1. business and industrial

4QFY2015 Result Update | Cement
May 8, 2015
Mangalam Cement
BUY
Performance Highlights
CMP
Target Price
Quarterly Results (Standalone)
Investment Period
4QFY2015
239
20
8.4
3
3QFY2015
213
9
4.4
(2)
% chg (qoq)
11.9
112.5
400bp
(213.3)
4QFY2014
218
29
13.2
8
% chg (yoy)
9.3
(29.9)
(472bp)
(65.2)
Source: Company, Angel Research
For 4QFY2015, Mangalam Cement (MCL) reported numbers which are above
our expectation; the revenue grew by 9.3% yoy to `238.7cr on back of volume
growth of 10.5% yoy, backed by addition of new capacity. Realizations during the
quarter declined by 1% yoy. The EBITDA fell by 29.9% yoy to `20.2cr as against
`28.8cr reported during the corresponding quarter last year, but was above our
estimate of `15.5cr. The EBITDA margin decline by 472bp yoy to 8.4% but was
above our estimate of 6.6%. EBITDA/tonne came in at `320 as against `504 in
4QFY2014. Consequently the net profit declined by 65% yoy to `2.7cr (above our
estimate of loss of `2cr), as against `7.8cr reported during 4QFY2014.
EBITDA margin declined by 472bp yoy: MCL reported a sharp fall in its EBITDA
margin, ie a decline of 472bp yoy to 8.4%, on account of lower realization.
However, the EBITDA margin is above our estimate of 6.6% due to lower raw
material and other expenses. The operating cost/tonne increased by 4.2% yoy to
`3,468 due to increase in employee expenses and freight cost per tonne. Hence,
EBITDA/tonne came in at `320, a decline of 36.6% yoy. We expect cement
demand to improve in 2HFY2016 on expectation of increase in infrastructure
spending, which could improve realization, and thereby would lead to
improvement in margin.
Outlook and Valuation: Going ahead, we expect sales volume to remain strong
and grow at 13.7% CAGR during FY2015-17. Realization growth is expected to
improve in 2HFY2016, which would lead to top-line CAGR of 20.4% during
FY2015-17. Hence, we expect EBITDA to grow at 49.4% CAGR during the same
period. We maintain our Buy recommendation on the stock considering its
attractive valuation of EV/tonne of $36 on FY2017 (on 3.75mtpa installed
capacity). We have assigned a multiple of 6.0x EV/EBITDA to arrive at a target
price of `349 (earlier target of `360).
FY13
706
11.9
77
38.2
18.5
29
8.1
1.3
16.7
15.4
0.7
3.8
Stock Info
Sector
Cement
Market Cap (` cr)
439
Net Debt (` cr)
345
Beta
1.3
52 Week High / Low
354/126
Avg. Daily Volume
107,954
Face Value (`)
10
BSE Sensex
26,599
Nifty
8,057
Reuters Code
MGLC.BO
Bloomberg Code
MGC IN
Shareholding Pattern (%)
Promoters
27.4
MF / Banks / Indian Fls
4.7
FII / NRIs / OCBs
26.9
Indian Public / Others
41.0
Abs. (%)
3m
1yr
3yr
Sensex
(7.4)
19.2
57.3
(24.7)
83.7
79.6
MCL
3-year price chart
400
350
300
Key financials (Standalone)
Y/E March (` cr)
Net Sales
% chg
Net Profit
% chg
EBITDA (%)
EPS (`)
P/E (x)
P/BV (x)
RoE (%)
RoCE (%)
EV/Sales (x)
EV/EBITDA (x)
12 months
FY14
697
(1.2)
30
(61.7)
8.0
11
21.3
1.2
5.9
3.0
0.9
11.7
FY15
922
32.2
18
(39.5)
9.8
7
35.2
1.2
3.5
5.7
0.9
9.3
Source: Company, Angel Research, Note: CMP as of May 7, 2015
Please refer to important disclosures at the end of this report
FY16E
1,111
20.5
43
142.1
12.2
16
14.5
1.2
8.2
9.2
0.8
6.8
FY17E
1,336
20.2
92
112.6
15.1
35
6.8
1.0
16.0
15.1
0.6
4.2
250
200
150
100
50
May12
Jul12
Sep12
Nov12
Jan13
Mar13
May13
Jul13
Sep13
Nov13
Jan14
Mar14
May14
Jul14
Sep14
Nov14
Jan15
Mar15
May15
(` cr)
Net Revenue
EBITDA
EBITDA margin (%)
Net Profit
`236
`349
Source: Company, Angel Research
Shrenik C. Gujrathi
022 39357800 Ext: 6872
shrenik.gujrathi@angelbroking.com
1
Mangalam Cement | 4QFY2015 Result Update
Exhibit 1: Quarterly Performance
Y/E March (` cr)
Net Sales
Net material consumed
% of Net Sales
Power & Fuel
4QFY2015
3QFY2015
% Chg
4QFY2014
% Chg
FY2015
FY2014
% Chg
239
213
11.9
218
9.3
922
697
32.2
29
29
1.0
32
(7.2)
125
144
(12.9)
12.3
13.6
13.6
20.6
75
63
31.6
29.5
Employee expenses
17
15
% of Net Sales
7.1
6.9
Freight & forwarding charges
67
62
% of Net Sales
% of Net Sales
27.9
28.9
Other expenses
16
19
% of Net Sales
6.8
9.0
Purchase of traded stock
14
16
% of Net Sales
5.9
7.6
Total Expenses
14.5
19.8
65
16.3
258
172
28.0
24.6
55.2
58
43
6.3
6.1
28.7
256
209
27.8
30.0
69
59
7.5
8.5
29.7
14.3
11
5.0
8.1
52
23.7
(15.7)
16
3.3
7.2
(13.3)
15
64
15
6.9
7.0
2.2
50.7
35.6
22.5
16.7
219
204
7.2
190
15.2
831
642
29.6
Operating profit
20
9
112.5
29
(29.9)
90
56
62.2
OPM %
8.4
4.4
9.8
8.0
Finance cost
11
11
0.8
5
136.2
38
9
340.4
Depreciation
9
9
(0.9)
9
2.1
4
5
(15.2)
Other income
1
1
68.8
3
(55.8)
4
5
(15.2)
PBT & exceptional item
2
(9)
(118.9)
18
(90.2)
22
24
(6.4)
Exceptional item
0
0
3
0
19
24
1
(6)
5.6
(23.7)
18
30
PBT
13.2
0
2
(9)
(1)
(7)
% of PBT
(53.8)
74.3
Adj. PAT
3
(2)
PATM
1.1
(1.1)
3.6
1.9
4.2
EPS (`)
1.0
(0.9)
2.9
6.7
11.1
Provision for Tax
(118.9)
18
(90.2)
10
0.0
(213.3)
8
(65.2)
(20.7)
(39.5)
Source: Company, Angel Research
Exhibit 2: Financial Performance
(` cr)
300
(%)
20.0
250
16.3
15.0
13.2
200
9.7
150
8.4
(50)
3QFY14
(3.7)
4QFY14
1QFY15
Net Sales
5.0
2QFY15
EBITDA
3QFY15
EBITDA %
20
239
9
213
23
4.4
240
38
230
29
218
0
(6)
50
162
100
10.0
4QFY15
0.0
(5.0)
Source: Company, Angel Research
May 8, 2015
2
Mangalam Cement | 4QFY2015 Result Update
Revenue beats estimate on strong volume growth
MCL reported a top-line growth of 9.3% yoy to `238.7cr as against our estimate of
`224cr, led by strong volume growth on back of commissioning of new capacity.
However realization was flat during the quarter and came in at `3,729/tonne.
Cement volume grew by 10.4% yoy to 0.63mn tonne. Going forward, we expect
cement volume to remain strong and grow at a CAGR of 13.7% during
FY2015-17, on back of new capacity addition (0.5mtpa Aligarh unit to be
operational by 1QFY2017). The current realization situation remains challenging
but we expect it to improve during 2QFY2016 as demand environment recovers
on the back of improvement in infrastructure spending. Hence, we expect MCL’s
top-line to grow at a CAGR of 20.4% during FY2015-17.
Exhibit 3: Volume Performance
(mn tn)
0.70
0.57
0.60
0.50
0.59
0.54
0.63
0.55
0.46
0.40
0.30
0.20
0.10
0.00
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
Source: Company, Angel Research
EBITDA margin declined by 472bp yoy
MCL reported a sharp decline of 472bp yoy in EBITDA margin to 8.4% on account
of flat realization. However EBITDA margin was above our estimate of 6.6% due to
lower raw material costs and other expenses. The operating cost/tonne increased
by 4.2% yoy to `3,468 led by 40.4%/16.5% yoy increase in employee and freight
cost per tonne. Hence, EBITDA/tonne came in at `320 as against `504 during the
same quarter last year, a decline of 36.6% yoy. We expect the EBITDA margin to
improve going forward, led by realization growth and cost efficiency.
May 8, 2015
3
Mangalam Cement | 4QFY2015 Result Update
Per-tonne analysis
During 4QFY2015, MCL’s raw material cost/tonne declined by 16.0% yoy. The
company’s power and fuel cost/tonne increased by 5.3%/5.0% on a yoy/qoq
basis. Increase in power cost/tonne was mainly due to excess production of clinker
during the quarter. Freight cost/tonne rose by 16.5% yoy. Employee cost rose by
40.4% yoy to `268/tonne. The total operating cost increased by 4.2% yoy to
`3,468/tonne. The company’s operating profit/tonne declined by 36.6% yoy to
`320, during the quarter
Exhibit 4: Operational performance
4QFY2015 3QFY2015 4QFY2014 qoq chg (%) yoy chg (%)
Particulars (`/tonne)
Net Realization/tonne
Net Raw-Material Cost/tonne
Power and Fuel cost/tonne
Employee cost/tonne
Freight Cost/tonne
Other Cost/tonne
Operating costs/tonne
EBITDA/tonne
3,729
3,758
3,749
(0.8)
(0.5)
466
526
555
(11.4)
(16.0)
1,197
1,140
1,137
5.0
5.3
268
268
191
0.2
40.4
1,056
1,115
907
(5.2)
16.5
257
347
275
(26.0)
(6.6)
3,468
3,690
3,328
(6.0)
4.2
320
172
504
86.3
(36.6)
Source: Company, Angel Research
Outlook and Valuation
Going ahead we expect sales volume to remain strong and grow at 13.7% CAGR
during FY2015-17. Realization growth is expected to improve in 2HFY2016, which
would led to top-line CAGR of 20.4% during FY2015-17. Hence we expect EBITDA
to grow at 49.4% CAGR during the same period. We maintain our Buy
recommendation on the stock considering its attractive valuation of EV/tonne of
$36 on FY2017 (3.75mtpa installed capacity). We have assigned a multiple of
6.0x EV/EBITDA to arrive at a target price of `349 (earlier target of `360.)
Exhibit 5: Recommendation summary
Company
ACC*
Ambuja Cement*
Rating
Accumulate
Neutral
CMP Target Price
P/E (x)
EV/EBITDA (x)
EV/t (USD/t)
(`)
(`)
FY15E
FY16E
FY17E
FY15E
FY16E
FY17E
FY15E
FY16E
FY17E
1,449
1,654
31.7
23.9
17.3
15.9
12.2
9.3
120
112
112
231
234
24.7
23.8
20.6
16.1
12.7
10.9
183
177
175
India Cements
Buy
88
146
74.8
24.2
14.7
9.4
6.0
5.1
58
52
50
JK Lakshmi Cem
Buy
342
443
23.4
18.7
12.3
12.1
8.4
6.6
97
86
82
Mangalam Cement
Orient Cement
The Ramco Cement
Shree Cement#
Buy
236
349
35.2
14.5
6.8
9.3
6.8
4.2
35
39
36
Accumulate
171
183
21.5
22.6
13.9
10.3
9.8
7.1
92
88
83
Buy
282
350
35.2
20.9
14.1
14.4
10.3
7.6
103
98
88
Neutral
10,098
9,852
40.5
44.3
29.2
24.0
17.2
12.7
284
234
206
Ultratech Cement
Buy
2,621
3,224
35.7
23.6
18.1
18.0
13.7
10.7
195
174
165
JK Cement
Buy
598
778
35.0
26.7
14.1
14.5
9.6
7.1
91
90
86
Source: Company, Angel Research; Note: *Y/E December;#Y/E June
May 8, 2015
4
Mangalam Cement | 4QFY2015 Result Update
Company Background
Mangalam Cement was incorporated in 1978, and is a part of the BK Birla group.
The company is engaged in the business of cement manufacturing and has an
installed cement capacity of 3.25mtpa and clinker capacity of 2.3mtpa in Morak,
Rajasthan. The company is adding another 0.5mtpa capacity in Aligarh which
would be operational by 1QFY2017; this would take its total capacity to
3.75mtpa. MCL also has a 35MW captive thermal power plant and 13.65MW
wind energy capacity, all located in Rajasthan. The company sells three types of
cement products OPC grade 43, OPC grade 53 and PPC under the brand name
Birla Uttam cement. The company has a network of 1,179 dealers and 3,415
retail touch points spread across Rajasthan, Delhi, Haryana, Uttar Pradesh, and
Madhya Pradesh.
Exhibit 6: Mangalam Cement Sales Mix
7
8
35
10
40
Rajasthan
Uttar Pradesh
Madhya Pradesh
Delhi
Haryana
Source: Company, Angel Research
May 8, 2015
5
Mangalam Cement | 4QFY2015 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY13
FY14
FY15
FY16E
FY17E
Net Sales
706
697
922
1,111
1,336
% Chg
11.9
(1.2)
32.2
20.5
20.2
Total expenditure
575
642
831
976
1,134
Net Raw Materials
76
144
125
167
196
0
15
64
65
65
201
172
258
302
345
Purchases of Traded Goods
Power and Fuel
Employee expenses
Freight & forwarding charges
38
43
58
70
84
179
187
256
289
341
EBITDA
131
56
90
135
202
% Chg
25.6
(57.4)
62.3
49.2
49.5
EBIDTA %
18.5
8.0
9.8
12.2
15.1
Depreciation
25
28
34
40
41
EBIT
106
28
57
95
161
% Chg
46.7
(73.5)
102.9
67.3
69.6
Interest Charges
5
9
38
36
34
Other Income
7
5
4
3
4
1.0
0.7
0.4
0.3
0.3
108
24
19
62
132
(% of Net Sales)
PBT
Tax
30
(6)
1
19
40
% of PBT
28.2
(23.7)
5.6
30.0
30.0
PAT before Exceptional item
108
24
22
62
132
Exceptional item
0
0
3
0
0
77
30
18
43
92
% Chg
38.2
(61.7)
(39.5)
142.1
112.6
PAT %
11.0
4.2
1.9
3.9
6.9
29
11
7
16
35
PAT
Basic EPS
Diluted EPS
% Chg
29
11
7
16
35
38.2
(61.7)
(39.5)
142.1
112.6
May 8, 2015
6
Mangalam Cement | 4QFY2015 Result Update
Balance Sheet
Y/E March (` cr)
FY13
FY14
FY15E
FY16E
FY17E
Equity Capital
27
27
27
27
27
Reserves Total
466
480
491
519
578
Networth
492
507
518
545
604
Total Debt
211
357
345
380
330
58
61
61
61
61
839
1,005
1,004
1,067
1,076
681
872
1,127
1,247
1,267
Sources of Funds
Deferred Tax Liability
Total Liabilities
Application of Funds
Gross Block
Accumulated Depreciation
331
357
390
430
471
Net Block
349
515
736
816
796
Capital WIP
214
255
70
20
20
Investments
36
36
36
36
36
Current Assets
Inventories
137
116
159
178
201
Sundry Debtors
30
23
29
35
42
Cash and Bank Balance
92
46
29
34
55
Loans, Advances and Deposits
83
114
153
163
164
370
337
409
451
503
Other Current Asset
Current Liabilities
129
138
229
256
279
Net Current Assets
219
168
149
162
192
0
0
0
0
0
839
1,005
1,004
1,067
1,076
Miscellaneous Expenditure
Total Assets
May 8, 2015
7
Mangalam Cement | 4QFY2015 Result Update
Cash Flow Statement
Y/E March (` cr)
FY13
FY14
FY15E
FY16E
FY17E
Profit before tax
108
24
19
62
132
Depreciation
25
28
34
40
41
Change in Working Capital
(6)
5
2
(8)
(8)
7
5
4
3
4
Less: Other income
Direct taxes paid
30
(6)
1
19
40
Cash Flow from Operations
89
58
49
72
121
(Inc)/ Dec in Fixed Assets
(216)
(232)
(70)
(70)
(20)
(Inc)/ Dec in Investments
(34)
0
(0)
0
0
Other income
7
5
4
3
4
Cash Flow from Investing
(244)
(227)
(66)
(67)
(16)
Issue/(Buy Back) of Equity
0
0
0
0
0
211
146
(12)
35
(50)
19
9
6
16
33
Inc./(Dec.) in loans
Dividend Paid (Incl. Tax)
May 8, 2015
Others
(11)
13
(18)
19
0
Cash Flow from Financing
203
124
(1)
0
(84)
Inc./(Dec.) in Cash
49
(46)
(18)
5
22
Opening Cash balances
44
92
46
29
34
Closing Cash balances
92
46
29
34
55
8
Mangalam Cement | 4QFY2015 Result Update
Key Ratios
Y/E March
FY13
FY14
FY15E
FY16E
FY17E
P/E (on FDEPS)
8.1
21.3
35.2
14.5
6.8
P/CEPS
6.1
11.0
12.2
7.6
4.7
Dividend yield (%)
2.5
1.3
0.8
2.1
4.4
EV/Sales
0.7
0.9
0.9
0.8
0.6
EV/EBITDA
3.8
11.7
9.3
6.8
4.2
EV / Total Assets
0.6
0.6
0.8
0.9
0.8
EPS (Basic)
29.0
11.1
6.7
16.3
34.6
EPS (fully diluted)
29.0
11.1
6.7
16.3
34.6
Cash EPS
38.4
21.5
19.3
31.2
49.7
6.0
3.0
2.0
4.9
10.4
14.5
4.4
0.9
8.5
17.5
RoCE (Pre-tax)
15.4
3.0
5.7
9.2
15.1
Angel RoIC (Pre-tax)
21.8
4.8
7.4
10.3
16.6
RoE
16.7
5.9
3.5
8.2
16.0
Asset Turnover (Gross Block) (X)
1.1
0.9
0.9
0.9
1.1
Inventory / Sales (days)
50
66
54
55
52
Receivables (days)
15
14
10
10
10
101
76
80
91
86
Valuation Ratio (x)
Per Share Data (`)
DPS
Operating ROE
Returns (%)
Turnover ratios (x)
Payables (days)
May 8, 2015
9
Mangalam Cement | 4QFY2015 Result Update
Research Team Tel: 022 - 39357800
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Mangalam Cement
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Based on expected returns
over 12 months investment period):
May 8, 2015
Buy (> 15%)
Accumulate (5% to 15%)
Reduce (-5% to -15%)
Neutral (-5 to 5%)
Sell (< -15%)
10