heidelberg cement (myscem) | 82 - icici direct

February 18, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Operational performance improves… • Revenues during Q3FY15 increased 17% YoY to | 410.3 crore led by

19% YoY volume growth (32% YoY on a like-to-like basis, i.e. excluding sales from Raigad unit) to 1.1 MT while realisations declined 1.7% YoY to | 3730/tonne. This was in line with the industry trend

• The EBITDA margin increased to 12.9%, which was in line with our estimates. The EBITDA/tonne came in at | 482/tonne (vs. I-direct estimate: | 491/tonne)

• At the PBT level, the company reported a net profit of | 7.0 crore. However, due to tax implications pertaining to the sale of the Raigad unit, Heidelberg’s net loss came in at | 9.9 crore for the quarter. Operationally, the result reflects the company’s efforts are on the right path to become operationally efficient, which would yield results over the next two or three years

Doubling of capacity during slowdown takes toll on profitability…

Heidelberg Cement is a central regional player that contributes over ~94% of its total revenues. The company recently doubled its cement capacity to 6 MT from 3 MT in CY13 at a total capex of | 1570 crore. However, due to subdued demand, these major expansions took a heavy toll on its profitability with the company reporting a net loss of | 41 crore in CY13 (vs. net profit of | 31 crore in CY12) led by high interest and depreciation. It has operated at low margins of 6.3% in CY13 vs. industry average of 18-20% due to lower cement realisation in the central region and high operational costs due to capacity expansions.

…but operating leverage benefit, cost efficiency initiatives to lead to healthy margin expansion, going ahead

To bring down freight costs, Heidelberg installed a conveyor belt between its limestone reserves and clinker units, which are 20 km away (at a cost of | 200 crore) to transport lime stones to its clinkerisation unit, which are currently being transported by trucks. This would help the company to achieve cost savings of about ~| 45-50/tonne. Further, to reduce its power costs, Heidelberg is currently setting up a 13 MW waste heat recovery plant (capex of ~| 180 crore), which will be commissioned by early 2016E. Considering these benefits, we expect operating margins to improve to 13.5% in FY16E and 14.3% in FY17E from 6.3% in CY13.

Improving cash flows, strong promoter back-up allay concern on high debt; repayment to start from FY16E onwards

The debt at the end of FY15E is expected at ~| 1057 crore with net D-E ratio of 1.2x. However, the operational turnaround as witnessed in the last two quarters coupled with a strong promoter back-up (Heidelberg AG) allay our concerns with regard to its debt servicing ability. Growth visibility in sight; maintain BUY We expect the company to report a net profit of | 77 crore in FY17E. We expect an EBITDA/tonne of | 585/tonne in FY17E from | 260/tonne in CY13. On an EV/tonne basis, the stock is trading at $94/tonne (on capacity of 5.4 MT). Given the scope for growth along with margin expansion at expanded capacity, we remain positive on the stock with a BUY and recommendation. We maintain our target price of | 105/share (i.e. valuing at 12.0x FY17E EV/EBITDA, $110/tonne on capacity of 5.4 MT.

Rating matrix

Rating : BuyTarget : | 105Target Period : 15-18 monthsPotential Upside : 28%

What’s Changed? Target UnchangedEPS FY15E Changed from |2.9 to |1.9EPS FY16E Changed from |2.9 to |1.9EPS FY17E Introduced at |3.4Rating Unchanged

Quarterly Performance

Q4FY15 Q4CY13 YoY (%) Q3FY15 QoQ (%)Revenue 410.3 350.3 17.1 400.0 2.6EBITDA 53.0 18.9 181.1 50.2 5.6EBITDA (%) 12.9 5.4 754 bps 12.6 37 bpsPAT -9.9 -6.6 49.2 1.6 -725.9

Key Financials

CY13 FY15E# FY16E FY17E

Net Sales 1364.8 1999.9 1794.8 2060.8

EBITDA 86.4 273.3 242.5 293.8

Net Profit -40.7 43.0 43.0 77.1EPS (|) -1.8 1.9 1.9 3.4

*CY14 includes profit of | 60.3 crore on sale of Raigarh unit# 15 montths period due to change in financial year

Valuation summary

CY13 FY15E FY16E FY17E

PE (x) NA 43.2 43.3 24.1

Target PE (x) NA 55.3 55.4 30.8

EV to EBITDA (x) 35.9 11.2 12.6 10.4

EV/Tonne(US$) 96 94 94 94

Price to book (x) 2.2 2.2 2.1 1.9

RoNW (%) -4.9 5.1 4.9 8.1

RoCE (%) -0.5 6.2 6.1 8.0 Stock data

Amount

Mcap | 1859 crore

Debt (FY15E) | 1356 crore

Cash & Invest (FY15E) | 37 crore

EV | 3178 crore

52 week H/L | 104 / 32

Equity cap | 226.6 crore

Face value | 10

Particular

Price performance (%)

1M 3M 6M 12M

Heildelberg Cem. 8.2 0.4 40.9 126.3

India Cement 34.2 -3.1 5.6 99.4

JK Cement 11.9 26.1 84.6 293.2

JK Lakshmi Cem. 1.9 15.9 82.6 458.6

Heidelberg Cement (MYSCEM) | 82

Research Analyst

Rashesh Shah [email protected]


Variance analysis Q4FY15 Q4CY14E Q4CY13 YoY (%) Q3FY15 QoQ (%) Comments

Net Sales 410.3 394.2 350.3 17.1 400.0 2.6Revenue growth mainly led by better sales volumes (up 32.2% YoY) while realisation declined 1.7% YoY

Other Incomes 11.4 8.8 11.2 8.8 8.8 28.8Raw Material Expenses 92.5 88.4 93.5 -1.1 89.2 221.6Employee Expenses 28.8 25.9 25.8 11.5 25.8 11.6Change in stock -0.7 0.0 5.5 -112.0 -0.3 100.0Power and fuel 115.6 109.2 94.0 22.9 112.0 3.2

Freight 49.5 52.0 52.3 -5.3 53.2 -6.9Freight cost remained lower than our estimates due to the company's focus on nearby regions for the sale of the product coupled with the benefit of lower fuel prices

Others 71.5 67.6 60.3 18.5 69.9 2.4EBITDA 53.0 37.0 18.9 181.1 50.2 5.6EBITDA Margin (%) 12.9 9.4 5.4 754 bps 12.6 37 bps Higher sales volume supported by fall in costs led to margin expansionInterest 28.8 28.8 35.9 -19.8 28.8 0.2Depreciation 28.6 28.5 26.6 7.6 27.8 2.9PBT 7.0 -7.7 -32.4 -121.5 2.5 178.8Total Tax 16.9 0.0 -25.8 -165.4 0.9 1,732.6

PAT -9.9 -7.7 -6.6 49.2 1.6 -725.9Higher taxes pertaining to sale of Raigarh unit led to a net loss of | 9.9 crore for the quarter

Key Metrics

Volume (MT) 1.10 1.00 0.92 19.2 1.04 5.6Capacity expansion along with better demand environment led to over 19% YoY jump in sales volumes. On a like to like basis, it grew over 32% YoY (ex-Raigad unit)

Realisation (|) 3,730 3,790 3,796 -1.7 3,840 -2.9EBITDA per Tonne (|) 482 491 204 135.9 482 0.0 Lower cost led to higher EBITDA/tonne for the company

Source: Company, ICICIdirect.com Research Change in estimates

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

Revenue 1,674.0 2,049.9 22.5 1,938.0 1,837.1 -5.2 NA 2,105.2 NAFigures for FY15 would include five quarters due to a change in the financial year.

EBITDA 234.5 273.3 16.6 281.2 242.5 -13.8 NA 293.8 NA

EBITDA Margin (%) 14.0 13.7 -34 bps 14.5 13.5 -100 bps NA 14.0 NA

We marginally revise our EBITDA margins guidance downward taking into account lower realisations. The recent reduction in diesel prices should help in margin expansion, going forward

PAT 65.5 43.0 -34.4 65.3 43.0 -34.2 NA 77.1 NAEPS (|) 2.9 1.9 -34.6 2.9 1.9 -34.6 NA 3.4 NA

FY15E* FY16E FY17E

Source: Company, ICICIdirect.com Research Assumptions

Comments0 FY15E FY16E FY17E CY14E FY16E FY17E

Volume (MT) 3.6 5.2 4.6 5.0 4.2 4.6 NA UnchangedRealisation (|) 3,800 3,836 3,910 4,104 3,976 4,269 NA We expect realisation growth to remain better, going forward

EBITDA per Tonne (|) 260 524 528 585 592 726 NA

However, cost pressure will stay, which should lead to a gradual rise in margins. Low fuel cost will play a vital role in margin expansion, going forward

EarlierCurrent

Source: Company, ICICIdirect.com Research


Company Analysis Central focused player with revenue contribution of over 94%

Heidelberg Cement India sells ~94% of total cement volumes in the central region, a favourable region in India considering the demand-supply scenario. The company sells the rest of the volume in the western and southern regions. Its share in the central region has gone up from 75% to over 94% led by the recent capacity expansion. With no major capacity addition on the cards, we believe it will likely remain a central regional player over the next two or three years.

Doubling of capacity during slowdown takes toll on profitability…

The company recently doubled its cement capacity to 6 MT from 3 MT in CY13 at a total capex of | 1570 crore. However, due to subdued demand, these major expansions took a heavy toll on its profitability with the company reporting a net loss of | 41 crore in CY13 (vs. net profit of | 31 crore in CY12) led by high interest and depreciation. It has operated at low margins in the industry (average of 6.5% in the last three years CY11-13). However, with a revival in demand along with stabilisation of new capacity, we expect its margin to climb over 15% by CY16E with capacity utilisation of over 85% during the same period.

Exhibit 1: Cement capacity doubles in CY12 leading to sharp fall in capacity utilisation

3.10 3.10 3.10 3.10

6.005.40 5.40 5.40

82.487.8 88.0

94.7

48.4

66.1

78.085.0

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

CY08 CY09 CY10 CY11 CY12 CY13 CY14E CY15E

40

50

60

70

80

90

100

Capacity (In MT) - LHS Capacity utilisation (%) - RHS


Focus now on margin expansion after scaling up capacity…

To bring down freight costs, Heidelberg has installed a conveyor belt between its limestone reserves and clinker units, which are 20 km away (at | 200 crore) to transport limestone to its clinkerisation unit, which is currently being transported by trucks. This would help the company in achieving cost savings of about ~| 45-50/tonne. Further, to reduce its power costs, the company is currently setting up a 13 MW waste heat recovery plant (capex of | 150 crore), which will be commissioned by early 2016E. Considering the benefit of conveyor belt, economies of scale coupled with better utilisations, we expect operating margins to improve to 14.8% in CY15E and 15.4% in CY16E from 6.3% in CY13.

Large global promoter

Heidelberg’s Indian operations have the support of the rich experience of the German promoter (Heidelberg AG), a Germany-based company, which is one of the world’s largest cement manufacturers with consolidated revenue of €14 billion in 2013. This, we believe, would provide a huge potential to grow inorganically over the longer run.

Regional presence

Others6%

Central94%

Margin trend

11.7 11.4

17.1

6.2 6.8 6.3

15.414.814.3

0

5

10

15

20

CY08

CY09

CY10

CY11

CY12

CY13

CY14

E

CY15

E

CY16

E

(%)

EBITDA Margin


Expect revenue CAGR of 14.5% during CY13-FY17E

Revenues have grown at a CAGR of 16.6% in FY10-13 led by volume CAGR of 9.9% supported by realisation CAGR of 6.1% during the same period. For CY13-FY17E, we expect sales CAGR of 14.5% led by volume CAGR of 11.6% and realisation CAGR of 2.6% during the same period. The company has completed its expansion plans along with divesting of assets, like the Raigad unit, which were not fit strategically. The current cement capacity of the company stands at 5.4 MTPA.

Exhibit 2: Expect expansion led revenue CAGR of 14.5% during CY13-17E

983 11011372

20001795

2061

-

500

1,000

1,500

2,000

2,500

CY11 CY12 CY13 FY15E* FY16E FY17E

Source: Company, ICICIdirect.com Research *15 months

Exhibit 3: Cement capacity Current Post expansion Current

ClinkerAmmasandra Karnataka 0.4 0.4 0.4Damoh MP 1.2 3.1 3.1Total 1.6 3.5 3.5CementAmmasandra Karnataka 0.6 0.6 0.6Damoh MP 1.0 2.1 2.1Jhansi UP 0.8 2.7 2.7Raigarh Maharastra 0.6 0.6 0.0Total 3.0 6.0 5.4


Exhibit 4: Volume to grow at 11.6% CAGR during CY13-FY17E

2.94 2.913.61

5.214.59

5.02

0.00

1.00

2.00

3.00

4.00

5.00

6.00


Milli

on T

onne

s

Sales Volumes


Exhibit 5: Realisation to improve at CAGR of 2.6% during CY13-FY17E

33443790 3800 3836 3910 4104

0

1000

2000

3000

4000

5000


(|/to

nne)

-5

0

5

10

15

(%)

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

bb


Exhibit 6: Q4FY15 volume up 19.2% YoY (32% YoY on like to like basis, i.e. ex- Raigad unit)

0.95 0.950.79

0.92 1.02 1.03 1.04 1.10

0.0

0.5

1.0

1.5

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

Q4FY

15

Milli

on T

onne

-10

0

10

20

30

(%)

Sales volumes -LHS Growth (%) -RHS


Exhibit 7: Q4FY15 realisation declines 1.7% YoY

3887

3775

3732

3796

3873

3913

3840

3730

2000

3000

4000

5000

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

Q4FY

15

|/to

nne

-10-50510152025

(%)

Realisation-LHS Growth (%) -RHS

`



Margins to improve, going forward, on economies of scale

With all capacity concentrated in the central region and steps like overhead belt conveyor to transport lime stones to clinkerisation unit, going forward, we expect margins to improve and expect them to reach 14.3% by FY17E.

Exhibit 8: Expect EBITDA/tonne of | 585 in FY17E

206256 260

524 528585

0100200300400500600700


|

EBITDA/Tonne


Exhibit 9: Margins to improve led by improvement in utilisation

11.4

6.2 6.8 6.3

13.7 13.5 14.3

0.0

5.0

10.0

15.0

CY10 CY11 CY12 CY13 FY15E* FY16E FY17E

(%)

EBITDA Margin (%)


Exhibit 10: Q4FY15 EBITDA per tonne improves due to cost efficiency

382 334

90204

587 613

482 482

0100200300400500600700

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

Q4FY

14

EBITDA/tonne


Exhibit 11: Pick-up in margins expected, going forward, led by improvement in capacity utilisation

9.8 8.9

2.45.4

15.2 15.712.6 12.9

0

5

10

15

20

Q1CY

13

Q2CY

13

Q3CY

13

Q4CY

13

Q1CY

14

Q2CY

14

Q3CY

14

Q4FY

14

EBITDA Margin (%)


Expect sharp rebound in net profit growth by FY17E

After witnessing a loss in CY13, mainly due to higher interest cost on debt due to expansion, we expect the company to report healthy profitability growth over CY13-FY17E.

Exhibit 12: Profitability trend

63

29 3143

77

-41

437

2.43.7

2.1

3 3

-3-60-40

-200

20

4060

80100

CY10 CY11 CY12 CY13 FY15E* FY16E FY17E

| cr

ore

-5

-3

-1

1

3

5

7

9

(%)

Net profit - LS Net profit margin -RS



Outlook and valuations We expect the company to report a net profit of | 77 crore in FY17E. We expect EBITDA/tonne of | 585/tonne in FY17E from | 260/tonne in CY13. On an EV/tonne basis, the stock is trading at $94/tonne (on capacity of 5.4 MT). Given the scope for growth along with margin expansion with expanded capacity, we remain positive on the stock with a BUY and maintain our target price of | 105/share (i.e. valuing at 12.0x FY17E EV/EBITDA, $110/tonne on capacity of 5.4 MT).

Exhibit 13: Assumptions | per tonne CY11 CY12 CY13 FY15E* FY16E FY17E

Sales Volume (mtpa) 2.9 2.9 3.6 5.2 4.6 5.0

Net Realisation 3344 3790 3800 3836 3910 4104

Total Expenditure 3138 3534 3540 3311 3382 3519

Stock Adjustment 11 -88 -77 -29 0 0

Raw material 786 1078 1043 854 870 885

Power & Fuel 882 1055 1077 1064 1045 1070

Employees 267 318 288 252 275 284

Freight 468 526 580 525 535 570

Others 724 645 630 644 657 710

EBITDA per Tonne 206 256 260 524 528 585 Source: Company, ICICIdirect.com Research * 15 months


Exhibit 14: One year forward EV/EBITDA

-1000

0

1000

2000

3000

4000

5000

Feb-

07

Aug-

07

Feb-

08

Aug-

08

Feb-

09

Aug-

09

Feb-

10

Aug-

10

Feb-

11

Aug-

11

Feb-

12

Aug-

12

Feb-

13

Aug-

13

Feb-

14

Aug-

14

Feb-

15

(| c

rore

)EV 30.0x 25.0x 20.0x 15.0x 5.0x


Exhibit 15: One year forward EV/tonne

-1000

100200300400500600700800

Feb-

07

Aug-

07

Feb-

08

Aug-

08

Feb-

09

Aug-

09

Feb-

10

Aug-

10

Feb-

11

Aug-

11

Feb-

12

Aug-

12

Feb-

13

Aug-

13

Feb-

14

Aug-

14

Feb-

15

Milli

on $

EV $115 $100 $85 $70 $55 $40


Exhibit 16: Valuation Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) ($) (x) (%) (%)CY12 1101.2 12.1 1.4 5.7 60.3 139 37.8 3.6 2.3CY13 1364.8 23.9 -1.8 NA 0.0 96 35.9 -4.9 -0.5FY15E 1999.9 46.5 1.9 NA 43.2 94 11.2 5.1 6.2FY16E 1794.8 -10.3 1.9 -0.1 43.3 94 12.6 4.9 6.1FY17E 2060.8 14.8 3.4 79.6 24.1 94 10.4 8.1 8.0



Company snapshot

Target Price:| 105

0

20

40

60

80

100

120

Jan-

09

Apr-0

9

Jul-0

9

Oct-0

9

Jan-

10

Apr-1

0

Jul-1

0

Oct-1

0

Jan-

11

Apr-1

1

Jul-1

1

Oct-1

1

Jan-

12

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Jan-

15

Apr-1

5

Jul-1

5

Oct-1

5

Jan-

16

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date EventMay-08 Board approves amalgamation of Indorama Cement and Heidelberg Cement India with Mysore Cements. Total capacity of the merged entity stands at 3.07 MTPA

Jul-08 The Securities and Appellate Tribunal (SAT) dismisses the Securities and Exchange Board of India's (Sebi) directive on the structure of Heidelberg's open offer for Mysore Cement shares, which involved a non-compete fee for promoters. Thus, it clears the way for an open offer

Oct-09 The board of HeidelbergCement India approves setting up of an expansion project at its plants at Damoh (Madhya Pradesh) and Jhansi (Uttar Pradesh) to increase cement production capacity from the existing 1.8 MTPA to 4.7 MTPA

Jun-10 The board of HeidelbergCement India approves increasing the cement production at Raigad unit of the company in Maharashtra by 0.625 MTPAFeb-13 HeidelbergCement India successfully completes and commissions the expansion project at Damoh (MP). This comprises increase of clinker manufacturing capacity

at its unit Narsingarh, district Damoh from 1.2 to 3.1 MTPA and increase of cement capacity at Imlai, district Damoh from 1.0 to 2.0 MTPA

Feb-13 Board approves setting up of a waste heat recover based power generation plant at its clinkerisation unit at Narsingarh, district Damoh (MP). The proposed plant will produce approximately 12.15 MW of power

Oct-13 JSW Steel acquires HeidelbergCement India's 0.6 MTPA cement- grinding facility in Raigad, Maharashtra, as a going concern on a slump sale basis for an undisclosed sum

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Heidelbergcement AG 31-Dec-14 69.39 157.2 0.02 HDFC Standard Life Insurance Company Limited 31-Dec-14 4.61 10.5 0.13 Jupiter Asset Management Ltd. 30-Nov-14 2.81 6.4 -2.04 Ashoka Pte. Ltd. 31-Dec-14 1.99 4.5 4.55 Life Insurance Corporation of India 31-Dec-14 1.59 3.6 0.06 J.P. Morgan Asset Management (Hong Kong) Ltd. 31-Dec-14 1.08 2.4 1.37 Sundaram Asset Management Company Limited 31-Dec-14 0.76 1.7 0.08 Dimensional Fund Advisors, L.P. 31-Dec-14 0.61 1.4 0.19 UBS Global Asset Management (Americas), Inc. 30-Sep-14 0.16 0.4 0.410 ING Investment Management India Private Ltd. 31-Oct-14 0.04 0.1 0.0

(in %) Dec-13 Mar-14 Jun-14 Sep-14 Dec-14Promoter 68.91 69.39 69.39 69.39 69.39FII 4.89 4.78 4.78 5.16 7.27DII 6.75 6.60 6.60 8.50 7.06Others 19.45 19.23 19.23 16.95 16.28

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesAshoka Pte. Ltd. 5.83m 4.52m Jupiter Asset Management Ltd. -2.79m -2.00m J.P. Morgan Asset Management (Hong Kong) Ltd. 1.61m 1.25m Fidelity Worldwide Investment (UK) Ltd. -1.92m -1.37m UBS Global Asset Management (Americas), Inc. 0.50m 0.36m IDFC Asset Management Company Private Limited -0.71m -0.55m Dimensional Fund Advisors, L.P. 0.13m 0.10m Morgan Stanley Investment Management (India) Pvt. Ltd. -0.22m -0.41m HDFC Standard Life Insurance Company Limited 0.12m 0.09m Nomura Asset Management Taiwan Limited -0.11m -0.18m

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore (Year-end March) CY13 FY15E* FY16E FY17E

Total operating Income 1,364.8 1,999.9 1,794.8 2,060.8

Growth (%) 23.9 46.5 -10.3 14.8

Raw material 348.7 430.6 399.3 444.4

Power & Fuel 388.8 555.0 479.7 537.2

Employees 104.1 131.5 126.1 142.6

Freight 209.3 273.5 245.6 286.2

Others 227.5 336.0 301.7 356.5

Total Operating Exp. 1,278.4 1,726.6 1,552.3 1,766.9

EBITDA 86.4 273.3 242.5 293.8

Growth (%) 16.0 216.5 -11.3 21.2

Depreciation 97.0 136.7 105.3 107.8

Interest 105.9 140.8 115.3 115.3

Other Income 35.8 49.9 42.3 44.4

Exceptional items 0.0 -60.3 0.0 0.0

PBT -80.7 106.1 64.1 115.1

Total Tax -39.9 63.1 21.2 38.0

PAT -40.7 43.0 43.0 77.1

Growth (%) -232.2 NA -0.1 79.6

EPS (|) -1.8 1.9 1.9 3.4

Source: ICICIdirect.com Research * 15months

Cash flow statement | Crore (Year-end March) CY13 FY15E* FY16E FY17E

Profit after Tax -40.7 43.0 43.0 77.1

Add: Depreciation 97.0 136.7 105.3 107.8

(Inc)/dec in Current Assets -199.5 -35.1 40.9 -24.5

Inc/(dec) in CL and Provisions 23.9 13.4 -31.5 -1.3

CF from operating activities -119.3 158.0 157.7 159.1

(Inc)/dec in Investments 0.0 0.0 0.0 0.0

(Inc)/dec in Fixed Assets -160.2 -80.0 -150.0 -150.0

Others -32.7 0.0 0.0 0.0

CF from investing activities -192.9 -80.0 -150.0 -150.0

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

Inc/(dec) in loan funds 326.0 0.0 0.0 0.0

Dividend paid & dividend tax 0.0 0.0 -5.3 -5.3

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

Others 27.4 -30.8 0.0 0.0

CF from financing activities 353.5 -30.8 -5.3 -5.3

Net Cash flow 41.2 47.2 2.4 3.8

Opening Cash 73.2 114.1 161.3 163.7

Closing Cash 114.5 161.3 163.7 167.5 Source: Company, ICICIdirect.com Research

Balance sheet | Crore (Year-end March) CY13 FY15E* FY16E FY17E

Liabilities

Equity Capital 226.6 226.6 226.6 226.6

Reserve and Surplus 606.7 618.9 656.5 728.4

Total Shareholders funds 833.3 845.5 883.1 955.0

Total Debt 1,361.5 1,361.5 1,361.5 1,361.5

Deferred Tax Liability 5.0 5.0 5.0 5.0

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 2,199.8 2,211.9 2,249.6 2,321.4

Assets

Gross Block 1,490.9 1,570.9 1,720.9 1,870.9

Less: Acc Depreciation 741.9 878.6 983.9 1,091.7

Net Block 749.0 692.3 737.0 779.2

Capital WIP 1,205.3 1,205.3 1,205.3 1,205.3

Total Fixed Assets 1,954.3 1,897.6 1,942.3 1,984.5

Investments 0.0 0.0 0.0 0.0

Inventory 198.9 203.5 239.1 156.2

Debtors 30.6 31.3 37.5 52.8

Loans and Advances 460.2 490.0 407.4 499.3

Other Current Assets 0.5 0.5 0.4 0.6

Cash 114.1 161.3 163.7 167.5

Total Current Assets 804.3 886.6 848.0 876.3

Creditors 392.4 401.8 365.3 402.5

Provisions 166.4 170.4 175.4 136.9

Total Current Liabilities 558.8 572.2 540.7 539.4

Net Current Assets 245.5 314.4 307.3 336.9

Application of Funds 2,199.8 2,211.9 2,249.6 2,321.4 Source: Company, ICICIdirect.com Research

Key ratios (Year-end March) CY13 FY15E* FY16E FY17E

Per share data (|)

EPS -1.8 1.9 1.9 3.4

Cash EPS 2.5 7.9 6.5 8.2

BV 37 37 39 42

DPS 0.0 0.0 0.2 0.2

Cash Per Share 5.0 7.1 7.2 7.4

Operating Ratios (%)

EBITDA Margin 6.3 13.7 13.5 14.3

PAT Margin -3.0 2.1 2.4 3.7

Inventory days 48.7 36.7 45.0 35.0

Debtor days 7.0 5.6 7.0 8.0

Creditor days 105.2 72.5 78.0 68.0

Return Ratios (%)

RoE -4.9 5.1 4.9 8.1

RoCE -0.5 6.2 6.1 8.0

RoIC -1.2 16.2 15.6 19.6

Valuation Ratios (x)

P/E 0.0 43.2 43.3 24.1

EV / EBITDA 35.9 11.2 12.6 10.4

EV / Net Sales 2.3 1.5 1.7 1.5

Market Cap / Sales 1.4 0.9 1.0 0.9

Price to Book Value 2.2 2.2 2.1 1.9

Solvency Ratios

Debt/EBITDA 15.7 5.0 5.6 4.6

Debt / Equity 1.6 1.6 1.5 1.4

Current Ratio 1.4 1.5 1.6 1.6

Quick Ratio 1.2351152 1.2674906 1.26575464 1.31420671 Source: Company, ICICIdirect.com Research


ICICIdirect.com coverage universe (Cement)

CMP M Cap(|) TP(|) Rating (| Cr) FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E

ACC* 1551 1,635 HOLD 28,392 19.0 21.4 16.1 14.4 141 146 134 134 9.9 8.3 10.2 10.5 14.0 14.1 11.9 12.4Ambuja Cement* 250 241 HOLD 35,091 19.7 15.5 14.6 12.3 164 165 163 149 11.4 8.3 8.1 8.7 13.6 9.2 9.1 9.7UltraTech Cem 3008 3,240 HOLD 85,550 23.8 21.6 16.5 12.6 253 227 199 181 11.9 10.8 12.7 15.9 12.5 11.9 13.1 15.7Shree Cement^ 11084 11,200 HOLD 37,236 27.4 25.2 20.4 17.0 300 248 225 225 13.0 11.0 12.8 14.1 16.7 13.5 15.3 15.9Heidelberg Cem* 82 105 BUY 1,858 35.9 11.2 12.6 10.4 96 94 94 94 -0.5 6.2 6.1 8.0 -4.9 5.1 4.9 8.1India Cement 103 127 BUY 3,226 11.2 8.3 6.6 5.6 71 68 66 65 3.9 7.1 9.0 10.6 -0.9 2.0 4.1 6.2JK Cement 707 718 HOLD 4,944 5.5 5.9 8.8 12.9 142 100 103 96 5.2 5.9 6.6 12.5 5.2 5.9 6.6 12.5JK Lakshmi Cem 379 458 BUY 4,449 18.3 15.9 11.7 8.4 139 106 99 89 6.1 7.7 9.6 13.5 7.1 9.4 12.6 15.7Mangalam Cem 281 322 BUY 750 22.8 12.1 7.3 5.6 54 54 56 55 2.1 6.2 12.1 15.4 5.8 4.4 10.8 13.9

RoE (%)RoCE (%)EV/Tonne ($)EV/EBITDA (x)Company



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Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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heidelberg cement (myscem) | 82 - icici direct

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