1. business and industrial

Result Update
November 3, 2014
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Buy
| 458
12-15 months
23%
JK Lakshmi Cement (JKCORP)
| 374
Beats estimates…
• JK Lakshmi reported a robust set of Q2FY15 numbers. Sales volumes
for the quarter remained ahead of our estimates at 1.46 MT (vs. ITarget
Changed from | 423 to | 458
direct estimate: 1.33 MT) while realisations of | 3922/tonne were
EPS FY15E
Changed from|13.2 to |14.6
marginally lower than our estimates (I-direct estimate: | 3971/tonne)
EPS FY16E
Unchanged
• The EBITDA margin of 15.6% (up 304 bps YoY) remained in line with
EPS FY17E
Unchanged
estimates due to operating leverage benefits. In absolute terms, the
Rating
Unchanged
company reported an EBITDA of | 89.2 crore (up 58.5% YoY) and
EBITDA/tonne of | 620/tonne, which remained in line with our
Quarterly performance
estimates (| 630/tonne)
Q2FY15 Q2FY14 YoY (%) Q1FY15 QoQ (%)
• Better volume along with good margins led to 3x YoY jump in net
Revenue
572.6
448.9
27.6
600.4
-4.6
profit to | 30.8 crore against PAT of | 10.3 crore in Q2FY14
EBITDA
89.2
56.3
58.5
113.5
-21.4
15.6
12.5 304 bps
18.9 -333 bps One of the most efficient players in cement midcap space
EBITDA (%)
PAT
30.8
10.3
198.9
40.5
-23.9
JK Lakshmi Cement is one of the most cost efficient players in the
industry. It has been operating close to ~100% capacity utilisation for the
last
three years with healthy operating margins vs. industry. Its cost
Key financials
efficiency
emanates from high usage of alternate fuel (pet coke), logistic
| Crore
FY14
FY15E
FY16E
FY17E
advantage
led by expansion strategy through split grinding unit and self
Net Sales
2056.6
2485.6
3271.0
4218.0
sufficiency
in power. Its per tonne power consumption remains best in
EBITDA
302.0
467.1
609.8
775.9
the
industry
with usage of 72 Kwhr/tonne against industry norms of 90-95
Net Profit
93.0
171.4
228.8
336.9
Kwhr/tonne.
Its fuel consumption is also lower at 706 kcal/kg for the
EPS (|)
7.9
14.6
19.4
28.6
company against industry norms of 800 kcal/kg. The company has also
more than 100% low cost power availability for its plants. Due to this
Valuation summary
operational efficiency, P&F cost has remained lower for the company.
FY14
FY15E
FY16E
FY17E
Healthy expansion plans to fuel growth in future
P/E
47.0
25.5
19.1
13.0
We expect JK Lakshmi to report healthy revenue CAGR of over 27.1%
Target P/E
58.0
31.5
23.6
16.0
over the next three years led by capacity expansion and healthy demand
EV/EBITDA
18.0
12.2
9.7
7.1
in the northern region (to add 3.4 MT capacity i.e. 56% of its existing
EV/Tonne($)
137
101
98
85
capacity over the next two years) coupled with operating efficiency
P/BV
3.4
2.9
2.6
2.2
leading to better volume growth and higher profitability. The company’s
RoNW (%)
7.1
11.4
13.5
16.8
ongoing greenfield project at Durg is expected to come on stream by
RoCE (%)
6.1
9.0
11.1
14.3
Q3FY15E. Apart from this, the company is expanding grinding capacity by
7.0 lakh tonne per annum at Gujarat. Both projects are expected to be
Stock data
complete by the end of FY15E and FY16E, respectively, leading to total
Amount capacity of 9.3 MT in FY15E, 10.0 MT in FY16E and 10.8MT by FY17E
Particular
Mcap
| 4437 crore from current capacity of 6.6 MT.
Debt (FY14)
| 1446 crore Expect D/E to remain in comfort zone despite aggressive expansion
Cash & Invest (FY14)
| 374 crore
We expect the net debt-equity ratio to remain in a comfortable zone (i.e.
EV
| 5509 crore below 1.0x) despite aggressive expansion undertaken by the company.
52 week H/L
| 660 / | 153 As per our estimates, we expect the company to generate free operating
Equity cap
| 274.2 crore cash flow of ~| 490 crore each over the next three years, which will be
Face value
| 10 sufficient to fund the balance pending capex.
Price performance
Timely commissioning of new capacity remains key value driver
1M
3M
6M
12M
On the back of expansions and improvement in demand, we expect
Heildelberg Cem.
10.9
31.8
91.8
150.4
volume CAGR of 20.6% (vs. ~9.3% during FY11-14) in FY14-17E to 9.8
India Cement
-7.9
-4.8
46.2
111.1
MT. We expect cement EBITDA of | 776/tonne in FY16E and | 788/tonne
JK Cement
0.4
35.2
117.7
187.8
in FY17E vs. | 537/tonne in FY14 due to favourable demand-supply matrix
JK Lakshmi Cem.
3.9
47.5
163.9
341.9
in North India. Further, a strong balance sheet and better efficiency in
Analyst
terms of cost remain key positives for the company. Hence, we further
upgrade our target price to | 458/share with a BUY rating on the stock (i.e.
Rashesh Shah
rashes.shah@icicisecurities.com
at 8.5x FY16E EV/EBITDA, $100/tonne on FY17E capacity of 10.8 MT).
What’s changed?
ICICI Securities Ltd | Retail Equity Research
Variance analysis
Q2FY15 Q2FY15E
Q2FY14
YoY (%)
Q1FY15 QoQ (%)
Net Sales
Other Incomes
Raw Material Expenses
Employee Expenses
Change in stock
572.6
1.2
154.3
34.6
1.3
527.3
16.0
127.5
34.5
0.0
448.9
8.6
83.9
30.0
-8.9
27.6
-86.1
84.0
15.2
-114.7
600.4
2.5
159.5
37.4
-12.5
-4.6
-52.4
617.5
-7.4
-110.5
Power and fuel
Freight
Others
EBITDA
115.8
125.3
52.1
89.2
112.9
118.2
50.6
83.7
100.1
100.0
87.5
56.3
15.6
25.3
-40.4
58.5
121.8
126.0
54.8
113.5
-5.0
-0.6
-4.9
-21.4
EBITDA Margin (%)
Interest
Depreciation
Less: Exceptional Items
PBT
Total Tax
15.6
21.8
28.3
5.0
35.2
4.4
15.9
29.5
39.9
0.0
30.3
5.6
12.5 304 bps
19.2
13.7
34.0
-16.6
0.0
NA
11.7
200.8
1.4
214.2
18.9 -333 bps
21.5
1.3
28.3
0.0
16.5
-69.7
49.6
-29.1
9.2
-51.8
PAT
Adjusted PAT
30.8
35.8
24.7
24.7
10.3
10.3
198.9
247.5
40.5
57.0
-23.9
-37.2
1.46
1.33
1.29
13.3
1.44
1.4
Realisation (|)
3,922
3,971
EBITDA per Tonne (|)
620
630
Source: Company, ICICIdirect.com Research
3,482
436
12.6
42.0
4,171
788
-6.0
-21.4
Comments
Healthy revenue growth for the quarter mainly led by high volume growth (up 13.3%
YoY) supported by capacity expansion of 1.3 MT and coupled with improvement in
realisations (up 12.6% YoY)
Raw material cost continued to remain higher during the quarter
Higher fuel efficiency (706 K.Cal/kg v/s 729 K Cal/kg YoY) led to lower growth in
power & fuel costs on per tonne basis
Better operating leverage along with lower cost of production led to 304 bps
improvement in margins
Better revenue growth along with margin expansion led to healthy growth in
profitability
Key Metrics
Volume (MT)
Volume increase led by capacity expansion as well as good demand in the northern
region
Price rise in north backed by recovery in demand led to better realisation growth
during the quarter. On a QoQ basis, prices saw a healthy correction due to
seasonality. However, the management expects average realisations to remain
higher than Q2FY15
Increase in realisation led to substantial increase in EBITDA/tonne
Change in estimates
(| Crore)
Revenue
EBITDA
EBITDA Margin (%)
PAT
FY15E
New % Change
Old
2,464.5
435.4
2,521.2
467.1
17.7
154.9
18.5
171.4
EPS (|)
13.2
14.6
Source: Company, ICICIdirect.com Research
2.3
7.3
Old
3,219.9
566.5
FY16E
New % Change
3,335.0
609.8
Old
3.6
7.6
NA
NA
FY17E
New % Change
4,286.0
775.9
NA
NA
86 bps
10.6
17.6
193.4
18.3
228.8
69 bps
18.3
NA
NA
18.1
336.9
NA
NA
10.6
16.4
19.4
18.3
NA
28.6
NA
Comments
Given the strong recovery in demand supported by
higher cement prices, we expect realisation growth to
remain strong, going ahead. Hence, we increase our
revenue expectations for FY15E and FY16E
The company's continuous efforts on margin
improvement has been refletced in the results. Going
ahead, we expect this trend to continue. So we build in
higher margin expansion
Net EPS to remain higher than previous estimates due
to better operating performance
Assumptions
Volume (MT)
FY13
5.3
FY14
5.6
Current
FY15E FY16E
6.1
7.9
FY17E
9.8
Earlier
FY15E FY16E
6.3
7.9
Realisation (|)
3,889
3,661
4,075
4,163
4,284
3,874
3,979
NA
No change
We expect realisation growth to remain healthy backed by strong
demand in the coming quarters
EBITDA per Tonne (|)
808
537
Source: Company, ICICIdirect.com Research
766
776
788
596
620
NA
Higher realisation along with cost efficiencies is expected to lead to
higher EBITDA/tonne. So we revise our assumption upwards
ICICI Securities Ltd | Retail Equity Research
Comments
FY17E
NA
Page 2
Company Analysis
Capacity spread
North
(excluding
Rajasthan
)
35%
Rajasthan
23%
Presence in better performing markets
JK Lakshmi has a strong presence in North India with a dominant position
in Rajasthan. Other states where the company has a presence include
Haryana, Delhi, Punjab and Uttarakhand in north. In the west also, the
company has a healthy presence in Gujarat and has made inroads in the
Mumbai markets as well. Sales wise, Gujarat contributes highest at ~34%
of sales while Rajasthan contributes 23% while contribution from the rest
of the north region is at ~35%. Maharashtra contributes ~8% in topline.
Cost effective operational efficiency
Maharash
tra
8%
Gujarat
34%
JK Lakshmi has been one of the most cost effective players in the
industry. The company has gradually shifted from coal usage to low cost
pet-coke, which also avoids uncertainty about coal availability. As a result,
fuel consumption has reduced gradually. The company has 100% captive
power capacity with 54 MW of thermal power plant and 12 MW of waste
heat recovery. Other than this, the company has an external arrangement
with VS Lignite for sourcing 21 MW. Effectively, the company has captive
power availability of 87 MW against current requirement of ~65 MW. The
available surplus power can be sold in the open market by the company.
Exhibit 1: Gradual reduction in power & fuel consumption
KCal/Kg
90
763
762
79
750
80
746
742
79
738
78
80
726
75
73
700
70
60
650
FY09
FY10
FY11
FY12
FY13
Fuel Consumption (Kcal/Kg of Clinker)
FY14
Electricity (Kwh/T)
Source: Company, ICICIdirect.com Research
Exhibit 2: Lower P&F costs than industry
1,200
Due to the combined effect of a shift in fuel components
and captive power plants, the P&F cost has been lower
for the company
| / Tonne
1,000
800
761
911
819
633
730
849
846
993
956
769
949
751
600
400
200
0
FY09
FY10
FY11
JK Laxmi Cement
FY12
FY13
FY14
Industry
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 3
Kwh/MT
800
Operates at healthy utilisation in industry
Due to the company’s strong focus on the northern and western regions
where demand is continuously rising, the company has been able to
maintain higher utilisation even in a difficult business environment.
During FY12 and FY13, the company reported over 90% capacity
utilisation while in FY14 the company managed to maintain effective
capacity utilisation of 85% despite a slowdown in the economy.
Exhibit 3: Higher utilisation levels
120
100
97
85 84
100
92
91
86
81
73
80
80
85
77
(%)
60
40
20
0
FY09
FY10
FY11
FY12
FY13
JK Lakshmi
Industry
FY14
Source: Company, ICICIdirect.com Research
Strong balance sheet with manageable D/E ratio even after expansion
In terms of D/E ratio, the company has consistently managed it below 1.0
in the recent years. We expect the net debt-equity ratio to remain in a
comfortable zone (i.e. below 1.0x) despite aggressive expansion
undertaken by the company. As per our estimates, we expect it to
generate free operating cash flow of ~| 490 crore each over the next two
years, which will be sufficient to fund the balance pending capex.
Exhibit 4: Manageable D/E ratio
| Crore
2000
1500
1000
1996 1996
1746
1446
1.2
1.1
1.1
1100 1175
1025
922
1.0 0.9 0.9
708 703 0.8 0.9
1.5
1.3
1.2
1.0
0.9
500
0
0.8
0.5
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15EFY16EFY17E
Debt (| Crore) (LHS)
D/E (RHS)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
12
10
Million Tonne
2500
Exhibit 5: Capacity expansion plans (standalone)
8
6
4
2
3.4
3.7
4.8
4.8
4.8
5.3
5.3
6.6
10.8
9.3 10.0
0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15EFY16EFY17E
Capacity(MT)
Source: Company, ICICIdirect.com Research
Page 4
Expect revenue CAGR of 27.1% in FY14-17E led by capacity expansion,
better realisations
The revenue has grown at 8.4% CAGR in FY10-14 led by realisation CAGR
of 3.0% and volume CAGR of 5.2% during the same period. Going
forward, with an expected recovery in demand along with additional
capacity of 3.4 MT, we expect revenue CAGR of 27.1% during FY14-17E.
We expect volume to grow at a CAGR of 20.6% during FY14-17E while
realisation is expected to grow at 5.4% on an annual basis.
Exhibit 6: Expect expansion led revenue CAGR of 27.1% during FY14-17E
5,000
4218
4,000
1491
1317
1711
2053
State
Region
MT
Rajasthan
North
4.6
Gujarat
West
0.7
Haryana
North
Current Capacity
3271
3,000
2,000
Exhibit 7: Capacity addition plans
2486
2057
1.3
Total Current Capacity
6.6
Addition
1,000
FY10
FY11
FY12
FY13
FY14
FY15E FY16E FY17E
Chhattisgarh
East
2.7
Gujarat
West
0.7
Rajasthan (Subsidiary)
West
1.6
Total Capacity by FY15E
Sales (| crore)
9.3
Total Consolidated Capacity by FY16E
11.6
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
Exhibit 8: Volume to grow at 20.6% CAGR during FY14-17E
Exhibit 9: Realisation to pick up from FY15 led by recovery in demand
9.85
10.00
7.86
8.00
4.59
4.89
4.30
4.00
2.00
3062
3498
3889
3661
30
3000
20
2000
10
1000
FY13
FY14
FY15E FY16E FY17E
0
Sales Volumes
FY14
FY15E
Realisation (|/tonne) -LS
3834
3544
1000
-5
Realisation (|) -LHS
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
-15
Q3FY13
0
Q2FY13
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
3482
5
-25
Q3FY13
3745
2000
0.0
Q2FY13
3739
5
-15
Growth (%) -RHS
15
3000
0.5
-10
25
15
-5
Sales volume -LHS
4000
Q1FY13
1.2 1.3
1.4 1.5
(%)
1.2 1.3
1.4
1.0
Q1FY13
In MT
1.4
1.4
5000
25
3934
Exhibit 11: Q2FY15 realisations up 12.6% YoY
4064
Exhibit 10: Q2FY15 revenue growth remains robust due to higher sales
volume (up 13.3% YoY)
3851
Source: Company, ICICIdirect.com, Research
1.7
FY17E
Growth (%) -RS
Source: Company, ICICIdirect.com, Research
2.0
FY16E
(%)
FY12
FY13
3922
FY11
FY12
Q2FY15
FY10
0
FY11
4171
0.00
1.5
40
4284
4163
4075
Q1FY15
6.00
5.28
4000
6.10
5.62
5000
Growth (%) -RHS
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 5
Margins to improve but low utilisation of new capacity to limit expansion
Despite an expected recovery in demand, we expect the company’s
operating margins to improve progressively given the initial higher
operating cost post commissioning of new capacity.
Exhibit 12: Expect EBITDA/tonne of | 788 in FY17E
925
808
800
656
600
30.0
788
776
766
25.0
537
(%)
431
28.5
400
20.0
15.0
200
20.9
18.8
18.6
18.4
14.7
14.1
10.0
0
FY10
FY11
FY12
FY13
FY14
FY10
FY15E FY16E FY17E
FY11
FY12
FY13
EBITDA/Tonne
FY14
Source: Company, ICICIdirect.com Research
Exhibit 14: Q2FY15 EBITDA per tonne increases 42% YoY
Exhibit 15: Margins increase 304 bps YoY
925
25
788
782
800
665
600
663
576
436
22.8 22.8
20
620
447
(%)
878
FY15E FY16E FY17E
EBITDA Margin (%)
Source: Company, ICICIdirect.com Research
400
19.9
17.8
15
15.4
10
17.3
18.9
15.6
12.5 12.6
5
200
Q2FY15
Q1FY15
Q4FY14
Q2FY14
Q1FY14
Q4FY13
Q1FY13
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
Q3FY13
0
0
Q2FY13
1000
18.8
Q3FY14
1000
Exhibit 13: Margins to improve led by improvement in realisation
EBITDA Margin
EBITDA/Tonne (|)
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
Expect net profit CAGR of 54% during FY14-17E
After witnessing a sharp decline in profit in FY14, we expect net margins
to improve to 8.0% in FY17E from 4.5% in FY14. Overall, we expect net
profit to grow at a CAGR of 54% during FY14-17E.
400
350
300
250
200
150
100
50
0
16.2
17
337
241
15
13
229
176
8.5
109
59
11
171
6.4
93
7.0
6.9
8.0
7
5
4.5
4.5
9
3
FY10
FY11
FY12
FY13
Net profit - LS
FY14
FY15E
FY16E
FY17E
Net profit margin -RS
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 6
(%)
| crore
Exhibit 16: Profitability trend
Outlook and valuation
With the commissioning of new capacity at Durg, Udaipur and Jhajjar, the
company will have a total standalone cement capacity of over 10.8 MT by
the end of FY17E. However, the full benefit of the Durg expansion would
start accruing only from H2FY15E. Considering this, we expect cement
volumes to grow at ~20.6% CAGR in FY14-17E to 9.8 MT in FY17E from
5.6 MT in FY14.
At the CMP of | 372, the stock is trading at 19.1x and 13.0x its FY16E and
FY17E earnings, respectively. The stock is trading at an EV/EBITDA of 9.7x
and 7.1x FY16E and FY17E EBITDA, respectively, vs. average trailing
multiple of 8.5x. This leaves scope for appreciation over the longer term
despite a sharp rally in stock prices over the past two months. Given the
upcoming new capacity from FY15E and strong Q2FY15E operating
performance backed by sharp improvement in prices and operating
efficiencies, we expect growth in profitability to remain healthy over the
next three years. Hence, we remain positive on JK Lakshmi Cement and
upgrade our target price to | 458/share with a BUY rating on the stock (i.e.
at 8.5x FY17E EV/EBITDA, $100/tonne on FY17E capacity of 10.8 MT).
Exhibit 17: Assumptions
| per tonne
FY12
FY13
FY14
FY15E
FY16E
4.9
5.3
5.6
6.1
7.9
9.8
3498
3889
3661
4075
4163
4284
Total Expenditure
2842
3081
3123
3328
3387
3496
Stock Adjustment
1
32
5
0
0
0
525
639
823
1069
1080
1110
875
Sales Volume (mtpa)
Net Realisation
Raw material
Power & Fuel
846
769
751
805
830
Employees
201
214
219
228
235
243
Freight
677
798
813
862
862
863
Others
592
628
512
363
380
405
EBITDA per Tonne
656
808
537
747
776
788
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
FY17E
Page 7
Exhibit 18: One year forward EV/EBITDA
4000
(| Crore)
3000
2000
1000
EV
8.5x
7.5x
6.5x
5.5x
Nov-14
Mar-14
Jul-13
Nov-12
Mar-12
Jul-11
Nov-10
Mar-10
Jul-09
Nov-08
Mar-08
Jul-07
Nov-06
0
3.5x
Source: Company, ICICIdirect.com Research
Exhibit 19: One year forward EV/Tonne
Million $
600
400
200
EV
$71
$62
$53
$44
Nov-14
Mar-14
Jul-13
Nov-12
Mar-12
Jul-11
Nov-10
Mar-10
Jul-09
Nov-08
Mar-08
Jul-07
Nov-06
0
$35
Source: Company, ICICIdirect.com Research
Exhibit 20: Valuations
FY14
FY15E
FY16E
FY17E
Sales Growth
(| cr)
(%)
2056.6
0.1
2485.6
20.9
3271.0
31.6
4218.0
28.9
EPS
(|)
7.9
14.6
19.4
28.6
Growth
(%)
-47.1
84.3
33.5
47.2
PE
(x)
24.9
47.1
25.5
19.1
EV/EBITDA
(x)
11.9
18.1
12.2
9.7
EV/Tonne
($)
137
102
98
85
RoNW
(%)
7.1
11.4
13.5
16.8
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 8
RoCE
(%)
6.1
9.0
11.1
14.3
Company snapshot
500
Target Price: 458
450
400
350
300
250
200
150
100
50
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
0
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Jul-08
Feb-09
News/Event
The company commences work on the 2.7 million tonne (MT) greenfield cement plant at Durg, Chhattisgarh at an investment of over | 1,100 crore. The plant is
scheduled to be commissioned by 2011
Government announces excise duty cut of 2% to boost cement sales
Mar-11
The company completes the setting up of 18 MW power plant and 12 MW green power project, through waste heat recovery
Apr-11
The company registers de-growth of ~ 12% in sales and ~6% in volume due to subdued demand. However, capacity utilisation for the company stood at 91%, much
higher than industry trend of ~75%
Stock surges as board approves buyback of equity shares up to | 97.5 crore at maximum price of | 70/share (i.e 1.39 crore shares)
Feb-12
Mar-12
The government proposes to raise excise duty on the building material from 10% to 12% against the expectations of a cut in the same
Apr-12
The company reports one of the best quarterly results in recent times with 39% YoY increase in net sales due to a sharp increase in cement demand after the
monsoon season. Net profit increased 10 times compared to the previous year on the back of a lower base and higher margin expansion
Expansion plant at Durg gets delayed by four to six months to Q1FY15 from Q4FY14 as projected earlier due to damage caused to properties by local villagers. The
expected loss from this damage works out to ~| 140 crore, which was fully covered by insurance
The company increased its stake in Udaipur Cement Works (UCWL) from 27.72% to 75.46% with the allotment of fresh equity shares worth | 78 crore, thereby
making UCWL a subsidiary company
Company increases its capacity from 5.3 MTPA in FY13 to 6.6 MTPA by FY14 via brownfield expansion and de-bottlenecking at existing plants
Apr-13
Mar-14
Apr-14
May-14
With the commissioning of the 2.7 MTPA plant in eastern region, the company will have a standalone capacity of 9.3 MTPA by Q3FY15
Source: Company, ICICIdirect.com Research
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Shareholding Pattern
Name
Bengal & Assam Company Ltd
JK Organisation
HDFC Standard Life Insurance Company Limited
Life Insurance Corporation of India
Bansal (Sachin & Vivek)
Franklin Templeton Asset Management (India) Pvt. Ltd.
DNB Asset Management (Asia) Limited
Bansal (Parveen Kumar & Vivek)
DSP BlackRock Investment Managers Pvt. Ltd.
Ashoka Pte. Ltd.
Latest Filing Date % O/S Position (m) Change (m)
30-Jun-14 23.73
27.9
0.0
30-Jun-14 20.31
23.9
0.0
30-Jun-14 5.39
6.3
-0.2
30-Jun-14 4.53
5.3
-0.2
30-Jun-14 3.64
4.3
0.3
31-May-14 2.25
2.7
-0.2
30-Jun-14 1.70
2.0
-0.3
30-Jun-14 1.69
2.0
0.3
30-Jun-14 1.19
1.4
1.4
30-Jun-14 1.16
1.4
1.4
(in %)
Promoter
FII
DII
Others
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14
45.96 45.96 45.96 45.96 45.94
6.19
5.52
6.32
8.57 10.85
13.06 12.18 11.20 17.65 18.28
34.79 36.34 36.52 27.82 24.93
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
GMO LLC
Ashoka Pte. Ltd.
Tata Asset Management Limited
DNB Asset Management (Asia) Limited
L&T Investment Management Limited
Value
6.94m
4.49m
4.12m
3.23m
1.65m
Shares
1.20m
0.78m
0.72m
0.56m
0.29m
Sells
Investor name
Franklin Templeton Asset Management (India) Pvt. Ltd.
HDFC Standard Life Insurance Company Limited
IDFC Asset Management Company Private Limited
The New India Assurance Co. Ltd.
Manulife Asset Management (Taiwan) Co., Ltd
Value
-1.99m
-1.38m
-0.71m
-0.18m
-0.16m
Shares
-0.34m
-0.24m
-0.21m
-0.20m
-0.13m
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 9
Financial summary
Profit and loss statement
(Year-end March)
| Crore
Cash flow statement
FY14
FY15E
FY16E
FY17E
2,056.6
2,485.6
3,271.0
4,218.0
0.1
20.9
31.6
28.9
Raw material
465.2
652.1
848.7
1092.9
Power & Fuel
422.0
491.3
652.2
861.5
Total operating Income
Growth (%)
(Year-end March)
| Crore
FY14
Profit after Tax
FY15E
FY16E
FY17E
93.0
171.4
228.8
336.9
135.2
173.1
200.8
218.2
(Inc)/dec in Current Assets
-1.8
155.1
-273.4
-65.4
Inc/(dec) in CL and Prov.
99.5
68.8
86.7
180.3
670.0
Add: Depreciation
Employees
123.0
139.1
184.7
239.2
CF from operating activities
325.9
568.4
242.9
Freight
456.8
526.0
677.1
849.7
(Inc)/dec in Investments
-41.3
-70.0
-70.0
-40.0
Others
287.7
221.2
298.6
398.7
(Inc)/dec in Fixed Assets
-552.4
-780.0
-350.0
-200.0
1,754.6
2,029.7
2,661.2
3,442.0
302.0
455.9
609.8
775.9
Total Operating Exp.
EBITDA
Others
CF from investing activities
9.2
8.0
8.0
8.0
-584.5
-842.0
-412.0
-232.0
Growth (%)
-29.6
51.0
33.8
27.2
0.0
0.0
0.0
0.0
Depreciation
135.2
173.1
200.8
218.2
Inc/(dec) in loan funds
270.7
300.0
250.0
-100.0
77.2
108.8
179.6
180.1
Dividend paid
-23.5
-34.4
-34.4
-34.4
Interest
Other Income
44.3
35.7
64.0
68.0
Exceptional items
18.5
21.5
0.0
0.0
PBT
Issue/(Buy back) of Equity
Inc/(dec) in Sec. premium
0.0
0.0
0.0
0.0
Others
-26.0
64.9
0.0
0.0
-134.4
115.4
188.2
293.4
445.6
CF from financing activities
221.2
330.5
215.6
Total Tax
22.4
28.0
64.5
108.7
Net Cash flow
-37.4
56.9
46.4
303.5
PAT
93.0
160.2
228.8
336.9
Opening Cash
72.6
35.2
92.1
138.5
Adjusted PAT
111.5
192.9
228.8
336.9
Closing Cash
35.2
92.1
138.5
442.0
Growth (%)
-41.9
73.0
18.7
47.2
9.5
16.4
19.4
28.6
FY14
FY15E
FY16E
FY14
FY15E
FY16E
FY17E
Adjusted EPS (|)
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
Balance sheet
(Year-end March)
| Crore
Key ratios
FY17E
Liabilities
(Year-end March)
Per share data (|)
Equity Capital
58.9
58.9
58.9
58.9
Adjusted EPS
16.3
9.5
16.4
19.4
Reserve and Surplus
1,244.4
1,446.2
1,640.6
1,943.1
Cash EPS
19.4
29.3
36.5
47.2
Total Shareholders funds
1,303.2
1,505.1
1,699.5
2,001.9
BV
110.7
127.9
144.4
170.1
Total Debt
1,446.1
1,746.1
1,996.1
1,896.1
DPS
2.0
2.5
2.5
2.5
122.6
130.6
138.6
146.6
Cash Per Share
3.0
7.8
11.8
37.6
14.7
18.8
18.6
18.4
4.5
6.9
7.0
8.0
19.3
15.0
14.0
14.0
Deferred Tax Liability
Minority Interest / Others
Total Liabilities
0.0
0.0
0.0
0.0
2,871.9
3,381.7
3,834.2
4,044.6
Operating Ratios (%)
EBITDA Margin
PAT Margin
Assets
Gross Block
3,409.0
4,199.0
4,724.0
4,974.0
Inventory days
Less: Acc Depreciation
1,339.1
1,512.2
1,712.9
1,931.1
Debtor days
Net Block
2,069.9
2,686.8
3,011.1
3,042.9
Creditor days
Capital WIP
9.4
7.5
7.5
7.5
106.9
98.0
80.0
72.0
Return Ratios (%)
410.0
400.0
225.0
175.0
2,479.9
3,086.8
3,236.1
3,217.9
RoE
7.1
11.4
13.5
16.8
Investments
338.9
338.9
338.9
338.9
RoCE
6.1
9.0
11.1
14.3
Inventory
102.4
101.9
149.1
174.5
RoIC
8.0
11.5
13.1
18.1
Debtors
55.5
46.6
87.8
85.5
Loans and Advances
445.7
300.0
485.0
527.3
P/E
39.3
22.7
19.1
13.0
Non current Investments
108.8
178.8
248.8
288.8
EV / EBITDA
18.1
12.2
9.7
7.1
35.2
92.1
138.5
442.0
EV / Net Sales
2.7
2.3
1.8
1.3
Total Current Assets
747.6
719.4
1,109.2
1,518.2
Market Cap / Sales
2.1
1.8
1.3
1.0
Creditors
653.1
681.6
752.3
911.8
Price to Book Value
3.4
2.9
2.6
2.2
Provisions
41.5
81.8
97.8
118.5
Solvency Ratios
694.6
763.4
850.1
1,030.3
Debt/EBITDA
4.8
3.7
3.3
2.4
53.1
-44.0
259.2
487.8
Debt / Equity
1.1
1.2
1.2
0.9
2,871.9
3,381.7
3,834.2
4,044.6
Current Ratio
0.9
0.7
1.0
1.2
Quick Ratio
0.9
0.6
0.8
0.8
Total Fixed Assets
Cash
Total Current Liabilities
Net Current Assets
Application of Funds
Source: Company, ICICIdirect.com Research
Valuation Ratios (x)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 10
ICICIdirect.com coverage universe (Cement)
Company
ACC*
Ambuja Cement*
UltraTech Cem
Shree Cement^
Heidelberg Cem*
India Cement
JK Cement
JK Lakshmi Cem
Mangalam Cem
CMP
(|)
1500
227
2560
9090
88
114
663
367
295
TP(|)
1,635
241
3,180
8,600
105
141
660
458
322
Rating
HOLD
HOLD
BUY
HOLD
BUY
BUY
BUY
BUY
BUY
M Cap
(| Cr)
28,185
35,091
68,002
30,165
1,994
3,195
3,916
4,378
700
EV/EBITDA (x)
FY14 FY15E FY16E FY17E
18.8 17.8 15.4 13.8
19.7 15.5 14.6 12.3
18.9 16.4 12.4
9.4
22.3 17.6 13.5 11.6
37.5 11.9
9.7
6.7
11.1
8.1
6.4
5.4
5.5
7.8 11.1 15.3
18.1 12.2
9.7
7.1
21.7
6.7
5.6
3.7
EV/Tonne ($)
FY14 FY15E FY16E FY17E
140
140
129
129
164
165
163
149
202
183
163
148
259
237
193
183
100
89
89
84
71
65
63
58
120
85
85
78
137
102
98
85
51
50
52
49
RoCE (%)
FY14 FY15E FY16E FY17E
9.9
9.9 10.9 11.3
11.4
8.3
8.1
8.7
11.9 12.3 14.9 18.1
13.0 14.0 16.7 16.7
-0.5
6.0
7.8 12.1
3.9
6.4
8.3
9.1
5.2
7.4
9.9 15.1
6.1
9.0 11.1 14.3
2.1 11.7 14.6 20.7
RoE (%)
FY14 FY15E FY16E FY17E
14.0 12.6 13.3 13.9
13.6
9.2
9.1
9.7
12.5 12.9 14.9 16.6
16.7 16.8 18.9 17.5
-4.9
7.5
7.1 12.7
-0.9
1.2
4.0
5.1
5.2
7.4
9.9 15.1
7.1 11.4 13.5 16.8
5.8
9.5 13.4 18.7
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 11
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
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Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
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Page 12