star ferro cement ltd - skp securities ltd
TRANSCRIPT
February 24, 2016
Star Ferro & Cement Ltd.
Cement Star of North East
CMP INR 105 Target INR 151 Initiating Coverage – BUY
SKP Securities Ltd www.skpmoneywise.com Page 1 of 22
Ke y Sha re Da ta
Face Value (INR) 1.0
Equity Capital (INR Mn) 222.2
Market Cap (INR Mn) 23,328.2
52 Week High/Low (INR) 189/96
6 months Avg. Daily Volume (BSE) 16,254
BSE Code 536666
NSE Code SFCL
Bloomberg Code SFCL IN
Shareholding Pattern (as on 31st Dec 2015)
Promoter,66.43%
Institution 0.12%
Others, 33.45%
Source: Company
P a rtic ula rs FY 14 FY 15 FY 16E FY 17E
Net Sales 11,733.7 14,304.3 16,817.2 20,369.8
Growth (%) 77.9% 21.9% 17.6% 21.1%
EBITDA 2,549.5 4,350.7 4,136.3 5,152.8
PAT 61.5 834.1 1,006.6 1,630.7
Growth (%) - 75.3% 1256.2% 20.6% 62.0%
EPS (INR) 0.3 3.8 4.5 7.3
BVPS (INR) 42.3 45.1 50.0 58.5
Ke y Financ ia ls ( INR Million)
Pa rtic ula rs FY14 FY15 FY16E FY17 E
P/E (x) 380.9 28.0 23.2 14.3
P/BVPS (x) 2.5 2.3 2.1 1.8
Mcap/Sales (x) 2.0 1.6 1.4 1.2
EV/EBITDA (x) 12.5 6.9 7.0 5.5
ROCE (%) 4.4% 9.6% 10.2% 13.1%
ROE (%) 0.5% 7.0% 8.4% 12.6%
EBITDA Mar (%) 21.7% 30.4% 24.6% 25.3%
PAT Mar (%) 0.5% 5.8% 6.0% 8.0%
Debt - Equity (x) 0.9 0.7 0.5 0.4
Ke y Fina nc ia ls Ra tios
Source: Company, SKP Research
1 Yr price performance SFCL vis-à-vis BSE Mid Cap
-10%
40%
90%
140%
190%
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12-M
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12-A
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12-M
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12-J
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12-J
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12-A
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12-S
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12-D
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12-J
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12-F
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SFCL BSE Mid Cap
Company Background
Star Ferro & Cement Ltd (SFCL), promoted by first generation entrepreneurs Mr. Sajjan Bhajanka and Mr. Sanjay Agarwal is the largest cement player in the North East Region (NER) with 23% market share selling under ‘Star Cement’ brand. It has fully integrated cement plants with an installed cement capacity of 3.7 MTPA (own capacity 2.9 MTPA & leased capacity 0.84 MTPA); 2.6 MTPA of clinker capacity, 51 MW of power plant located in Meghalaya and Assam and adding 1.0 MTPA grinding unit in West Bengal. Investment Rationale Leadership in NER with strong brand pull, robust distribution network and close proximity to raw materials SFCL has emerged as NER’s largest cement manufacturer with ~23% market
share, having its own captive limestone mines (reserves of ~300 million tonnes), captive power plant (51 MW) and close availability of coal resulting in operational efficiencies and low logistic costs. Regional players enjoy strong entry barriers on account of political instability, geographical complexity and regulatory hurdles making it a supply deficit market with no additions to the existing capacities is in the pipeline.
SFCL has invested heavily in dealer’s network expansion and currently has presence in 11 states with a network of 2,300+ dealers and 8,700+ retailers. It distributes directly via dealers (77% sales contributed by trade segment), which has resulted in strong brand equity, deeper penetration, greater reach and higher market share. About 3-4% of revenue is spent on advertising.
En-route to eastern market- Positive step for future growth
NER contributes ~70% of SFCL cement output whereas eastern region market accounts for the rest ~30%. SFCL is leveraging its strong brand and distribution network to penetrate into markets of West Bengal, Bihar & Jharkhand which has a total cement market of about 53 MTPA (volumes from the eastern market have grown from 3% of the total volumes in FY13 to ~30% in FY15). Over the next two years, we expect a sharp uptick in volumes from eastern market backed by capacity addition of 1 MTPA grinding unit at Siliguri and aggressive advertisement.
SFCL would get a freight subsidy of ~90% by expanding towards the Eastern Region, as opposed to ~50% freight subsidy within NER under NEIPP 2007.
Margins to scale up with better operating efficiencies & capacity utilization EBITDA margins have improved significantly from ~17.9% in FY13 to ~23.3%
in 9MFY16 on account of better operating efficiencies, higher capacity utilization, fiscal incentives (Rs 600-650/tonne) and uninterrupted supply of raw materials enabling, SFCL to enjoy higher EBIDTA/tonne of Rs 1,800+ (higher by Rs 40-50/bag compared to other regional players) which is ~2x-3x the industry average.
SFCL is set to increase its cement capacity utilization to ~74% by FY17E from ~65.4% in FY15, on its effective capacity of ~4.7 MTPA. SFCL is likely to maintain its margin supremacy over its peers, backed by improvement in cement realizations, moderation in operating cost & fiscal incentives benefit, and we expect SFCL's EBITDA margins to improve to ~25.3% by FY17E.
Valuation
With government’s thrust on infrastructure development, leadership in NER with entry barriers, strong brand pull and pricing power coupled with robust distribution network, retail-centric business model, raw material security, en-route to eastern market, fiscal incentives benefit and enhancing return ratios, augurs well for SFCL.
We have valued the stock on the basis of EV/EBIDTA ‐ of 6.5x of FY17E EBIDTA – method of relative valuation. In view of the sharp correction in the share price to Rs 105 now, after a stupendous rally to a life time high of Rs 185 recently, we recommend a BUY on the stock with a target price of Rs 151/- (44% upside) in 15 months.
Analysts: Nikhil Saboo
Tel No: +91-33-40077019; Mobile: +91-9330186643
e-mail: [email protected]
Anik Das
Tel No: +91-33-40077020; Mobile: +91-8017914822
e-mail: [email protected]
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 2 of 22
Industry Snapshot – Indian Cement Sector (North Eastern & Eastern Market) India is the second largest cement manufacturer in the world with a cumulative installed
capacity of nearly ~366 MTPA. Country’s cement consumption from current ~263 MTPA is
expected to grow at a CAGR of ~7.4% over FY14-17E vs a ~5.5% CAGR witnessed in
FY11-14 backed by expected pick-up in the demand of housing and infrastructure
segments, which accounts for ~60% and ~20% of total cement consumption. Per capita
consumption of cement in India stands at ~210 kg vis-à-vis global average of ~365 kg,
indicating a good potential for secular growth over medium to long term. The cement sector
is all set to enter a cyclical upturn backed by (1) imminent project led demand recovery (2)
subsiding of cost pressures and (3) improved demand-supply dynamics would further
accelerate the sector's cyclical recovery.
Presently, North East & Eastern market accounts for ~13% of installed capacity of cement
in India i.e. ~48 MTPA. Regional per capita cement consumption is lowest in the country,
highlighting good potential for growth coupled with pricing premium of over ~50 kg bag in
the Region and renewed focus of GoI to kick start infrastructure projects in North East,
augurs well for SFCL.
Exhibit: Per capita cement consumption region-wise / state-wise
Bihar
Jharkhand
Orissa
West Bengal
Chhattisgarh
NER
Pan India
Source: SKP Research; NER - North Eastern Region
260 - 210
9.5
14.2
6.9
7.5
4%
6%
3%
Expected Consumption
In FY16 (MTPA)
% of total cement
consumption
211
148
258
2% 142
Per capita cement
consumption (in kg)States
10.4
5.4
100
160
4%
2%
North East Region: Size and Growth Trends: In the last 5 years cement capacity in the North East Region
(NER) has nearly doubled and is currently estimated at ~11 MTPA and cement
consumption is expected to grow at a CAGR of ~10% over next five years vs. 7% CAGR
witnessed in last 5 years. Pick-up in demand and better utilization is on account of GoI’s
thrust on infrastructure development, no major additional capacities in the pipeline
(consolidation on cards as small players expected to be edged out eventually) and
sustained reduction of cement arrivals from mainland players, gives additional advantage to
existing players.
Exhibit: North East Region - (Total Capacity and Demand)
Source: Company, SKP Research
7 79
1011 11 11
5.4 5.8 6.0 6.3 6.6 7.5 8.2
77% 83%
67% 63% 60%68%
75%
0%
50%
100%
0
5
10
15
FY11 FY12 FY13 FY14 FY15 FY16E FY17E
NER Cement Capacity (MTPA) NER Cement Demand (MTPA)
Capacity Utilisation (%)
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 3 of 22
Major Players and Market Share: Currently, in NER, there are only three major cement
manufacturers: SFCL, Dalmia Bharat & Meghalaya cement. SFCL has been one of the
earliest players with ~0.4 MTPA capacity in Meghalaya. Over the years, it has increased its
capacity manifold to ~2.9 MTPA in cement and 2.6 MTPA in clinker. Dalmia Bharat acquired
Calcom and Adhunik cement and expanded Calcom’s clinker capacity to become regional
players with ~18% market share. Meghalaya cement is the third largest cement producer in
NER with ~15% market share.
Exhibit: Major Players - Installed Capacity
Player Capacity (MMT) *CPP Brand Name
Dalmia Bharat (Only NER Capacity) 3.6 25 MW Dalmia Cement
Star Cement 3.0 51 MW Star Cement
Meghalaya Cement 1.3 10 MW Topcem
Others 3.1 - Amrit,Max Cement
Total Capacity - North East 11.0 86 MW -
Exhibit: Market Share - North Eastern Market
Source: Company, SKP Research; *CPP - Captive pow er plant
Star Cement, 23%
Dalmia Bharat, 18%
Meghalaya Cement, 15%
Others, 25%
Supplies from West Bengal, 10%
Imports from Bangladesh, 9%
NER - High entry barrier & supply deficit region: In FY15, cement demand in the NER
was at ~6.6 MTPA and top 3 producers accounted for ~55-60% of total demand with
capacity utilization levels at ~60%. Notwithstanding the region’s superior limestone reserves
coupled with coal availability, only few mainland cement companies have been able to set
up local manufacturing units due to tangible entry barriers such as political instability, tough
terrain and difficulty in land acquisition and mining approvals. Thus NER remains a supply
deficit market due to lower regional capacity addition and gap is filled by imports from
Bangladesh and supply from West Bengal. Going forward, we believe the supply from
Bangladesh and West Bengal would reduce (import of cement from other states declined
from 30% in FY12 to 10% in FY15) as players like SFCL and Dalmia Bharat ramp up their
production.
Opportunities & Demand Drivers GoI’s thrust on infrastructure development in NER: Despite NER being extremely rich in
terms of natural resources, rail & road connectivity has been one of the concerns for the
government which has remained far behind as compared to other regions of India, leaving a
significant socio-economic development gap with rest of India on parameters like per capita
GDP and electricity consumption. To fill the gap, GoI has launched various infrastructure
development projects in NER.
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 4 of 22
Multitude of tax incentives for cement producers in the NER: To boost investments in
NER region, the government had introduced fiscal incentives under the North East Industrial
policy (NEIP) in 1997 for 10 years. In 2007, Sikkim was also included under the new policy
‘North East Industrial and Investment Promotion Policy’ (NEIIPP) to attract industrial
investments in the region. Key benefits under NEIIPP 2007 are as follows:
All new and existing units that go in for substantial expansion, unless otherwise
specified, and which commence commercial production within the 10 years from the
date of notification of NEIIPP, 2007 eligible for incentives for ten years from the date
of commencement of commercial production.
Incentives to all industrial units, new as well as existing units on their substantial
expansion, located anywhere in NER. Consequently, the distinction between ‘thrust’
and ‘non-thrust’ industries made in NEIP,1997 discontinued from April1, 2007.
100% Excise Duty exemption on finished products made in the NER continued, as
was available under NEIP, 1997.
Capital Investment Subsidy enhanced from 15% of investment in plant and machinery
to 30% and the limit for automatic approval of subsidy at this rate at Rs.1.5 crores per
unit, as against Rs.30 lakhs available under NEIP,1997.
Interest Subsidy available @ 3% on working capital loan under NEIIPP, 2007 as was
available under NEIP, 1997.
Source: DIPP
Exhibit: Central government’s infrastructure development thrust in north eastern region
Airports 50
Railways 450
Source: Company, SKP Research
~20 ongoing new line (Rs 330 bn for ~1,157 kms of rail network), gauge conversion (Rs
99 bn – ~1,439kms of rail network) & double line (Rs21 Bn – 1,400kms) projects in NER.
Sector
Roads
Largest Hydro power potential in India is in NER with ~98% still untapped, ~63,000 MW of
Hydro Power capacity identified; ~14,000 MW already allotted to Pvt. Every ~1,000 MW of
hydro‐power has the potential to generate cement demand of ~1‐1.2 MT. Hence this itself
will mean incremental cement demand of ~70‐75 MT in the longer term.
Hydro Power -
Five airports sanctioned and eight more are in pipelines. Rs 50 bn investment is expected
in next ~10 years.
Budgeted
expenditure
(Rs bn)
Govt Initiative
Special Accelerated Road Development for North East (SARDP-NE) and National Highway
Development Programmes (NHDP) in NER for 10,141 kms, will result in over ~18-22 MT
of cement demand in NER region over next few years. Furthermore, Minister of Road
Transport and Highways of India will spend additional Rs150 bn on road projects in
North‐East.
335
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 5 of 22
Eastern Region: Size and Growth Trends: Total capacity of eastern market in FY15 was estimated at ~53
MTPA, with a capacity utilization of 77%. The region is expected to post a CAGR of ~12%
over next ~2-3 years backed by capacity addition from the exiting players and significantly
higher infrastructure spending especially in West Bengal where assembly elections are due.
Further, the eastern region continues to be underpenetrated coupled with regional
contribution of 15% to the total housing shortage in urban India, thereby implying potential
for strong cement demand.
Major Players and Market Share: Currently in the Eastern region’s top six cement
manufacturers enjoys a market share of ~67% and top cement group (Lafarge Holcim)
enjoy a market share of ~38%. Recently, Heidelberg Cement has announced the acquisition
of Italcementi at a global level, which may result in consolidation of the group in India.
Exhibit: Eastern Market- (Total Capacity, Production & Capacity Utlilisation)
Source: Company, SKP Research
34 37 43 45 49 53 62 6629 31 33 36 37 41 46 51
8584
77
80
7677
73
78
65
70
75
80
85
90
0
10
20
30
40
50
60
70
FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E
Total Capacity (MTPA) Total Production (MTPA)
Capacity Utilisation (%)
Exhibit: Market Share & Installed Capacity - Eastern Market
Source: SKP Research
Lafarge, 15%
Dalmia Bharat,
13%
Ambuja, 12%ACC,
11%
Others, 33%
Market Share (%) - Eastern India
UltraTech,11.4
Lafarge, 5.2
Dalmia Bharat,
8.8
Ambuja, 4.9
ACC, 6.2
Shree Cement,
2.0
Birla Corp,
7.5
Capacity- Eastern Market (MTPA)
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 6 of 22
Capacity addition in the East: Cement players are planning to add ~22 MMT of capacity
over the next 3 years, despite that utilization levels are likely to remain healthy. Shree
Cement and JK Lakshmi, the new entrants over last six months in the region, are operating
at utilisation levels of around 45-50%, planning to add 5.2 MMT & 2.7 MMT capacities
respectively while Emami Cement, another new entrant is expected to commission its plant
by next year. There has been increased supply from Ultratech and Star Cement in the
market and Shree and JK Lakshmi Cement have been ramping up their market share with
aggressive pricing. In H1FY16, prices in the region have moderated by INR5-20/bag.
Opportunities & Demand Drivers:
There is an uptick in government-related infrastructure spending in Odisha and Bihar and a
significant pick-up in the private sector capex after a long halt. Over the next 2-3 years,
government-led Housing for All projects coupled with upcoming state election in West Bengal
will spur cement demand. Key opportunities in the eastern market are as follows.
Exhibit:Capacity addition in Eastern region (In MTPA) & Utilisation rate - (%)
Source: Company, SKP Research
1
0.8
1.5
1.7
2
1
1
2.6
3.2
2.5
2.5
2.6
0 1 2 3 4
ACC
Ambuja -…
Dalmia-…
Emami …
JK Lakshmi-…
JK Lakshmi-…
Star Cement
Shree-Bihar
Shree-…
Ultratech-…
Capacity addition in Eastern region (In MTPA)
FY18E FY17E FY16E
81 85 82 78 56
82 79 80 7955
78 79 82 80
55
80 79 81 80
57
81 83 80 81
59
0
100
200
300
400
500
North Central East West South
Utilisation Rate (%)
FY13 FY14 FY15 FY16E FY17E
Expected
DemandStates Opportunities
Odisha 10 MMT
The state has received higher budgetary allocation for Irrigation and Rural
development and the state government is focused on low-cost housing
under Housing for All scheme.
States per capita cement consumption stands at 148kg Vs all India
average of 207kg, huge potential for growth. Post monsoon, demand is
expected to pick-up as government will increase its focus on from rural and
urban housing, owing to huge under-investment in the past.
15 MMTWest Bengal
Bihar 12 MMT
Post elections, Bihar could see heightened activities in roads & highways
construction sector. The Central government had already announced
schemes worth US$16bn and special package of US$19bn for the state.
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 7 of 22
Company Profile Star Ferro & Cement Company (SFCL) was incorporated as a separate company in 2011
and is the de-merged entity of Century Plywood, with demerger coming in effect from 1st
April 2012. SFCL is promoted by first generation entrepreneurs Mr. Sajjan Bhajanka
(Chairman & MD), Mr. Sanjay Agarwal (Managing Director), Mr. Rajendra Chamaria (VC &
MD) and ably supported by Mr. Sanjay Kumar Gupta (CEO) and Mr. Dilip Kumar Agarwal
(CFO).
The demerged entity had two major business verticals a) Cement and b) Ferro Alloys,
contributing 88% and 12%, respectively to revenues in FY14. The Ferro Alloy vertical was
demerged into Shyam Century Ferrous Ltd at a demerger ratio of 1:1 w.e.f 1.4.2014.
SFCL has ~3.03 MTPA cement capacity in Meghalaya, Assam and West Bengal under its
~70.48% owned subsidiary Cement Manufacturing Company Ltd (CMCL). CMCL has a
clinker capacity of 0.8 MTPA at Lumshnong (Meghalaya) with grinding capacity of ~3.03
MTPA (~0.6 MTPA at Lumshnong, ~1.6 MTPA at Guwahati, Assam and leased capacity of
~0.84 MTPA in West Bengal) and is adding ~1.0 MTPA of grinding unit in West Bengal.
CMCL through its 100% subsidiary Megha Technical & Engineers Pvt. Ltd (MTEPL), has
~0.67 MTPA grinding capacity at Lumshnong (Meghalaya) and power generation capacity
of 9 MW (DG Set). CMCL holds ~87.5% in Star Cement Meghalaya Ltd (SCML), which has
~1.75 MTPA clinker capacity at Lumshnong (Meghalaya) and rest ~12.5% stake in SCML is
held by MTEPL. CMCL also holds 51% stake in Meghalaya Power Limited (MPL) which
operates 51 MW power plant.
Exhibit: Key Milestones
Cement capacity increased to 3.7 MTPA
Power generation capacity increased to 51 MW
The ferro alloy division has been demerged into Shyam Century Ferrous Ltd
Source: Company, SKP Research
2013 Cement capacity increased to 2.9 MTPA and clinker capacity to 2.6 MTPA
2014
2015
Star Ferro & Cement Company (SFCL) was incorporated as a separate company
Cement capacity increased to 1.27 MTPA, and clinker capacity increased to 0.8 MTPA
Cement Manufacturing Company Ltd (CMCL) was incorporated in 2001
The plant commenced operations in 2005 with capacity of 0.4 MTPA
SFCL entered into on-lease agreement with local cement grinding units in Siliguri and Durgapur (Total
0.84 MTPA capacity)
Cement and clinker capacity increased to 1.06 MTPA and 0.6 MTPA respectively2008
2001
2005
Commenced 8 MW of power capacity2010
2011
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 8 of 22
Business Segment and Revenue Mix: SFCL has three business segments viz. cement,
clinker and others. Cement vertical contributes ~90%+ of total sales and ~88% of total EBIT
whereas clinker and others vertical contributes ~8-10% of total sales.
Exhibit: Revenue Mix (%)
Source: Company, SKP Research
90%
83%
92%
0%
4%
8%10%12%
0%
75%
80%
85%
90%
95%
100%
FY13 FY14 FY15
Cement Clinker Others
Exhibit: Company Structure (Key Subsidiaries/Associates)
Source: Company, SKP Research
Star Ferro and Cement Ltd.
Cement Manufacturing Comapny Ltd.('CMCL')
Star Cement Meghalaya Ltd.('SCML')
Megha Technical & Engineers Pvt. Ltd. ('MTEPL')Promoters 28.5
0%70.48
%
100%
87.49%
12.51%
*Grinding unit with capacity of 0.67 MTPA at Lumshnong
* Power generation capacity of 9MW (DG Set)
Meghalaya Power Ltd. ('MPL)
*Clinker manufacturing capacity of 0.80 MTPA at Lumshnong
*Grinding Unit with capacity of 0.59 MTPA at Lumshnong
*Grinding unit with capacity of 1.60 MTPA at Sonapur, Guwahati, Assam
*Hired 0.70 mn ton grinding units in WB
*Clinker manufacturing capacity of 1.75 MTPA at Lumshnong
*51 MW power plan
*Rest of 49% Shareholding with Shyam Century Ferrous Ltd
51%
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 9 of 22
Cement - Installed Capacity & Capacity Utilisation:
SFCL, is the largest cement player in NER, with ~23% market share and a cumulative
cement manufacturing capacity of ~3.7 MTPA. It has three manufacturing units in
Meghalaya and one unit in Assam along with two hired units in West Bengal and sells
cement under the brand name ‘Star Cement’. NER remains the supply deficit market due to
lower regional capacity addition, political instability, regulatory hurdles and geographical
complexity.
To grasp the demand opportunity and lessen the region’s dependence on import from other
states, SFCL has increased its total cement capacity (Assam & Meghalaya) from ~1.27
MTPA in FY12 to ~2.9 MTPA in FY15, through setting up ~1.6 MTPA grinding unit in Assam
and adding ~0.6 MTPA at Meghalaya. Both these units were commissioned in Q4FY13,
post which cement capacity in Meghalaya now stands at 1.26 MTPA.
SFCL entered into on-lease agreement with local cement grinding units in Siliguri and
Durgapur (total 0.84 MTPA), further increasing total capacity to ~3.7 MTPA. SFCL is also
planning to add 1 MTPA grinding unit in West Bengal, which is expected to be operational
by October 2016.
SFCL currently manufactures high grade ordinary portland cement (OPC), pozzolana
portland cement (PPC) and other specialty grades required in infrastructure projects using
state-of-the-art dry process rotary kiln technology.
Exhibit: Cement - (Installed Capacity & Capacity Utilisation)
Source: Company, SKP Research, *Effective capacity utilization
1270000
1270000
2860000
2860000
3320000
3700000 4
700000
950000
1100000
1070000
1631047
2171666
2518600
2982333
75%
87%
37%
57%
65%
72%* 74%*
0%
20%
40%
60%
80%
100%
-600000
200000
1000000
1800000
2600000
3400000
4200000
5000000
FY11 FY12 FY13 FY14 FY15 FY16E FY17E
Cement Installed Capacity (TPA) Production (TPA)
Capacity Utilisation (%)
Clinker- Installed Capacity & Capacity Utilisation:
SFCL has increased its clinker capacity to 2.6 MTPA (~1.7 MTPA commissioned in
Q4FY13) from 0.8 mt in FY12.
The recent lease arrangement for grinding clinker in West Bengal will further increase
CMCL’s market expansion. Clinker’s production grew at a CAGR of ~6% during FY13-15
and we expect this segment to maintain a share of ~7-10% in total sales over the next two
years, on back of higher capacity utilization (current capacity utilization – 61%).
Currently, Bangladesh imports 10-15 MT of clinker annually as the country does not have its
own supply of limestone. SFCL is exploring opportunities to export clinker from its north
east plants.
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 10 of 22
Exhibit: Clinker - (Installed Capacity & Capacity Utilisation)
Source: Company, SKP Research
2550000
2550000
2550000
2550000
2550000
1378616
1100000
1550000
1734000
1912500
54%
43%
61%
68%
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-600000
200000
1000000
1800000
2600000
3400000
4200000
5000000
FY13 FY14 FY15 FY16E FY17E
Cement Installed Capacity (TPA) Production (TPA) Capacity Utilisation (%)
Market Mix – North Eastern Region Vs Eastern Market:
Currently, NER contributes ~70% of its cement output whereas eastern region accounts for
the rest ~30%. Within NER, Assam is the major market where it dispatches ~35%-40% of
its cement volumes followed by Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Tripura,
Sikkim etc. In East region, West Bengal is the major market (accounts for ~24% of the
volumes and 4% market share) followed by Jharkhand and Bihar. SFCL has started
expanding its presence in eastern market (total market of ~53 MTPA) and over the next two
years we expect a sharp uptick in volumes backed by capacity addition of 1 mn MT grinding
unit at Siliguri (volumes from the eastern market have grown from 3% of the total volumes in
FY13 to ~30% in FY15).
Exhibit: Market Mix (%)
Source: Company, SKP Research
Market Mix (FY15)Market mix (FY14)Market mix (FY13)
North-East,97% North-East,79% North-East,70%
East,21% East,30%East,3%
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 11 of 22
Fiscal Incentives leads to higher profitability: SFCL enjoys various fiscal benefits under NE industrial policy (NEIIPP 2007) which includes
100% excise exemption, 100% income tax exemption, interest subsidy at 3% of working
capital loan, transport subsidy, capital investment subsidy up to 30% of investment in plant
& machinery. As a result, SFCL generates robust EBITDA/tonne which is almost ~2.0x of
pan-India level cement players.
SCML CMCL-GGU CMCL-LMS MTEPL
Excise Duty on
Clinker 75% 8 years - 2 years -
Cement 75%/36%^ - ^8 years 2 years ^2 years
Central Sales Tax 99% 5 years - - -
VAT 99%^^ 5 years Rs 275 Crs / 5 years - -
Freight Subsidy Inward
Within NER* 90% - - - -
Outside NER 90% - - - -
Freight Subsidy Outward 3 years 3 years
Within NER* 50% - - - -
Outside NER 90% - - - -
Source: Company, SKP Research
Exemption
100% under Section 80
IE, subject to MATIncome Tax 8 years 8 years - 2 years
-
Exhibit: Fiscal Incentives leads to higher profitability
^^At GGU unit, VAT exemption is 99% upto 200% of FCI ̂75% for integrated units and 36% for standalone grinding
units. *Freight subsidies are not available for intra-state movements; ** As on 31.03.2015
Capital Investment Subsidy
30% of Investment in
Plant & MachineryOne time One time -
Balance Exemption period**
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 12 of 22
Investment Rationale
Leadership in North East region with strong brand pull, close proximity to raw materials
and robust distribution network
Leadership in North East region with pricing power
Over the years, SFCL has emerged as the largest cement manufacturer in NER with ~23%
market share and a total NER installed capacity of 2.9 mn MT (one integrated cement plant,
one clinkerisation unit and two split grinding unit). The regional players enjoy strong entry
barriers on account of political instability, geographical complexity and regulatory hurdles
making it a supply deficit market with no new capacities in the pipeline.
Presently, mainland companies bring cement in NER which results in high logistic cost
coupled with demand supply mismatch which creates a high price-end market (cement
arrivals in NER from mainland players has come down to 10% from 30%), allowing SFCL to
enjoy its leadership position with better pricing power.
Exhibit: Higher realisations Vs Peers backed by leadership position in NER
Source: Company, SKP Research
58185982
62066399
6591
5400
5600
5800
6000
6200
6400
6600
6800
FY13 FY14 FY15 FY16E FY17E
Sales Realization (Rs/Tonne)
23
23
23
23
18
Growing Market Share In NER (%)
Closer proximity to raw materials
Cement is a localised industry due to low value and bulky end product. Proximity to source
of raw material is imperative to keep the cost of cement at bay. SFCL enjoys the advantage
of having its own captive limestone mines in Meghalaya (mines are located within 2-3 kms
of the clinker units, providing uninterrupted supply of raw material) having reserves of 300
million tonnes, which is enough to meet all its raw material requirements (based on
expanded capacity) for the next 70-80 years.
Also, coal is readily available in close proximity (Assam and Meghalaya have large coal
deposits), ensuring cost and operational efficiencies which provides strong back-up for
Company’s 51 MW power plants. Captive power ensures non-dependency on grid power
and fly ash generated from power plant is used in cement plants at almost nil cost.
Proximity to rich limestone source, availability of quality fuel at the doorstep and a presence
in the market place has resulted in an edge in logistic costs.
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 13 of 22
Exhibit: SFCL locational advantage
Source: Company, SKP Research
Strong brand pull led by aggressive advertising campaigns
The Company’s greatest asset is the recall value of its brands among customers. This is
largely driven by its aggressive but strategic brand spends over the last 3-4 years with
consistent focus on quality. Currently, advertisement expense accounts for ~3-4% of total
revenues. As a result, over the years SFCL has positioned ‘Star Cement’ as a Tier 1 brand
in NER.
Star Cement followed by Dalmia Cements, commands premium pricing. Second grade
cement brands sells at Rs 5-7 per bag discount, and C grade brands sell at Rs 20-30 per
bag discount to Star Cement.
Exhibit: Advertisement Expense (Rs Million)
Source: Company, SKP Research
161
434 462
555
672
2.4%
3.7%
3.2% 3.3% 3.3%
0.0%
1.0%
2.0%
3.0%
4.0%
0
150
300
450
600
750
FY2013 FY2014 FY2015 FY2016E FY2017E
Advertisement Expense - As a (%) of Sales
A&P Expense (Rs Millions) As a (%) of Net Sales
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 14 of 22
Robust distribution network and retail-centric business model
SFCL has heavily invested in dealer’s network expansion to retain its premium position in
NER and currently has its presence in 11 states with 2,300+ strong dealers and 8,700+
strong retail network. It distributes directly via dealers rather than through C&F agents which
has resulted in deeper penetration, greater reach and higher market share.
SFCL would achieve a freight subsidy of ~90% by expanding towards the Eastern Region,
as opposed to ~50% freight subsidy within NER under NEIPP 2007. Therefore, SFCL has
steadily increased its sales presence outside NER (West Bengal, Bihar, and Jharkhand) to
capitalize the freight subsidy. SFCL's business model is primarily retail driven, nearly 77%
of its total product marketed to retail customers while only 23% is marketed through the
discount-driven institutional network.
Exhibit: Robust Dealer network growth & Sales Mix (%)
Source: Company, SKP Research
603 693 796 877 95090
110
572
11491358
0
500
1000
1500
2000
2500
FY12 FY13 FY14 FY15 FY16 (Oct)NE WB, BH & JHK
Trade, 77%
Non Trade, 23%
SFCL- A retail focus brand with 77% sales in the trade segment
En-route to eastern market - Positive step for future growth
NER contributes ~70% of SFCL cement output whereas eastern region market accounts for
the rest ~30%. SFCL is leveraging its strong brand and distribution network to penetrate into
markets of West Bengal, Bihar & Jharkhand which has a total cement market of about 53
MTPA (volumes from the eastern market have grown from 3% of the total volumes in FY13
to ~30% in FY15). Over the next two years, we expect a sharp uptick in volumes from
eastern market backed by capacity addition of 1 MTPA grinding unit at Siliguri and
aggressive advertisement.
Exhibit: Capacity addition details
Grinding Clinker
CMCL Meghalaya - Lumshnong 590000 800000
MTEPL Meghalaya - Lumshnong 670000 - Q4FY13
SCMIL Meghalaya - Lumshnong - 175000 Q4FY13
CMCL Guwhati (Assam) 1600000 - Q4FY13
CMCL West Bengal 460000 - On lease from Q3FY14-15
CMCL West Bengal - Durgapur 380000 - On lease from Q3FY16
CMCL West Bengal 1000000 - Expected by October 2016
Source: Company, SKP Research
Capacity (MTPA) Remarks Subsidiaries Location
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 15 of 22
Strong Financial performance:
Cement volumes expected to grow at ~17.1% CAGR over FY15-17E
Key drivers for revenue growth for SFCL going forward will be (1) GoI’s thrust on
infrastructure development in NER (2) en-route to eastern market with robust distribution
network and retail-centric business model (3) superior brand mix and innovative marketing
strategies and (4) strong entry barriers for new player in NER with no new capacities in
pipeline. To grasp the demand opportunity and lessen the region’s dependence on import
from other states, SFCL has increased its total cement capacity from ~1.27 MTPA in FY12
to ~3.7 MTPA currently and is also planning to add 1 MTPA grinding unit in West Bengal,
which is expected to be operational by October 2016.
Going forward, on the back of above demand drivers, we expect SFCL sales to grow at a
CAGR of 19.3% during FY15-17E resulting into better capacity utilization and higher sales
volume. Capacity utilization is expected to improve from 65% in FY15 to effective sub ~74%
by FY17E and cement volumes to grow at ~17.1% CAGR over FY15-17E.
Pricing premium, regional advantage and fiscal incentives drive EBITDA/Tonne of Rs
1900+, 2x of industry’s average
Cement prices in the NER are among the highest in the country. Strong realisations led by
tier 1 brand positioning and focus towards trade sales, tax benefits (excise duty & VAT
benefits amounting to Rs 250-350/tonne), freight subsidy (subsidy of Rs 250-300/tonne)
and proximity to raw materials (uninterrupted supply of limestone, coal & power) have
helped SFCL to enjoy higher EBIDTA/tonne of Rs 1,800+ (higher by Rs 40-50/bag
compared to other regional players) which is ~2x-3x the industry average. These benefits
will continue for the next 3-8 years.
During FY15, SFCL reported cement realizations of Rs 6,213/tonne and EBITDA/tonne of
Rs 1,847/tonne. Going forward, on back of above factors we expect SFCL cement
realisation to improve moderately by ~3% y-o-y during FY15-17E led by gradual
improvement in utilisation rates
Exhibit: Expect revenue CAGR of 19.3% during FY15-17E led by pick-up in sales volume
Source: Company, SKP Research
10
65
09
7
16
31
04
7
21
69
25
1
25
11
04
4
29
73
38
6
83
55
76
13
78
61
6
15
50
00
0
17
34
00
0
19
12
50
0
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
FY13 FY14 FY15 FY16E FY17E
( T
on
ne
s P
er
An
nu
m)
Capacity ramp-up drive sales volume CAGR of ~17.1% during FY15-17E
Cement Sales Volume Clinker Sales Volume
65
96
11
73
4
14
30
4
16
81
7
20
37
0
78
2218
21
0
10
20
30
40
50
60
70
80
90
0
5000
10000
15000
20000
25000
FY13 FY14 FY15 FY16E FY17E
Expect revenue CAGR of 19.3% during FY15-17E
Revenue (Rs Mn) Growth (%)
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 16 of 22
Consolidated EBITDA/PAT to grow at a CAGR of 8.8%/39.8% during FY15-17E
We expect SFCL to post an EBITDA growth at ~8.8% CAGR over FY15-FY17E, backed by
improvement in cement realizations, moderation in operating cost and fiscal incentives
benefit. Net profit during the same period is expected to improve by ~1.95x on account of
higher utilization rates amid stable capital charges and decline in interest cost. PAT growth
will also be supported by increase in cash flow generation which will yield a higher treasury
income over FY16-17E.
De-leveraging balance sheet with low capex commitment:
Over the last few years, SFCL has reduced its net debt from Rs 829 crores in FY13 to Rs
672 crores in FY15, bringing down D/E ratio significantly to ~0.7x in FY15 from ~0.9x in
FY14 on account of better operational performance and working capital management.
Exhibit: Cement EBITDA/tonne comparison
Source: Company, SKP Research
1111
1485
1847
694 730 725
0
400
800
1200
1600
2000
FY13 FY14 FY15
Star Ferro & Cement All India average
2.0x 2.5x1.6x
58
45
59
82
62
13
63
99
65
91
11
11
14
85
18
47
15
21
16
09
17.9 21.7
30.4
24.6% 25.3%
0.0
10.0
20.0
30.0
40.0
0
2000
4000
6000
8000
FY13 FY14 FY15 FY16E FY17E
EBITDA/tonne to improve to Rs 1920/t by FY17E
Cement Realisation (Rs/Tonne) EBITDA/Tonne (Rs)
EBITDA Margin (%)
EBITDA - 2x of industry’s average
Exhibit: EBITDA And PAT
Source: Company, SKP Research
11
84 25
50 4
35
1
41
36
51
53
18%
22%
30%
24.6% 25.3%
0%
5%
10%
15%
20%
25%
30%
35%
-500
1000
2500
4000
5500
7000
FY13 FY14 FY15 FY16E FY17E
EBITDA And EBITDA Margin (%)
EBITDA (Rs Mn) EBITDA Margin (%)
24
9
61 83
4
10
07 1
63
1
6%
1%
6% 6%
8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0
400
800
1200
1600
2000
FY13 FY14 FY15 FY16E FY17E
PAT and PAT Margin (%)
PAT (Rs Mn) PAT Margin (%)
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 17 of 22
On account of better capacity utilization over the next two years, it is estimated to generate
an operating cash flow of Rs 250 crore, which would be used to fund its major capex
programme. Currently, SFCL is adding ~1 MTPA of grinding unit in West Bengal at a capex
of Rs 190 crore and has leased ~0.84 MTPA grinding unit in Siliguri and Durgapur.
Furthermore, SFCL is also expected to receive Rs. 600 crore of subsidies over next two
years. Thus, on back of limited capex commitment, we expect D/E ratio to come down to~
0.4x in FY17E.
.
Peer Comparison:
Exhibit: Debt/Equity And Interest Coverage Ratio
Source: Company, SKP Research
0.9x 0.9x 0.7x 0.5x 0.4x
2.4x
1.1x
2.4x2.7x
4.3x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
FY13 FY14 FY15 FY16E FY17E
Debt/Equity And Interest Coverage Ratio (x)
Debt/ Equity (x) Interest Coverage Ratio (x)
Exhibit: Peer Valuation
FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15
Dalmia Bharat Ltd 23.9 52608 27906 30158 35141 12.2% 20.0% 13.6% 15.0% 1971 -84 31 -87.6%
JK Lakshmi Cement Ltd 8.3 31418 20550 20566 23155 6.2% 18.6% 13% 13.7% 1750 939 1029 -23.3%
Ramco Cement Ltd 7.7 87612 38308 36835 36554 -2.3% 22.9% 13.3% 17.1% 4037 1146 2461 -21.9%
Birla Corp 5.2 26948 26030 30164 32099 11.0% 13.1% 7.4% 8.1% 2703 1298 1752 -19.5%
Mangalam Cem 3.3 4303 7060 6973 9218 14.3% 15.9% 6.9% 8.6% 774 296 179 -51.9%
Sanghi Industries 4.0 11241 9901 10483 9323 -3.0% 17.2% 17.2% 15.2% 459 496 306 -18.3%
Star Ferro Cement Ltd 3.3 23328 6596 11734 14304 47.3% 17.9% 21.7% 30.4% 249 61 834 83.1%
Source: Company, SKP Research ,*Capacity in MTPA, Mcap as on Feb 24, 2016
Revenue
CAGR
(%) FY13-
15
PAT
CAGR
(%) FY13-
15
Company
Mcap
(Rs
Mn)
Revenue (Rs Mn) EBITDA Margin (%) PAT (Rs Mn)
Capacity*
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 18 of 22
Valuations
With government’s infrastructure development thrust & strong entry barriers in NER, coupled
with leadership in NER with strong brand pull and pricing power, robust distribution network,
retail-centric business model, raw material security, en-route to eastern market, fiscal
incentives benefit and enhancing return ratios, augurs well for SFCL.
We have valued the stock on the basis of EV/EBIDTA ‐ of 6.5x of FY17E EBIDTA – method of
relative valuation. In view of the sharp correction in the share price to Rs 105 now, after a
stupendous rally to a life time high of Rs 185 recently, we recommend a BUY on the stock
with a target price of Rs 151/- (44% upside) in 15 month.
Risks & Concerns
Sharp recovery in diesel prices can inflate cost pressures-
Currently road freight accounts for ~80% of total freight cost, any sharp recovery in diesel
prices could inflate costs pressures may hurt margins.
Delay in project execution may lead to lower capacity utilizations-
Any material delay in infrastructure project execution will lead to lower utilization of its
existing capacity resulting to lower sales volumes and pricing power.
Rollback of subsidy benefits under ‘NEIIPP 2007’-
Currently, the company enjoys various fiscal benefits under NE industrial policy (NEIIPP
2007). This includes 100% excise exemption, 100% income tax exemption, interest subsidy
at 3% of working capital loan, transport subsidy, capital investment subsidy up to 30% of the
investment in plant & machinery. Rollback of any such benefits could lead to a negative
impact on margins.
Source: Company, SKP Research
Exhibit: Valuation Charts
0
4
8
12
16
20
De
c-1
3
Fe
b-1
4
Ap
r-1
4
Ju
n-1
4
Au
g-1
4
Oc
t-1
4
De
c-1
4
Fe
b-1
5
Ap
r-1
5
Ju
n-1
5
Au
g-1
5
Oc
t-1
5
De
c-1
5
Rolling forward EV/EBITDA (x) chart
Daily EV/EBITDA Mean EV/EBITDA
Mean+1sd Mean-1sd
0
50
100
150
200
250
De
c-1
3
Feb
-14
Ap
r-1
4
Jun
-14
Au
g-1
4
Oct
-14
De
c-1
4
Feb
-15
Ap
r-1
5
Jun
-15
Au
g-1
5
Oct
-15
De
c-1
5
Rolling forward EV/MT ($) chart
Daily EV/MT($) Mean EV/MT($)
Mean+1sd Mean-1sd
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 19 of 22
Q2 FY16 Result Update
Particulars Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%) FY16-9M FY15-9M YoY (%)
Net Sales 4,282.4 3,371.0 27.0% 3,111.5 37.6% 11,478.3 9,216.7 24.5%
Other Operating Income 5.1 10.6 - 3.2 57.7% 10.8 18.1 -
Total Income 4,287.5 3,381.6 26.8% 3,114.7 37.7% 11,489.1 9,234.8 24.4%
Expenditure 3,370.3 2,201.6 53.1% 2,562.6 31.5% 8,806.6 6,431.7 36.9%
Material Consumed 465.6 475.9 -2.2% 359.9 29.4% 1,293.3 1,299.1 -0.4%
(as a % of Total Income) 10.9% 14.1% 11.6% 11.3% 14.1%
Purchase of Traded goods 412.7 77.0 436.1% 266.8 54.7% 1,008.8 112.8 794.2%
(as a % of Total Income) 9.6% 2.3% 8.6% 8.8% 1.2%
Changes in Inventories & WIP 80.0 (325.4) -124.6% (163.9) -148.8% (332.3) (190.7) 74.3%
(as a % of Total Income) 1.9% -9.6% -5.3% -2.9% -2.1%
Employees Cost 277.7 246.2 12.8% 304.8 -8.9% 813.8 686.3 18.6%
(as a % of Total Income) 6.5% 7.3% 9.8% 7.1% 7.4%
Other Expenses 2,134.3 1,727.8 23.5% 1,795.0 18.9% 6,023.0 4,524.2 33.1%
(as a % of Total Income) 49.8% 51.1% 57.6% 52.4% 49.0%
EBITDA 917.2 1,180.0 -22.3% 552.1 66.1% 2,682.5 2,803.1 -4.3%
EBITDA M argin (%) 21.4% 34.9% (1,350)Bps 17.7% 367 Bps 23.3% 30.4% (701)Bps
Depreciation 430.1 551.5 -22.0% 428.0 0.5% 1,275.4 1,637.7 -22.1%
EBIT 487.1 628.5 -22.5% 124.1 292.4% 1,407.1 1,165.4 20.7%
Other Income 12.7 8.2 54.6% 11.5 10.1% 41.1 17.1 139.7%
Interest Expense 198.9 233.9 -15.0% 216.5 -8.1% 617.6 673.3 -8.3%
Income from Forw ard Contracts - - -
Exceptional Items, net (4.8) 7.9 1.7 (3.1) (2.5)
Profit Before Tax 296.1 410.7 -27.9% (79.1) -474.3% 827.5 506.8 63.3%
Income Tax 8.2 29.3 -72.1% 15.7 -48.1% 29.2 66.9 -56.3%
Effective Tax Rate (%) 2.8% 7.1% - -19.9% - 3.5% 13.2% -
Profit After Tax (PAT) 288.0 381.4 -24.5% (94.8) -403.6% 798.3 439.9 81.5%
Minority interests 102.4 128.9 (16.2) 276.0 155.4
Profit After Tax (PAT) 185.6 252.5 -26.5% (78.6) -336.0% 522.2 284.5
PAT M argins (%) 6.7% 7.5% (75)Bps -3.04% 976 Bps 6.95% 4.76% 218 Bps
Diluted EPS 0.8 1.1 -26.5% (0.4) -336.0% 2.35 1.28 83.6%
Exhibit: Q3FY16 Result Review Figs. in INR M illion
Source: Company Data, SKP Research
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 20 of 22
Exhibit: Balance Sheet
Particulars FY14 FY15 FY16E FY17E Particulars FY14 FY15 FY16E FY17E
Total Income 11,733.7 14,304.3 16,817.2 20,369.8 Share Capital 222.2 222.2 222.2 222.2
Growth (%) 77.9% 21.9% 17.6% 21.1% Reserve & Surplus 6,641.1 6,578.0 7,324.5 8,695.1
Expenditure 9,184.2 9,953.6 12,680.9 15,217.0 Shareholders Funds 6,863.3 6,800.2 7,546.6 8,917.2
Material Cost 2,095.7 1,679.1 1,597.6 1,874.0 Total Debt 8,443.0 6,917.6 6,015.6 5,145.6
Traded Goods -77.6 616.4 1,345.4 1,629.6 Minority Interest 2,528.5 3,230.9 3,566.4 4,081.4
Employee Cost 785.8 912.8 1,177.2 1,425.9 Liabilities & Provisions 4,192.5 4,869.4 5,394.3 5,315.5
Admin & Other Exp. 6,380.4 6,745.3 8,559.9 10,286.7 Deferred Tax Liabilities 44.8 86.6 86.6 86.6
EBITDA 2,549.5 4,350.7 4,136.3 5,152.8 Total Liabilities 22,072.0 21,904.7 22,609.6 23,546.3
Depreciation 1,616.4 2,237.4 1,876.3 2,116.7 Net Block inc. Capital WIP 12,717.4 10,689.4 9,819.7 8,682.2
EBIT 933.2 2,113.2 2,260.0 3,036.1 Deferred Tax (Net) - - - -
Other Income 25.0 7.8 53.3 58.7 Non-Current Assets - - - -
Interest Expense 872.1 873.8 822.0 711.1 Inventories 1,754.9 1,091.4 1,491.8 1,679.2
Profit Before Tax (PBT) 76.0 1,247.4 1,491.3 2,384.1 Sundry Debtors 1,415.7 3,098.0 3,260.2 4,441.2
Income Tax 27.1 48.0 -149.1 -238.4 Cash & Bank Balance 125.8 203.7 388.4 577.5
Profit After Tax (PAT) 48.9 1,199.4 1,342.1 2,145.7 Other Current Assets - -
Minority Interest 12.4 -365.0 -335.5 -515.0 Loans and Advances 6,037.4 6,802.3 7,633.5 8,149.9
Adj PAT (Post Minority) 61.5 834.1 1,006.6 1,630.7 Non Current Investment 15.3 15.3 15.7 15.4
Growth (%) -75.3% 1256.2% 20.6% 62.0% Other Non Current Assets 5.4 4.5 0.4 0.9
Diluted EPS 0.3 3.8 4.5 7.3 Total Assets 22,072.0 21,904.7 22,609.6 23,546.3
Exhibit: Ratio Analysis
Particulars FY14 FY15 FY16E FY17E Particulars FY14 FY15 FY16E FY17E
Profit Before Tax (PBT) 76.0 1,247.2 1,491.3 2,384.1 Earning Ratios (%)
Depreciation 1,616.4 2,237.4 1,876.3 2,116.7 EBITDA Margin (%) 21.7% 30.4% 24.6% 25.3%
Finance Costs 872.1 873.8 822.0 711.1 PAT Margins (%) 0.5% 5.8% 6.0% 8.0%
Chg. in Working Capital 1,599.4 2,809.2 2,160.7 2,206.5 ROCE (%) 4.4% 9.6% 10.2% 13.1%
Direct Taxes Paid - (207.5) (149.1) (238.4) ROE (%) 0.5% 7.0% 8.4% 12.6%
Other Charges - - Per Share Data (INR)
Operating Cash Flows 1,599.4 2,601.7 1,189.6 1,257.0 Diluted EPS 0.3 3.8 4.5 7.3
Capital Expenditure (1,173.2) (433.6) (874.8) (916.7) Cash EPS (CEPS) 7.5 15.5 14.5 19.2
Investments - 4.6 BVPS 42.3 45.1 50.0 58.5
Others - - 3,000.0 3,000.0 Valuation Ratios (x)
Investing Cash Flows (1,174.7) (402.3) 2,084.9 1,993.3 P/E 380.9 28.0 23.2 14.3
Changes in Equity - - Price/BVPS 2.5 2.3 2.1 1.8
Inc / (Dec) in Debt 409.1 (1,231.1) (2,002.0) (2,090.0) EV/Sales 2.7 2.1 1.7 1.4
Dividend Paid (inc tax) (122.1) - (184.2) (184.2) EV/EBITDA 12.5 6.9 7.0 5.5
Financing Cash Flows (585.2) (2,103.1) (3,084.2) (3,061.2) Dividend Yield (%) 0.4% 1.0% 1.0% 1.0%
Chg. in Cash & Cash Eqv (160.4) 96.3 190.3 189.1 Balance Sheet Ratios
Opening Cash Balance 262.5 102.1 198.0 388.4 Debt - Equity 0.9 0.7 0.5 0.4
Balances with Banks - - Current Ratio 1.6 1.8 1.8 2.1
Closing Cash Balance 102.1 198.0 388.4 577.5 Fixed Asset Turn. Ratios 0.4 0.6 0.8 1.1
Source: Company, SKP Research
Exhibit: Income Statement Figures in INR Million
Exhibit: Cash Flow Statement
Figures in INR Million
Figures in INR Million
Star Ferro and Cement Ltd.
SKP Securities Ltd www.skpmoneywise.com Page 21 of 22
Notes:
The above analysis and data are based on last available prices and not official closing rates. SKP Research is also available on Bloomberg,
Thomson First Call & Investext Myiris, Moneycontrol, Tickerplant and ISI Securities.
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