 5,116 6,622 9,590 11,434 Realisations/tonne 4,100 4,564 5,021 5,171

Other Income 1,371 1,379 1,421 1,468 EBITDA/tonne 525 819 1,255 1,312

Depreciation 3,063 2,499 2,560 2,570

EBIT 3,425 5,502 8,452 10,332 Revenues -4.1% -1.1% 4.8% 18.0%

Interest 1,881 1,938 1,751 1,571 EBITDA -46.9% 29.4% 44.8% 19.2%

PBT 1,543 3,564 6,701 8,761 PBT -73.8% 130.9% 88.0% 30.7%

Exceptionals loss/(Income) - - - - PAT -65.9% 76.0% 107.4% 22.0%

Tax 166 1,141 1,675 2,628 Margins Ratios



Networth 24,821 26,452 30,924 36,227 PAT 3.8% 6.7% 13.3% 13.8%

Total Debt 29,288 27,119 24,119 21,119


Total Networth & Liabilities 61,482 61,841 63,314 65,617 RoAE (%) 6% 9% 18% 18%

Gross Block 66,754 72,005 74,755 77,505 RoCE (%) 6% 7% 12% 13%




Cash 446 619 1,015 536 Market Cap (Rs. mn) 76,185 76,185 76,185 76,185



Cash Flows Core EV/t (Rs) 7,894 7,726 6,897 6,599



Cash flows from financing 528 (4,179) (5,304) (5,401) FCF yield % -3.3% 3.2% 5.2% 4.4%

Free Cash Flows after interest (2,506) 2,413 3,950 3,351 Dividend yield (%) 0.3% 0.5% 0.6% 0.9%

Key metrics

Performance Ratios

238


Growth ratios


India Cements - Financial Summary




EBITDA 5,052 6,826 8,749 10,291 Blended realisations/t 4,159 4,627 4,881 5,125

Other Income 890 308 317 327 EBITDA/t 424 657 921 998

Depreciation 2,764 2,579 2,564 2,559

EBIT 3,178 4,554 6,502 8,059 Revenues -3.4% -0.4% 1.2% 14.8%

Interest 3,536 4,260 4,176 4,176 EBITDA -38.6% 35.1% 28.2% 17.6%

PBT (1,624) 295 2,327 3,883 PBT NM NM 690.0% 66.9%

Exceptionals loss/(Income) - - - - PAT NM NM 421.4% 66.9%

Tax - - 791 1,320

PAT after exceptionals (1,624) 295 1,536 2,563 EBITDA 11.4% 15.4% 19.5% 20.0%

PBT -3.7% 0.7% 5.2% 7.6%

Networth 38,513 35,931 36,927 38,951 PAT -3.7% 0.7% 3.4% 5.0%

Total Debt 32,024 32,123 32,123 32,123


Total Networth & Liabilities 73,834 71,350 72,347 74,371 RoE (%) -4.1% 0.8% 4.2% 6.8%

Gross Block 70,776 65,925 68,425 71,425 RoCE (%) 3.3% 6.9% 6.6% 7.9%


Investments 9,455 15,852 15,852 15,852


Cash 31 39 693 1,880 Market Cap (Rs. mn) 22,737 22,737 22,737 22,737



EV/t of capacity (Rs/t) 3,925 3,932 3,886 3,802

Cash flows from operating 5,356 8,285 7,552 8,575 P/EPS(x) (14.0) 77.2 14.8 8.9

Cash flows from investing (2,435) (1,238) (2,183) (2,673) Book value/share 114 107 110 117

Cash flows from financing (2,940) (4,162) (4,715) (4,715) FCF/EV % 1.7% 15.9% 1.6% 2.6%

Free cash flows after interest 956 8,876 876 1,400 Dividend yield (%) 0.0% 0.0% 2.0% 2.0%


Cash Flows

Balance Sheet

Valuation metrics

307

Growth ratios

Margins Ratios

Performance Ratios

Key metrics


Birla Corporation - Financial Summary


Rs. mn FY14 FY15 FY16 FY17E FY14 FY15 FY16E FY17E



Other Income 1,707 2,136 2,630 3,131 EBITDA/Tonne 286 321 400 499

Depreciation 1,326 1,535 1,626 1,702

EBIT 2,488 3,041 4,195 5,611 Revenues 16% 6% 10% 10%

Interest 856 784 738 720 EBITDA -40% 16% 31% 31%

PBT 1,632 2,257 3,457 4,890 PBT -53% 38% 53% 41%

Exceptionals loss/(Income) 109 128 - - PAT -52% 35% 48% 41%

Tax 225 374 864 1,223

PAT after exceptionals 1,298 1,754 2,593 3,668 EBITDA 7% 8% 9% 11%

PBT 5% 7% 10% 13%

Networth 25,261 26,241 28,184 31,202 PAT 4% 6% 8% 10%

Total Debt 14,013 13,022 12,426 12,426



Gross Block 29,352 31,487 32,987 34,487 RoCE (%) 5.6% 6.4% 7.9% 10.0%


Investments 13,340 13,179 13,179 13,179


Cash 5,011 4,668 6,092 8,779 Market Cap (Rs. mn) 34,655 34,655 34,655 34,655

Net working capital 8,211 8,061 9,534 12,755 Adj Enterprise Value (Rs. mn) 29,147 28,845 26,825 24,138


Core EV/t (Rs/t) 3,107 3,075 2,860 2,573

Cash flows from operating 3,622 2,784 4,907 5,557 P/EPS(x) 26.7 19.8 13.4 9.4

Cash flows from investing (3,437) (76) (1,500) (1,500) Price to Book (x) 1.4 1.3 1.2 1.1

Cash flows from financing (100) (2,651) (1,983) (1,370) FCF Yield (%) -1.9% 5.6% 7.7% 9.6%

Free Cash Flows (671) 1,925 2,669 3,337 Dividend yield (%) 1.3% 1.3% 1.6% 1.6%

Valuation metrics

Key metrics


Growth ratios

Cash Flows

Margins Ratios

Balance Sheet

77.0

Performance Ratios


Orient Cement - Financial Summary



Profit & Loss



Other Income 93 59 62 66 EBITDA/Tonne 511 748 756 988

Depreciation 564 473 1,322 1,312

EBIT 1,676 2,653 1,686 3,757 Revenues -4.2% 7.5% -1.2% 36.5%

Interest 144 141 1,299 1,319 EBITDA -32.6% 42.8% -4.0% 69.9%

PBT 1,532 2,512 387 2,439 PBT -38.4% 63.9% -84.6% 530.4%

Exceptionals loss/(Income) - - - - PAT -37.5% 92.8% -84.6% 509.7%

Tax 522 564 87 610

PAT after exceptionals 1,010 1,948 300 1,829 EBITDA 14.9% 19.8% 19.3% 24.0%


Networth 8,288 9,755 9,871 11,331 PAT 7.0% 12.6% 2.0% 8.8%

Total Debt 3,286 11,057 12,557 12,557



Gross Block 12,934 13,174 29,367 30,867 RoCE (%) 10.7% 12.7% 6.0% 12.2%


Investments 0.5 0.5 0.5 0.5

Net working capital (ex cash) 492 461 434 761 Shares Outstanding (mn)


Net working capital 1,308 888 825 2,097 Enterprise Value (-) CWIP (Rs. mn) 31,973 30,215 44,945 43,999


Cash Flows Core EV/t (Rs./t) 6,395 6,043 5,618 5,500



Cash flows from financing 925 7,268 17 (1,687) FCF Yield (%) -3.1% -23.8% -4.1% 4.0%

Free Cash Flows (1,016) (7,806) (1,352) 1,314 Dividend yield (%) 0.9% 1.1% 0.5% 0.9%

Margins Ratios

Valuation metrics

Performance Ratios

205

Key metrics

Operational metrics

Growth ratios


J.K. Lakshmi Cement - Financial Summary



Profit & Loss


EBITDA 3,020 3,495 4,419 7,249 Realisations/tonne 3,659 3,877 4,027 4,358

Other Income 443 282 302 302 EBITDA/tonne 537 587 646 921

Depreciation 1,352 1,119 1,808 1,876

EBIT 2,111 2,658 2,914 5,675 Revenues 0.1% 12.2% 19.4% 24.4%

Interest 772 907 1,994 2,232 EBITDA -29.6% 15.7% 26.5% 64.0%

PBT 1,339 1,750 919 3,443 PBT -46.8% 30.7% -47.5% 274.5%

Exceptionals loss/(Income) 185 633 55 - PAT -47.1% 2.8% -27.7% 298.4%

Tax 224 162 173 689 Margins Ratios

PAT after exceptionals 930 956 691 2,755 EBITDA 14.7% 15.1% 16.0% 21.1%


Networth 13,032 13,307 13,715 16,187 PAT 4.5% 4.1% 2.5% 8.0%

Total Debt 16,313 18,992 22,992 23,992



Gross Block 29,305 40,946 41,946 47,946 RoCE (%) 6.2% 7.4% 6.8% 11.8%



Net working capital (ex cash) 88 (643) 420 747 Shares Outstanding (mn)


Net working capital 440 (490) 1,226 2,073 Enterprise value (-) CWIP (Rs. mn) 46,182 55,828 55,675 57,654


Cash Flows Core EV/t (Rs) 6,934 6,678 5,948 5,565



Cash flows from financing 1,836 335 1,723 (1,515) FCF yield % -5.5% -3.3% -7.0% -0.5%

Free Cash Flows after interest (2,383) (1,454) (3,064) (196) Dividend yield (%) 0.5% 0.5% 0.5% 0.5%

118

Key metrics

Performance Ratios

Operational metrics

Growth ratios


Disclaimer

Spark Disclaimer

Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities and

infrastructure advisory services. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker.

We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in the last five years. We

have not been debarred from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of registration been cancelled by SEBI at any point of

time.

Spark Capital has a subsidiary Spark Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered

with SEBI as Investment Advisor. Spark Capital has also an associate company Spark Infra Advisors (India) Private Limited which is engaged in providing infrastructure

advisory services.

This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.

This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should

be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of

companies referred to in this document.

Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies

referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This

document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published,

copied, in whole or in part, for any purpose. 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 Spark Capital

and/or its 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

a certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such applicable restrictions. This

material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal.

Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this

document. Spark Capital , its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or

deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit

investment banking or other business from, any company referred to in this report.

This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark

Capital. While we would endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information.

Also, there may be regulatory, compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective

directors, employees, agents or representatives shall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents

or any errors or discrepancies herein or for any decisions or actions taken in reliance on the report or the inability to use or access our service in this report or for any loss or

damages whether direct or indirect, incidental, special or consequential including without limitation loss of revenue or profits that may arise from or in connection with the use of

or reliance on this report.

Absolute

Rating

Interpretation

BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year

horizon

ADD Stock expected to provide positive returns of >5% – <15% over a 1-year

horizon SELL Stock expected to fall >10% over a 1-year horizon


Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency,

Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of interest statement Yes/No

Analyst financial interest in the company No

Group/directors ownership of the subject company covered No

Investment banking relationship with the company covered No

Spark Capital’s ownership/any other financial interest in the company covered No

Associates of Spark Capital’s ownership more than 1% in the company covered No

Any other material conflict of interest at the time of publishing the research report No

Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:

Managing/co-managing public offering of securities

Investment banking/merchant banking/brokerage services

products or services other than those above

in connection with research report

No

Whether Research Analyst has served as an officer, director or employee of the subject company covered No

Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No

Cont’d

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research

analyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

Additional Disclaimer for US Institutional Investors

This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under

the Securities Exchange Act of 1934, as amended) only by Auerbach Grayson, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange

Act of 1934, as amended). Auerbach Grayson accepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities

discussed in the research material may do so through Auerbach Grayson. All responsibility for the distribution of this report by Auerbach Grayson, LLC in the US shall be borne

by Auerbach Grayson, LLC. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you

if Spark Capital Advisors (India) Private Limited or Auerbach Grayson, LLC is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available

to you. You should satisfy yourself before reading it that Auerbach Grayson, LLC and Spark Capital Advisors (India) Private Limited are permitted to provide research material

concerning investment to you under relevant legislation and regulations;

thematic note on east and central cement industrymailers.sparkcapital.in/uploads/girish/cement...

Documents