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Contacts
Sabyasachi Majumdar
+91 124 4545304
sabyasachi@icraindia.com
Avneet Kaur
+91 124 4545319
avneetk@icraindia.com
Anupama Reddy
+91 40 40676516
anupama.reddy@icraindia.com
September 2016
ICRA LIMITED
CONTENTS
1. Summary Opinion
2. Domestic Dynamics in Cement Industry
Trends in cement production
Estimates on cement demand in FY2017
3. Supply Dynamics in Cement Industry
Trends in capacity addition
Trends in capacity utilization
4. Market Structure
5. Trends in Cement Prices
Region wise trends in wholesale cement prices
6. Trends in Input Costs
7. Profitability Analysis of Cement Companies
8. Industry Outlook
9. Company Section
ACC Limited
Ambuja Cements Limited
JK Cement Limited
JK Lakshmi Cement Limited
OCL India Limited
Prism Cement Limited
Shree Cement Limited
The India Cements Limited
The Ramco Cements Limited
Ultratech Cement Limited
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5
10
12
15
19
23
26
29
31
34
36
38
40
43
45
47
49
September 2016
Summary
Cement production during April-July 2016 witnessed a modest growth of 4.6%, which is higher when compared to 1.4% growth during April-July 2015 on a YoY basis - while
production growth was lower in April-May 2016, the same picked up in June 2016 supported by pre-monsoon demand. ICRA expects demand growth to pick up to 6% during
FY2017 and 7% during FY2018. The demand outlook for FY2017 remains relatively more favourable when compared to 4.6% during FY2016, driven mainly by the pick-up in
the infrastructure segment, primarily road projects and the housing segment, and the likelihood of a recovery in the rural demand from H2 FY2017, given a better monsoon
season. This is likely to support cement prices in the near term. Notwithstanding the improved sentiments in these sectors, a number of structural constraints need to be
sorted out for project implementation to gather pace in the other infra sub segments. While the Governments emphasis on the infrastructure projects is likely to result in
increased public sector investments, revival of public private partnership is critical for improving the pace of infrastructure development. The pace of recovery in the cement
industry is likely to mirror the trends in economic recovery. Given the capacity overhang, the capacity utilisation is likely to remain moderate at 68% in FY2017. With the
pace of new capacity addition slowing down and improvement in the supply-demand scenario, utilisation is likely to increase to 71% in FY2018, which should support
cement prices and profitability indicators for cement manufacturers, especially in FY2018. While the energy cost savings are likely to be diluted going forward, given the
increase in the coal and pet coke prices during H1 FY2017, North Indian cement manufacturers would report better profit numbers for H1 FY2017 vis-a-vis H1 FY2016
supported by the significant increase in cement prices. The recent reconfirmation of penalty imposed by the Competition Commission of India (CCI) in August 2016 (earlier
order was in June 2012) on most cement companies has not had any major negative impact on cement prices.
All-India cement production reported a moderate growth of 4.6% in FY2016, (to 282 million MT from 270 million MT in FY2015), with the growth rate being lower than the
5.6% witnessed in FY2015. During April-July 2016, the production at 99 million MT, reported a growth of 4.6%, while modest has improved when compared to April-July
2015 at 1.4%. While the production growth during April-May 2016 was lower at 3.4% when compared to the 9%-13.5% growth reported during Q4 FY2016, the demand has
picked up in June 2016 and the production increased by 10.4% when compared to June 2015. The decline in the demand growth during April-May 2016 has been primarily
due to the continued weak rural demand (especially in Maharashtra, which is facing a drought) and slowdown in the pace of infrastructure execution due to the
unavailability of water. During June 2016, demand improved in most regions supported by the pre-monsoon demand. During July 2016, production has been at 23.33 million
MT, a 10.5% decline on MoM basis due to the onset of monsoons in most regions.
With an estimated capacity addition of 16 MTPA during FY2017 and an estimated demand growth of 6%, the incremental demand would just exceed the incremental supply,
resulting in a marginal increase in capacity utilisation to ~68% from 66% in FY2016. Cement production growth during FY2017 is likely to be driven by the pick-up in the
infrastructure segment, mostly road projects and the housing segment. Further, in the southern markets, the demand is likely to recover during H2 FY2017, supported by
the construction of a new capital for Andhra Pradesh and with the focus on irrigation and water grid schemes by the Telangana Government. Notwithstanding the improved
sentiments in the road sector and the housing segment, a number of structural constraints need to be sorted out for project implementation to gather pace in the other
infra sub-segments. Further, the new project announcements from the private sector continue to remain weak. The stalled projects remain sizeable with many projects
delayed due to unfavourable market conditions, funding constraints, absence of raw-material linkages etc. While the Governments emphasis on the infrastructure projects
is likely to result in increased public sector investments, revival of the public private partnership is critical for improving the pace of infrastructure development.
However, the capacity addition is expected to slow down considerably in FY2018 with the industry likely to add only 13 MTPA of capacity. ICRA expects steady growth in
demand (around 7% p.a. in FY2018), which is likely to result in an improvement in capacity utilisation to 71% in FY2018. The eastern region will lead the capacity expansion,
while the southern region, which had witnessed the highest capacity addition in the last five years, will see a considerable slowdown in capacity addition during this period.
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Summary
The demand uptick, followed by a strong pricing discipline, has resulted in a price rebound in the North to Rs. 305-345/bag in April-July 2016 from Rs. 225-240/bag in
January 2016. During April August 2016, cement prices in the North were higher by around Rs. 60/bag, compared to April August 2015. On the contrary, in the
Hyderabad market, the collapse of the pricing discipline resulted in pressure on prices from January 2016. However, there has been a rebound in cement prices during MayAugust 2016 to Rs. 330/bag from Rs. 260/bag in April 2016. On an average, in the Hyderabad market, the cement prices during April-August 2016 at around Rs. 300/bag,
have been lower by Rs. 35/bag when compared to April-August 2015. In other southern markets, the prices are relatively stable, with Chennai reporting the same at Rs. 375395/bag and Bangalore, between Rs. 340-370/bag. In the western markets, cement prices continued to remain subdued during April-August 2016 in the range of Rs. 260270/bag and the average cement price during April August 2016 at around Rs. 265/bag is largely similar to that during April August 2015. In the eastern markets, there
has been a decline in the cement price in during April May 2016, however, prices increased during June-August 2016 to Rs. 335/bag from around Rs. 315/bag in April 2016.
On an average, cement prices in the East during April-August 2016, has been lower by Rs. 30/bag, compared to April-August 2015.
The CCI, in its order dated August 31, 2016 has reconfirmed the penalty imposed on ten cement companies to the tune of Rs. 6316 crore and the Cement Manufacturers
Association (CMA) to the tune of Rs. 0.73 crore for cartelisation in the cement industry (equal to earlier order June 20, 2012). Through a separate order, the CCI has also
imposed a penalty on Shree Cement for Rs. 397 crore. The CCI has given a time of 60 days from the date of receipt of this order to deposit the penalty amount. The amount
of penalty is the same as per the earlier order of June 2012 (with the addition of Shree Cements Ltd) and amounts to 50% of the net profit for FY2010 and FY2011 of the
companies. However, it is likely that the cement companies will appeal to the Competition Apellate Tribunal. This imposition of penalties by the CCI has not had any major
negative impact on the recent cement prices.
Energy and freight costs are under pressure on the back of rising pet coke, coal and diesel prices in the recent months. During H2 FY2016, pet coke prices reported a decline
of ~30% when compared to the corresponding period in the previous year. However, pet coke prices have been increasing since February 2016 and reached at around Rs.
6400/MT in August 2016, an increase of ~78% when compared to the low of January 2016. This has been due to the higher domestic demand of pet coke, coupled with the
supply constraints. Pet coke prices during July August 2016 are higher by 8% when compared to the corresponding period last year, hence, going forward, the cost savings
are likely to get diluted. Further, the coal prices, which declined during FY2016, have witnessed some recovery during May-July 2016. In July 2016, coal prices were higher by
12.5% as against the price recorded during July 2015. The recovery in coal prices can be primarily attributed to supply side cuts and improved demand from China. Also,
during April-August 2016, there has been a nearly 15% increase in diesel prices when compared to Q4 FY2016 and around 6% when compared to the April-August 2015. This
is likely to put pressure on freight costs of the cement companies during FY2017.
Most cement companies in the ICRA sample* reported either a decline or a modest YoY increase in revenues in Q1 FY2017. Only two companies, namely JK Lakshmi Cement
Limited and Shree Cement Limited - registered a healthy double-digit YoY revenue growth. The profitability margins of most cement companies reported an increase on a
YoY basis during Q1 FY2017 when compared to Q1 FY2016. A significant price hike for North-based companies coupled with lower power and fuel costs reported a healthy
growth in operating margin during Q1 FY2017 on a YoY basis. While the cement prices are lower during Q1 FY2017 for the South and East-based companies, the operating
profitability is supported by cost side benefits such as lower power and fuel expenses due to lower pet coke costs and higher pet coke consumption on a YoY basis. Increase
in the operating profitability resulted in higher interest coverage ratio during Q1 FY2017, compared to Q1 FY2016. While the power cost savings are likely to be diluted going
forward and the freight costs relatively higher, North Indian cement manufacturers would report better profit numbers for H1 FY2017 vis-a-vis H1 FY2016, supported by the
significant increase in cement prices.
*ICRA Sample Includes ACC Limited, Ambuja Cements Limited, JK Cement Limited, JK Lakshmi Cement Limited, OCL India Limited, Prism Cement Limited, Shree Cement Limited, The India Cements Limited, The Ramco
Cements Limited and Ultratech Cement Limited
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Cement production in FY2016 is at 282.5 million MT, an increase of 4.6% on a YoY basis; however, pick-up in demand seen in Q4 FY2016
All-India cement production reported an increase by a moderate 5% in FY2016 to 282 million MT from 270 million MT in FY2015, with the growth rate being lower than the 6%
witnessed in FY2015. The same is reflected in the construction Gross Value Added (GVA) growth, which declined to 4% in FY2016 from 4.4% in FY2015. Cement demand has
recorded a rebound during Q4 FY2016, with all-India cement production registering a growth of 11.4% on a YoY basis, after a period of stagnancy for 9M FY2016. The growth in
Q4 FY2016 was supported by higher demand from the eastern markets and some demand revival in the northern and southern markets; powered by a pick-up in the
infrastructure segment following Government spending. As against this, during the first 9M FY2016, all-India cement production had registered a weak growth of 2% on a YoY
basis, being impacted by continued muted demand from key consumer industries (real estate and infrastructure).
Cement production growth increased on a YoY during 4M FY2017; however, is lower when compared to Q4 FY2016
During Q1 FY2017, the cement production at 75.64 million MT, reported a moderate growth of 5.7% over Q1 FY2016. While the production growth during April-May 2016
was lower at 3.4% when compared to the 9%-13.5% growth reported during Q4 FY2016, the demand has picked up in June 2016 and the production increased by 10.4%
when compared to June 2015. The decline in the demand growth during April-May 2016 has been primarily due to the continued weak rural demand (especially in
Maharashtra, which is facing a drought) and slowdown in the pace of infrastructure execution due to the unavailability of water. During June 2016, demand improved in
most regions supported by the pre-monsoon demand. Also, in the North, the pick-up in demand was due to the pick-up in the execution of infrastructure projects and
irrigation projects in Uttar Pradesh. In the East, demand continues to remain healthy, driven by rural housing and infrastructure (road) segments. During July 2016,
production has been at 23.33 million MT, decline by 10.5% on a MoM basis due to the on-set of monsoons in most regions.
During 4M FY2017, the production growth at 4.6%, while modest has improved when compared to 4M FY2016 at 1.4%.
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Pace of stalling of projects declined but stalled projects remained high as of June 2016
While projects that are under implementation continue to get stalled, their numbers have come down. Around 49 projects worth Rs. 547 billion were stalled during Q1 FY2017,
the smallest number stalled in the last six years. Eleven of the 49 projects were stalled due to unfavourable market conditions, while eight projects were stalled due to weak
promoters financials, making it difficult to arrange funds.
The overall value of stalled projects, nevertheless, remained high at Rs. 11.2 trillion as of June 2016, marginally lower than Rs. 11.3 trillion as of March 2016. While the stock of
stalled Government projects seems to have peaked at around Rs. 2.8 trillion in the first half of FY2016, stalled projects in the private sector continue to increase. About 56% of
the total stalled projects are in the power and metals sectors. Land acquisition, regulatory clearances, raw-material availability, lack of investor interest, funds, and unfavourable
market conditions continue to remain the key reasons behind stalled projects. As a majority of the stalled projects are from the private sector, with challenging market
conditions, the recovery of stalled projects could take more time.
ICRA LIMITED
All India cement production to increase by 6% during FY2017; recovery in infrastructure and real estate key to demand recovery
ICRA expects the growth in FY2017 to be around 6%. This is likely to be driven by the pick-up in the infrastructure segment, mostly road projects and the housing segment. In the
road sector, the Governments focus over the last two years in addressing several execution bottlenecks - speedy resolution of stuck projects, fast clearances and increasing limits
on sand mining have yielded positive results. This is reflected in the 43% increase in the pace of execution, with execution rate reaching 5.53 km/day during FY2016 as against 4.11
km/day during FY2015. The pace of execution increased, by 8% during Q1 FY2017 to 5.95 km/day, from 5.49 km/day during Q1 FY2016. The awards by NHAI during FY2016
increased to 4,390 km as compared to 3,076 km in FY2015 and NHAI intends to award 6,615 km during FY2017. These factors are likely to give cement demand a push. However,
the financial closure of road projects in the private sector continues to remain a challenge (given in Exhibit 6). Government thrust towards programmes like Housing for All and
rural housing is likely to result in a demand uptick from the housing segment, supported by an improvement in monsoons during the year. Further, in the southern region, the
demand is likely to recover further during H2 FY2017, supported by the construction of a new capital for Andhra Pradesh and a focus on irrigation and the water grid schemes by
the Telangana Government.
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Aggressive capacity expansion in the past, coupled with demand slowdown, put
pressure on capacity utilisation
The industry has seen a slowdown in addition to the new capacities, mainly due to the
demand slowdown and the supply glut faced in recent times. For instance, between FY2013FY2016, the industry added 109 MTPA cement capacities in a four-year period (Refer Exhibit 6)
as against 149 MTPA in the preceding five-year period FY2007-FY2012. The recent period
witnessed a considerable slowdown in cement demand due to a delay in infrastructure
projects on account of issues pertaining to land acquisition, delays in securing the requisite
approvals and problems in achieving financial closure. Cement production grew by 5.3% during
FY2013-FY2016 as against 7.2% during FY2009-FY2012. As a result, capacity utilisation declined
from 73% in FY2012 to 66% in FY2016, despite a slowdown in fresh capacity addition.
Exhibit 8: Region wise capacity addition
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Market Structure
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Market Structure
Cement in India is a fragmented industry with more than 160 players having a combination of large cement plants (~210) and mini and white cement plants (~370). The size of the
cement industry is estimated to be in the range of 425-430 million MTPA. Currently, the top three cement producersHolcim-controlled ACC Ltd and Ambuja Cement Ltd, Aditya
Birla Groups Ultratech Ltd, and Dalmia Cementhold about 35% of the cement market in India. With cement being a bulk, transport-expensive commodity, the production has
been concentrated on regional basis. India is divided into five main regions northern, eastern, western, southern and central. The southern has the highest installed capacity and
the main cement production states in India are Andhra Pradesh, Tamil Nadu (both in the southern region) and Rajasthan (northern region).
Uttar Pradesh, Rajasthan, Punjab, Delhi and Haryana are the key markets in the northern
region, which collectively account for more than 85% of the overall cement consumption
in the region with the balance demand coming from Uttarakhand, Himachal Pradesh,
Jammu & Kashmir, and Chandigarh. About 80% of the production in the northern region
is concentrated in Rajasthan. In the central region, Madhya Pradesh (MP) has large
limestone deposits in the Satna cluster and most clinker plants are located here.
80%
60%
40%
20%
0%
North
ACC+Ambuja
Dalmia cement
JAL+JSW+Orient
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South
East
Ultratech
India+Ramco+Chettinad
West
Shree+JAL+Birla Corp
Nirma+JAL
The Holcim Group (ACC & Ambuja) is the market leader in the North, followed by Shree
Cement, Ultratech Cement, Jaiprakash Associates and Birla Corporation Limited. The top
five players collectively accounted for around 60% of the market share in the northern
region as on March 2016, thus making the region reasonably consolidated.
With the planned acquisition of Jaiprakash Associates cement works located in Uttar
Pradesh, Himachal Pradesh and Uttarakhand, Ultratech is going to emerge as the largest
player in the northern region. Birla Corporation has also emerged as one of the top five
players in the region after acquiring the cement business of Reliance Infrastructure
Limited. Completion of these deals is going to result in an increased level of
consolidation, with the top five players accounting for around 64% of the capacity.
13
Market Structure
Southern region
Owing to abundant raw material availability i.e. large limestone reserves located in South India enjoys the highest share of cement capacities in India. Tamil Nadu, Andhra Pradesh
and Karnataka are the key consuming markets. The southern region is relatively more fragmented compared to the other regions, with the top five players accounting for around
40% of the total market share. The top five players in the South are Ultratech Cement, India Cements, Ramco Cement, Dalmia Cement and Chettinad Cement.
Eastern region
Out of the cement national capacity of ~420 million MTPA, the eastern regions contribution with 65 million MTPA capacity is 15-16%. Over the last five years, the eastern region
registered healthy growth in cement consumption, due to a good demand from states such as Orissa, Bihar, Jharkhand and Chhattisgarh. The other markets include West Bengal
and the North Eastern states.
The Holcim Group companies (ACC & Ambuja) enjoy the largest market share in the region, followed by the Dalmia Group, Ultratech Cement, the Nirma Group and the Jaypee
Group. The eastern region demonstrates relatively higher level of consolidation as compared to other regions, with the top five players accounting for almost 71% of the market
share. Amongst the key players, Nirma Limited has been a new entrant after the acquisition of Lafarges 11 million MTPA capacity, three-fourth of which is based in the East.
Western region
Maharashtra is one of the key cement consuming states in India and the largest cement consumer in the western region. Cement demand in Gujarat is also high with cement
consumption witnessing fast growth over the past few years on account of high infrastructure spending in the state. Ultratech Cement and the Holcim Group have a large
presence in the western market. Other key players in the western market are JSW Cement, Jaiprakash Industries and Orient Cement with a collective market share of almost 54%.
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South: Rebound in cement prices in May-August 2016 after a decline in March-April 2016 in Hyderabad; relatively stable in other southern markets
In Hyderabad, the collapse of the pricing discipline has put pressure on prices in Q4 FY2016. The price in April 2016, at Rs. 263/bag, is lower by around Rs. 90/bag when
compared to April 2015. However, there has been a rebound in cement prices by Rs. 20/bag in May 2016 to Rs. 282/bag and to Rs. 310/bag in June 2016. In July 2016, the
cement prices have been largely sustained at the previous month level, which thereafter increased to Rs. 330/bag in August 2016. On an average, in the Hyderabad market,
cement prices during April-August 2016 stood at around Rs. 300/bag, lower by Rs. 35/bag when compared to April-August 2015.
In other southern markets, cement prices have been relatively stable, with Chennai reporting Rs. 375-395/bag and Bangalore, between Rs. 340-370/bag.
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Source: CMIE
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10.6
2.4
12.6
0.9
11.6
1.7
3.1
3.1
2.4
0.7
2.7
1.9
JK Cement Limited
Lafarge India
1.9
5.7
0.6
4.1
1.3
4.9
3.1
9.5
2.1
14.1
2.6
11.8
JP Associates Limited
Shree Cement Limited
14.8
11.7
13.2
3.9
ACC Limited
Ambuja Cement Limited
Binani Cement
Century Textiles Limited
Total
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67.1
18
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Note: ICRAs sample analysis includes ACC Limited (ACC), Ambuja Cements Limited (ACL), JK Cement Limited (JKCL), JK Lakshmi Cement Limited (JKLC), OCL India Limited (OCL), Prism Cement
Limited (PCL), Shree Cement Limited (SCL), The India Cements Limited (ICL), The Ramco Cements Limited (RCL) and Ultratech Cement Limited (UCL)
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While pet coke prices have been lower during Q1 FY2017 on a YoY basis, the prices have increased on a QoQ basis
During H2 FY2016, pet coke prices reported a decline of ~30% when compared to the corresponding period previous year. This has been primarily due to the speculation on a
ban of high sulphur pet coke in China, which led to a significant reduction in Chinese pet coke imports. However, pet coke prices have been increasing since February 2016 and
reached to around Rs. 6400/MT in August 2016, an increase of ~78% when compared to the low of January 2016. This has been due to the higher domestic demand of pet coke,
coupled with the supply constraints. While the pet coke prices are higher by 21% during Q1 FY2017 when compared to Q4 FY2016, they are lower by 20% when compared to Q1
FY2016. Also, most companies had low cost inventory, which supported the lower power and fuel costs in Q1 FY2017. Pet coke prices during July August 2016 are higher by 8%
when compared to the corresponding period last year, hence, going forward, the cost savings are likely to get diluted.
Lower pet coke prices coupled with the increase in the pet coke consumption in the fuel mix by most cement companies during Q1 FY2017 has resulted in significant power
savings when compared to Q1 FY2016 as reflected in Exhibit 10.
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Freight costs
The rail-road mix and average lead distances are the key determinants for freight costs. Freight costs were on the rise during FY2014 and FY2015 due to an increase in Indian
Railways freight rates, an increased reliance on the relatively costlier road transport due to shortage of railway wagons, and an increase in lead distances. While the road freight
costs declined in FY2016 due to a drop in diesel prices, there was an increase in rail freight costs. During April-August 2016, there has been a nearly 15% increase in diesel prices
when compared to Q4 FY2016 and around 6% when compared to the April-August 2015. This is likely to put pressure on freight costs of the cement companies during H1 FY2017.
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Revenue
Growth (%)
YoY
PBDITA/OI (%)
Interest Coverage
Q1 FY2017
Q1 FY2016
Q1 FY2017
Q1 FY2016
29.2
-3.3%
15.7%
11.1%
26.3
25.0
25.6
2.1%
23.5%
15.3%
29.3
12.2
9.0
7.8
10.0%
31.6%
19.7%
15.1%
10.9%
8.5%
2.6
2.5
1.3
1.1
7.1
12.9
4.3%
-1.3%
25.5%
7.6%
20.4%
4.9%
5.5
1.8
4.3
1.0
22.3
12.1
29.0%
-1.6%
34.0%
17.0%
20.7%
16.4%
27.4
2.5
13.5
2.1
9.7
62.3
2.6%
3.8%
31.3%
22.8%
26.8%
19.2%
10.4
9.3
5.1
8.2
197.9
5.1%
21.8%
16.1%
8.1
5.4
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25
Industry Outlook
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27
Company Section
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ICRA Ratings
Aug 1936
Chairman
Product Portfolio
Manufacturing Facilities
Year ending
December
Consolidated
CY2015
Net
sales-
Operating Income
Growth (%) - YoY
OPBDIT
Less: Depreciation
Less: Interest Charges
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT (Concern Share)
Q2
CY2015
30.15
2%
3.35
1.68
0.13
0.22
0.00
1.75
0.46
1.29
Q2
CY2016
29.17
-3%
4.58
1.44
0.17
0.22
0.00
3.18
0.81
2.37
Q1
CY2016
29.91
-3%
4.34
1.46
0.16
0.42
0.00
3.14
0.91
2.27
OPBDIT/OI (%)
PAT/OI (%)
11.12%
4.27%
15.68%
8.13%
14.50%
7.59%
Operating Income
Growth (%) - QoQ
OPBDIT
PAT (Concern Share)
OPBDIT/OI (%)
PAT/OI (%)
Q2 CY2014
30.6
1%
4.52
2.43
14.80%
7.90%
Q3 CY2014
28.2
-8%
3.79
1.93
13.50%
6.80%
Q4 CY2014
28.4
1%
2.57
3.26
9.10%
11.50%
50.34%
FIIs
15.71%
DIIs
17.69%
Others
16.26%
Total
100.00%
12M
ACC
0.40%
20.21%
CNX
6.90%
10.18%
Stock Movement
Q2 CY2015
30.2
-2%
3.35
1.33
11.12%
4.27%
Q3 CY2015
27.9
-8%
3.13
1.15
11.23%
4.13%
Q4 CY2015
29.12
4%
2.80
1.02
9.60%
3.52%
Q1 CY2016
29.91
3%
4.34
2.27
14.50%
7.59%
Q2 CY2016
29.17
-2%
4.58
2.37
15.68%
8.13%
Valuations
CY16e
CY17e
CY18e
33.11
23.49
19.10
EV/EBITDA
17.66
Source: Bloomberg
13.26
10.21
Price
/Earnings
Source: Company Data, ICRA Research; Consolidated Financial Results; Amounts in Rs. Billion
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31
6.6
30
6.4
30
6.2
29
29
6.0
28
5.8
28
5.6
27
5.4
27
26
5.2
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
CY14 CY14 CY14 CY15 CY15 CY15 CY15 CY16 CY16
Net sales
Capex plans
Despacthes
25%
20%
15%
10%
5%
0%
Q2
CY14
Q3
CY14
Q4
CY14
Realisation
Q1
CY15
Q2
CY15
Q3
CY15
EBIT/tonne
Q4
CY15
Q1
CY16
Q2
CY16
EBIDTA margins
Net sales realization of cement business for the quarter declined by 3% as compared to the
corresponding quarter of the previous year.
With the sales volume of the company reporting a decline of 1.3% during Q2 CY2016 to 6.1
million MT as compared to 6.4 million MT in Q2 CY2015, the net sales have reported a decline
of 4.1% in Q2 CY2016 to Rs 27.04 billion over Q2 CY2015.
PAT increased by 79% to Rs. 2.38 billion in Q2 CY2016 from Rs. 1.33 billion in Q2 CY2015
ACC continues to focus on cost optimization through its customer excellence programme
With prospects of the economy gradually picking up in the infrastructure, housing and
construction sectors during the quarter, the demand for cement is expected to register a
perceptible increase in the coming quarters.
ACC is setting up a new clinker production facility of 2.79 million MTPA and an allied grinding facility
of 1.1 million MTPA at Jamul. The Jamul clinkering unit has attained commissioning during July 2016.
The grinding facility is expected to achieve commissioning within Q3 CY2016. The existing clinkering
and grinding lines at Jamul which include a clinker capacity of 0.76 million MTPA and cement
capacity of 1.58 million MTPA will be phased out. The Company is also planning two decentralized
grinding stations in Eastern India which will use clinker produced at Jamul. Work at one of these
sites in Sindri, Jharkhand for 1.35 million MTPA grinding unit is on and the unit is expected to be
completed by Q3 CY2016. The second plant with an annual capacity of 2.7 million MTPA is
scheduled to be built in Kharagpur.
Company Profile
Incorporated in 1949, ACC is a leading cement manufacturer with pan-India presence. The company
is a part of Holcim group which also has a stake in Ambuja Cements Limited. ACC has a pan-India
presence (Orissa, Jharkhand, Maharashtra, West Bengal, Himachal Pradesh, Chattisgarh, Karnataka,
Andhra Pradesh, Rajasthan, Tamil Nadu, Madhya Pradesh and Uttar Pradesh) with a grinding
capacity of about 31 million MT as on December 31, 2015.
ICRA LIMITED
30
ICRA Ratings
FACT SHEET
Year of Incorporation
Chairman
1983
Mr. N.S. Sekhsaria
Year ending
December
Manufacturing facilities
29.65 MTPA
Q2 CY2015
Q2 CY2016
Q1 CY2016
Operating Income
25.08
25.61
24.45
Growth (%)
-7.70%
2.09%
-0.75%
OPBDIT
3.84
6.01
4.50
Less: Depreciation
1.49
1.51
1.48
0.32
0.21
0.18
Other Income
1.06
1.17
1.36
Exceptional Gain/Loss
0.00
0.00
0.00
PBT
3.09
5.47
2.84
Less: Tax
0.83
1.47
1.16
PAT
2.26
4.00
3.04
OPBDIT/OI (%)
15.30%
23.47%
18.40%
PAT/OI (%)
9.02%
15.60%
12.43%
61.62%
FIIs
20.26%
DIIs
10.98%
Others
7.14%
Total
100%
12M
ACL
1.57%
27.09%
CNX
6.90%
10.18%
Stock Movement
Q4 CY2014
Q1 CY2015
Q2 CY2015
Q3 CY2015
Q4 CY2015
Q1 CY2016
Q2 CY2016
Operating Income
22.02
24.05
24.63
25.08
21.11
23.79
24.45
25.61
-19%
9%
2%
2%
-16%
13%
3%
5%
OPBDIT
3.93
3.58
5.09
3.84
3.10
3.28
4.50
6.01
2.39
3.29
3.17
2.26
1.54
1.10
3.04
4.00
OPBDIT/OI (%)
17.9%
14.9%
20.7%
15.3%
14.7%
13.8%
18.4%
23.5%
PAT/OI (%)
10.9%
13.7%
12.9%
9.0%
7.3%
4.6%
12.4%
15.6%
PAT
Source: Company Data, ICRA Research; Standalone Financial Results; Amounts in Rs. Billion
ICRA LIMITED
CY17e
CY18e
31.71
25.01
19.97
EV/EBITDA
23.84
Source: Bloomberg
15.49
10.07
Price
/Earnings
31
Business Overview
Improvement in sales volumes: ACLs cement sales volumes declined by 2.04% during Q2
CY2016 to 5.76 million MT from 5.88 million MT in Q2 CY2015. During quarter ended June, 2016,
the All-India cement demand growth was around 6%. ACLs average sales realization increased by
4.05% YoY to Rs. 4411/MT in Q2 CY2016 from Rs. 4250/MT in Q2 CY2015. This is majorly driven
by the significant increase in the cement prices in the North on a YoY basis.
Capex plans: ACL has undertaken the following expansion projects:
Green-field project in North India for setting up of a 2.7 MTPA clinkerization unit at
Marwar Mundwa, Rajasthan and three grinding units of 1.5 MTPA capacity each in
Rajasthan, Uttar Pradesh (Dadri) and Madhya Pradesh (Osara) at an approximate cost of
Rs. 40 billion.
Brown-field expansion project at Sankrail (West Bengal) to expand the grinding capacity
of the unit by 0.8 million MT (from 1.5 million MT to 2.3 million MT).
Construction of railway siding at Rabariyawas, Rajasthan
Outlook as per ACLs press release (Q2 CY2016): The medium to long term outlook for cement
demand is positive considering the Governments emphasis on the housing, concrete roads,
smart cities and infrastructure development.
th
Update on Coal Block: The Supreme Court vide its order dated 24 September 2014 cancelled
the coal block allocated to ACL along with other parties at Dahegaon, Maharashtra. The company
had not commenced any activity at this coal block and the cancellation does not have any
material impact on the financials.
In Mar 2015, ACL participated in the e-auction of coal blocks conducted by the Nominated
Authority of the Ministry of Coal, Government of India and has successfully secured the block at
Gare-Palma Sector-IV/8 in Chhattisgarh at a bid price of Rs. 2291/ MT. The estimated capex for
the development of this coal block would be approx Rs. 370 crore and the mining operation is
expected to commence in 2018.
Source: Company Data, ICRA Estimates
ICRA LIMITED
In July 2016, ACL secured a linkage of 96,000 MT of coal at Rs. 1,050 per tonne from Junadih
siding of South Eastern Coalfields. In August 2016, ACL has secured coal linkage of 20,400 MT at
Rs. 1,810 per tonne from Western Coalfields (Niljai colliery), 16,500 MT at Rs. 1,095 per tonne
from South Eastern Coalfields (Kusmunda siding) and 82,300 MT at Rs. 1,070 per tonne from
South Eastern Coalfields (Gevra siding).
32
Company Profile
ACL (formerly known as Gujarat Ambuja Cements Limited) is one of the leading cement manufacturing companies in India. The company was founded by Narotam Sekhsaria
and Mr. Suresh Neotia in 1983 and commenced cement production in 1986. In 2006, global cement major Holcim acquired management control of ACL. As on June 2016,
Holcim had an equity stake of 50.8% in ACL. ACL is a pan-India player with manufacturing facilities in Northern, Eastern and Western region and has an aggregate grinding
capacity of 29.65 million MT (as on June 2016).
ICRA LIMITED
33
ICRA Ratings
Robust growth in profitability driven by higher revenues and lower power & fuel costs
FACTSHEET
Chairman
Manufacturing facilities
Products
Manufacturing Facilities
PAT- FY2016
Operating Income
Q1 FY2016
Q1 FY2017
Q4 FY2016
8161.4
8977.6
9725.9
2%
10%
5%
OPBDIT
889.7
1767.2
1959.4
Less: Depreciation
Less: Interest Charges
Other Income
386.0
663.5
149.6
425.0
675.1
173.0
418.6
683.4
116.9
Exceptional Gain/Loss
PBT
0.0
-10.1
-111.1
729.0
0.0
857.4
Less: Tax
-20.7
120.5
268.7
PAT
10.6
608.5
705.6
OPBDIT/OI (%)
10.9%
19.7%
20.1%
PAT/OI (%)
0.1%
6.8%
7.3%
67.02%
FIIs
1.55%
DIIs
23.50%
Others
7.93%
Total
100.00%
12M
JKCE
27.22%
32.04%
CNX
6.90%
10.18%
Stock Movement
Q1 FY2015
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
Operating Income
8032.3
8306.8
7986.4
9160.6
8161.4
8703.1
9032.82
9725.79
8977.6
-4%
3%
-4%
15%
-11%
7%
4%
8%
-8%
OPBDIT
1003.7
904
1006.7
1638
889.7
1087.8
1264.1
1959.4
1767.2
PAT
380.3
323.2
167.3
698.4
10.6
137.3
170.9
705.6
608.5
Price /Earnings
OPBDIT/OI (%)
12.50%
10.90%
12.60%
17.90%
10.90%
12.50%
14.0%
20.1%
19.7%
PAT/OI (%)
4.70%
3.90%
2.10%
7.60%
0.1%
1.58%
2.0%
7.3%
6.8%
EV/EBITDA
12.19
Source: Bloomberg
ICRA LIMITED
FY18e
FY19e
27.34
14.63
9.63
9.21
6.98
34
Company Profile
JK Cement Limited, a part of JK Group, three grinding units in Rajasthan, one in Karnataka and one in Haryana with an aggregate capacity of 10.5 million MTPA. The company
also has a white cement plant at Rajasthan and 0.6 million MTPA white cement plant at Fujairah, UAE. The company also manufactures wall putty, installed capacity of which
is at 0.7 MTPA located in Rajasthan. The companys product offering consists of grey cement, white cement and wall putty.
ICRA LIMITED
35
ICRA Ratings
Significant growth in both revenues and profitability during Q1 FY2017 on a YoY basis
FACTSHEET
Chairman
Manufacturing facilities
Products
Cement, RMC
84%
Rs. 26198.5Million
PAT- FY2016
Q1 FY2017
ICRA Limited
Q4 FY2016
7772.30
7350.90
-2%
32%
27%
OPBDIT
505.00
1175.10
858.80
Less: Depreciation
392.00
411.90
401.00
457.50
463.20
495.30
Other Income
44.40
104.10
342.60
Exceptional Gain/Loss
-54.50
0.00
0.00
PBT
-354.60
404.10
305.10
Less: Tax
-119.80
117.70
-178.70
PAT
-234.80
286.40
483.80
Growth (%)-YoY
Revenue Growth JKLC reported 32% y-o-y growth in revenues from Rs.
5907.5 million in Q1 FY2016 to Rs. 7772.3 million in Q1 FY2017. The same
has been driven by healthy growth in both the cement volumes and
realizations.
On a sequential basis, the company reported a growth in operating income
of 5.7% in its Q1 FY2017 from Rs. 7350.90 million in Q4 FY2016.
5907.50
Operating Income
Not
Rated
by ICRA
ICRA
Ratings
45.94%
FIIs
12.57%
DIIs
19.80%
Others
21.69%
100.00%
45.9%
FIIs
Others
JKLC
CNX
3M
14.4%
18.4%
12M
21.3%
27.58%
32.74%
6.90%
10.18%
Stock Movement
JKLC
CNX Nifty
3M
12M
-15.09%
-17.01%
-8.08%
-7.64%
Stock Movement
52wk range: Rs. 253.0 -505.8
OPBDIT/OI (%)
8.55%
15.12%
11.68%
PAT/OI (%)
-3.97%
3.68%
6.58%
Operating Income
Growth (%)
Q1 FY2015
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
6004.20
5725.80
5559.10
5781.50
5907.50
6457.30
6482.80
7350.90
7772.30
-7%
-5%
-3%
4%
2%
9%
0%
13%
6%
OPBDIT
1134.80
891.50
753.80
714.50
505.00
666.60
669.10
858.80
1175.10
PAT
404.60
306.10
184.80
60.50
-234.80
-149.50
-36.70
483.80
286.40
OPBDIT/OI (%)
18.9%
15.6%
13.6%
12.4%
8.6%
10.3%
10.3%
11.7%
15.1%
PAT/OI (%)
6.7%
5.3%
3.3%
1.0%
-4.0%
-2.3%
-0.6%
6.6%
3.7%
FY17e
FY18e
FY18e
FY19e
71.28
42.07
16.48
19.47
10.13
14.13
14.28
EV/EBITDA
15.60
Source: Bloomberg
9.03
10.71
6.69
8.42
Price
/Earnings
Source: Bloomberg
ICRA LIMITED
36
ICRA LIMITED
37
ICRA Ratings
FACT SHEET
Year of Incorporation
1949
Chairman
Product Portfolio
Manufacturing facilities
PAT- FY2016
Operating Income
Growth (%)
OPBDIT
Less: Depreciation
Less: Interest Charges
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT
OPBDIT/OI (%)
PAT/OI (%)
Q1
FY2016
6792.2
25%
1388.5
401.0
325.5
124.9
Q1
FY2017
7086.2
4%
1804.2
329.8
328.6
299.1
Q4
FY2016
8348.2
25%
2057.5
471.9
338.5
498.2
786.9
246.1
540.8
1444.9
386.5
1058.4
1247.1
410
1335.3
20.44%
7.96%
25.46%
14.94%
24.65%
16.00%
74.89%
FIIs
2.17%
DIIs
0.28%
Others
Total
22.67%
100.00%
12M
OCL
36.94%
66.60%
CNX
6.90%
10.18%
Stock Movement
Q4 FY2014
Q1 FY2015
Q2 FY2015
Q3 FY1205
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
Operating Income
5386.2
5462.9
4733.2
5442.5
6651.9
6786.1
5371.5
6144.9
8348.2
7086.2
29%
OPBDIT
918.4
1%
971.7
-13%
572.2
15%
871.1
22%
1011.3
2%
1326.2
-21%
745.9
14%
1064.4
36%
2057.5
-15%
1804.2
PAT
416.4
361.5
127.4
287.7
360.1
488.2
16.87
370.7
1335.3
1058.4
OPBDIT/OI (%)
17.10%
17.80%
12.10%
16.00%
15.20%
19.54%
13.89%
17%
25%
25%
PAT/OI (%)
7.70%
6.60%
2.70%
5.30%
5.40%
7.19%
3.14%
6%
16%
15%
FY17e
FY18e
15.44
12.96
EV/EBITDA
7.00
Source: Bloomberg
ICRA LIMITED
38
6.27
Company Profile: OCL India Limited, a part of the Dalmia Group, has two business divisions- cement and refractory with cement division accounting for ~ 91% of OCLs
revenues and 108% of its profits in FY16, with the profits being offset to some extent by the losses reported in the refractory division. OCL is a regional cement player with
focus in Eastern India. The company has two grinding units in Orissa located at Rajgangpur (4 MTPA capacity) and Kapilas (1.35 MTPA capacity) and a clinkerisation unit (2.9
MTPA capacity) at Rajgangpur. The company has commissioned a 1.35 MTPA cement grinding unit at Medinipur, West Bengal in April 2014. The company is mainly involved in
the manufacturing of Portland Slag Cement (PSC) which constitutes around 85-90% of its total sales. OCLs refractory division manufactures a wide range of products such as
fireclay bricks, basic burnt bricks, silica bricks, magnesia carbon bricks, castables etc catering to a wide variety of industries.
Q1 FY2017
Q4 FY2016
Revenues
Cement
Refractory
6191.4
600.8
6289.2
797.0
7707.7
640.5
2%
33%
-18%
24%
PBIT
Cement
Refractory
1246.7
-26.3
1790.5
-28.8
2419.4
-215.3
44%
-26%
28.47%
-3.61%
31.39%
-33.61%
PBIT %
Cement
20.14%
Refractory
-4.38%
Amount in Rs. Million
Source: Company, ICRA Research
ICRA LIMITED
YoY Growth
QoQ Growth
39
ICRA Ratings
FACTSHEET
Year of incorporation
Chairman
Product Profile
Manufacturing
facilities
Capacity- April 2016
1992
Mr. Rajesh Kapadia
Cement, Tiles, Ready mix Concrete
Cement- Madhya Pradesh
Tiles- Maharashtra, Karnataka, MP,
Pondicherry
5.6 million MTPA
Q1 FY2017
Q4 FY2016
Operating Income
13071.8
12901.9
14554.7
-1%
-1%
-5%
OPBDIT
641.0
984.9
987.8
Less: Depreciation
390.2
408.5
486.5
620.7
553.5
539
Other Income
167.5
196.3
645.2
0.0
0.0
0.0
PBT
-202.4
219.2
607.5
Less: Tax
-53.4
62.7
-11.3
PAT
-149.0
156.5
618.8
OPBDIT/OI (%)
4.9%
7.6%
6.8%
PAT/OI (%)
-1.1%
1.2%
4.3%
Exceptional Gain/Loss
74.87%
FIIs
9.81%
DIIs
6.36%
Others
8.96%
Total
100.00%
12M
PCL
10.68%
18.45%
CNX
6.90%
10.18%
Stock Movement
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
Operating Income
13371.9
13375.5
15295.3
13071.8
13983.4
13278
14554.7
12901.9
-4%
0%
14%
-15%
7%
-5%
10%
-11%
OPBDIT
465.5
367.6
843.6
641.0
519.9
712.9
987.8
984.9
Price /Earnings
PAT
-197.6
-406.7
618.9
-149.0
-332.6
-122.2
618.8
156.5
OPBDIT/OI (%)
3.5%
2.7%
5.5%
4.9%
3.7%
5.4%
6.8%
7.6%
EV/EBITDA
12.89
Source: Bloomberg
PAT/OI (%)
-1.5%
-3.0%
4.0%
-1.1%
-2.4%
-0.9%
4.3%
1.2%
Valuations
FY17e
FY18e
FY19e
37.28
15.85
15.14
9.12
8.56
ICRA LIMITED
40
Q2 FY2016
Growth
Q3 FY2015
Q3 FY2016
Growth
Q4 FY2015
Q4 FY2016
Growth
Q1 FY2016
Q1 FY2017
Growth
5249.10
5218.40
2945.90
5311.50
5638.10
3073.00
1%
8%
4%
5128.00
5322.00
2971.10
4665.80
5638.30
3008.40
-9%
6%
1%
5632.10
6610.50
3094.40
5112.60
6107.30
3374.10
-9%
-8%
9%
5750.60
5273.10
3196.30
6352.10
4456.80
3352.30
10%
-15%
5%
347.20
2.40
-42.90
229.60
-122.00
27.60
-34%
81.80
-37.00
-8.80
359.00
-55.00
55.60
339%
446.90
-13.10
66.20
464.60
-92.40
129.10
4%
448.50
-93.60
41.70
819.00
-182.20
107.90
83%
6.6%
0.0%
-1.5%
4.3%
-2.2%
0.9%
1.6%
-0.7%
-0.3%
7.7%
-1.0%
1.8%
7.9%
-0.2%
2.1%
9.1%
-1.5%
3.8%
7.8%
-1.8%
1.3%
12.9%
-4.1%
3.2%
Revenues
Cement
TBK
RMC
PBIT
Cement
TBK
RMC
164%
732%
95%
PBIT Margins
Cement
TBK
RMC
ICRA LIMITED
41
159%
Company Profile
PCL, promoted by the Rajan Raheja group, was incorporated in 1992 and has been in the business of manufacturing and selling cement since 1997. The company has three
divisions namely the Cement, Tiles, Bathroom and Kitchen (TBK) and Ready Mix Concrete (RMC) divisions. PCLs cement division operates two units, both based in Satna, MP
with a combined installed cement capacity of 5.6 MTPA. It caters to the major markets in Uttar Pradesh, Uttaranchal, Madhya Pradesh and Bihar. PCL also has 51% stake in
Raheja QBE General Insurance Company Limited, a JV with QBE group in Australia.
ICRA LIMITED
42
ICRA Ratings
FACT SHEET
Year of Incorporation
1979
Chairman
Year ending
March
Business Segments
Cement, Power
Manufacturing
Cement
facilities-
Capacity as on September
2016
PAT- FY2016
June 2015
June 2016
Mar 2016
Operating Income
Growth (%) - YoY
17245.90
22250.40
20174.20
4.10%
29.02%
28%
OPBDIT
3567.70
7572.00
5050.30
Less: Depreciation
2382.50
1540.40
3337.70
263.60
275.90
285.80
Other Income
392.30
714.80
754.90
Exceptional Gain/Loss
-239.90
0.00
-0.90
PBT
1074.0
6470.50
2180.80
Less: Tax
32.90
1393.80
-52.60
PAT
1041.10
5076.70
2233.40
OPBDIT/OI (%)
20.70%
34.0%
25.0%
PAT/OI (%)
6.00%
22.8%
11.1%
Q1 FY2015
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q1 FY2017
16080.80
15445.00
15764.00
17245.90
17242.50
18288.30
20174.20
22250.40
871%
-4%
2%
9%
0%
6%
10%
10%
OPBDIT
3404.20
3060.80
3405.80
3567.70
3892.80
4259.50
5050.30
7572.00
PAT
1088.10
936.80
1197.30
1041.10
1287.30
1028.60
2233.40
5076.70
23.3%
25.0%
34.0%
5.6%
11.1%
22.8%
Operating Income
Growth (%)
6.1%
7.6%
64.79%
FIIs
13.81%
DIIs
15.43%
Others
Total
5.97%
100.00%
12M
SCL
16.61%
48.40%
CNX
6.90%
10.18%
Stock Movement
OPBDIT/OI (%)
6.8%
Promoters
21.2%
19.8%
21.6%
20.7%
22.6%
DISHMAN PHARMACEUTICALS
& CHEMICALS
LIMITED: Business
Overview
PAT/OI (%)
6.0%
7.5%
FY17e
Price
/Earnings
37.90
EV/EBITDA
21.88
Source: Bloomberg
ICRA LIMITED
43
FY18e
FY19e
29.04
17.53
21.74
14.61
Sep 2014
Sep 2015
Growth
Dec 2014
Dec 2015
Growth
Mar 2015
Mar 2016
Growth
Jun 2015
Jun 2016
Growth
Cement
14170.70
15267.90
8%
13516.40
16469.00
22%
14632.50
18013.8
23%
15152.80
22879.80
51%
Power
3482.60
3804.70
9%
3433.90
3701.20
8%
2964.80
4259.5
44%
3984.30
4009.30
1%
Cement
291.90
203.10
-30%
182.90
-269.50
-247%
-366.70
-386.5
5%
-475.60
3896.40
Power
923.90
1078.00
17%
878.70
1496.80
-70%
1186.10
2205.6
86%
1845.40
2227.80
Cement
2.1%
1.3%
1.4%
-1.6%
-2.5%
-2.1%
-3.1%
17.0%
Power
26.5%
28.3%
25.6%
40.4%
40.0%
51.8%
46.3%
55.6%
Revenues
PBIT
21%
PBIT %
Company Profile SCL was incorporated in the year 1979 and is owned and managed by the Bangur group, which is based in Kolkata. The company has its business activities
in the cement and power sector. Presently the company operates 27.20 million MTPA of cement manufacturing capacity. SCL has five grinding units of 16 million MTPA
capacity across different locations in Rajasthan (Beawar, Ras, Suatgarh, Jobner and Khushkhera), one unit of 1.5 MTPA capacity in Uttarakhand, one unit of 3.6 MTPA capacity
in Bihar, one unit of 1.5 MTPA in Panipat, Haryana (acquired from Jaiprakash Associates Limited), one unit of 2.6 MTPA in Chhattisgarh and one unit in Uttar Pradesh. SCL also
has 627 MW of power capacity, which not only makes it a fully self reliant unit for meeting its power requirements but also enables it to export surplus power.
ICRA LIMITED
44
ICRA Ratings
No rated by ICRA
FACT SHEET
Year of Incorporation
1946
Chairman
Shri.N.Srinivasan
Product Portfolio
Cement
Year ending
March
Manufacturing facility
In Rs. Million
Q1
FY2016
Q1
FY2017
Q4
FY2016
Operating Income
Growth (%) - YoY
OPBDIT
Less: Depreciation
Less: Interest Charges
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT
12257.0
-12.9%
2004.4
553.9
965.3
0.0
-107.2
378.0
0.0
378.0
12057.2
-1.6%
2046.1
511.3
824.5
0.0
0.0
710.3
270.5
439.8
11540.8
10.6%
2184.1
522.2
912.7
0.6
0.0
749.8
237.7
512.1
OPBDIT/OI (%)
PAT/OI (%)
Operating Income
Growth (%) -QoQ
OPBDIT
PAT
OPBDIT/OI (%)
PAT/OI (%)
16.4%
3.1%
Q2 FY2015
11357.1
-8%
1831.6
74.9
16.1%
0.7%
17.0%
3.6%
Q3 FY2015
10402.2
-8%
1630.4
-116.8
15.7%
-1.1%
28.63%
FIIs
24.22%
DIIs
17.59%
Others
29.56%
Total
100.00%
18.9%
4.4%
Q4 FY2015
10431
0%
2002.3
366
19.2%
3.5%
Q1 FY2016
12257.0
18%
2004.4
378.0
16.4%
3.1%
Q2 FY2016
10823.7
1%
2319
410.4
21.4%
3.8%
Q3 FY2016
9370.5
-13%
1536.4
54.6
16.4%
0.6%
Q4 FY2016
11540.8
23%
2184.1
512.1
18.9%
4.4%
Q1 FY2017
12057.2
4%
2046.1
439.8
17.0%
3.6%
3M
12M
ICL
42.93%
91.35%
CNX
6.90%
10.18%
Stock Movement
FY17e
FY18e
FY19e
18.01
12.69
10.20
6.95
6.38
EV/EBITDA
7.91
Source: Bloomberg
ICRA LIMITED
45
Company Profile:
Incorporated in 1946, India Cements (ICL) is a leading cement player in South India. The installed capacity of the company is at 14.05 million MTPA with the cement grinding
units located in Telangana, Andhra Pradesh, Tamil Nadu, Maharashtra and Rajasthan. The company primarily manufactures two standard types of cement: Ordinary Portland
Cement (OPC) and Portland Pozzolana Cement (PPC), the mix being 30:70. Apart from cement, the company is also engaged in shipping business and has a wind farm in
Coimbatore.
ICRA LIMITED
46
ICRA Ratings
1957
Sri.P.R.Ramasubrahmaneya Rajha
Year ending
March
Product Portfolio
Manufacturing facilities
Capacity FY2016
Standalone
FY2016
Net
sales-
Q1 FY2017
Q4 FY2016
Operating Income
9474.20
9720.90
10148.80
-2.84%
2.60%
1.78%
OPBDIT
2537.50
3042.10
3453.90
Less: Depreciation
667.30
663.20
652.10
492.90
291.40
444.20
Other Income
18.20
18.60
28.00
Exceptional Gain/Loss
0.00
0.00
0.00
PBT
1395.50
2106.10
2357.60
Less: Tax
403.10
546.80
342.40
PAT
992.40
1559.30
2043.20
OPBDIT/OI (%)
26.78%
31.29%
34.03%
PAT/OI (%)
10.47%
16.04%
20.13%
In Rs. Million
Operating Income
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
9591.5
8159.3
-14%
9971.2
22%
9474.2
8914.7
8209.2
10148.8
9720.90
-5%
-6%
-8%
24%
-4%
1299
2743.4
2537.5
2910.0
2536.5
3453.9
3042.10
1387.2
1177.3
2043.2
1559.30
Growth (%)
-3%
OPBDIT
1714
2163.4
OPBIT/OI (%)
Q1 FY2015
9514.3
-1%
PAT
362.6
897.1
229.6
934.2
992.4
17.90%
22.70%
15.92%
27.51%
26.78%
32.64%
30.90%
34.03%
31.29%
2.81%
9.37%
10.47%
15.56%
14.34%
20.13%
16.04%
AMBUJA
LIMITED (ACL)
PAT/OI (%) CEMENTS3.80%
9.40%
42.30%
FIIs
15.91%
DIIs
24.88%
Others
16.91%
Total
100.00%
12M
TRCL
7.33%
89.19%
CNX
6.90%
10.18%
Stock Movement
FY18e
FY19e
21.90
18.58
14.79
EV/EBITDA
13.60
Source: Bloomberg
12.18
10.27
Price /Earnings
ICRA LIMITED
47
Company Profile- RCL is the flagship company of the Ramco Group which has interests in cement, fibre cement sheets, textiles (cotton yarn) and information technology.
The Ramco Group was founded in 1938 by Late Mr. PAC Ramasamy Raja and is presently managed by his son, Mr. P R Ramasubrahmaneya Rajha. RCL is largely a regional
cement player with capacity of 12.50 million MTPA in South India (apart from grinding capacities of 4.00 million MTPA which is proposed to be expanded to 5.00 million MPTA
with a new facility planned at West Bengal). RCL manufactures and markets cement under the Ramco brand. The name of Madras Cements Limited was changed to The
Ramco Cements Limited in August 2013. TRCL has windmill capacity of 125.95 MW (post the transfer of 33.23 MW to a newly formed subsidiary, Ramco Windfarms Limited,
during 2013-14) and captive thermal power plants with capacity of 157 MW.
ICRA LIMITED
48
ICRA Ratings
FACT SHEET
Chairman
Year ending
March
Products
Manufacturing facilities
Pan-India Presence
Capacity as on March 16
Q1 FY2017
Q4 FY2016
Operating Income
Growth (%)
OPBDIT
Less: Depreciation
Less: Interest
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT
60.07
5.53%
11.53
2.85
1.40
1.18
0.00
8.46
2.42
6.04
62.33
3.76%
14.23
3.03
1.52
1.50
0.00
11.18
3.43
7.75
65.04
4.71%
13.53
3.49
1.11
0.38
0.00
8.92
2.49
6.81
OPBDIT/OI (%)
PAT/OI (%)
19.20%
10.06%
22.82%
12.43%
20.80%
10.48%
Q2 FY2015
Q3 FY2015
Promoters
Not Rated by ICRA
FIIs
62.27%
19.64%
DIIs
6.75%
Others
11.34%
Total
100.00%
12M
UCL
15.28%
43.99%
CNX
6.90%
10.18%
Stock Movement
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
FY17e
FY18e
FY19e
Price /Earnings
33.65
25.67
20.34
EV/EBITDA
19.10
15.24
12.05
Q1 FY2017
Operating Income
54.3
56.0
62.1
60.1
56.8
58.3
65.0
62.3
-5%
3%
11%
-2%
-7%
3%
11%
-4%
OPBITA
8.8
9.6
13.1
11.5
9.9
11.2
13.5
14.2
PAT
4.1
ULTRATECH
(UCL)
OPBIT/OI (%) CEMENT LIMITED
16.2%
3.6
6.2
6.0
3.9
5.1
6.8
7.8
17.1%
21.1%
19.2%
17.41%
19.27%
20.80%
22.82%
PAT/OI (%)
6.5%
9.9%
10.1%
6.93%
8.73%
10.48%
12.43%
7.6%
Source: Bloomberg
ICRA LIMITED
49
Growth in despatches: UCLs combined cement and clinker sales volumes grew by 6% YoY
from 12.41 million MT in Q1 FY2016 to 13.20 million MT in Q1 FY2017. The capacity
utilization on existing plants is around 80% while the new plants are in ramp up mode.
Overall the capacity utilization declined from 80% in Q1 FY2016 (installed capacity at 60.15
million MTPA) to 77% in Q1 FY2017 (installed capacity at 66.25 million MTPA).
Business Overview
Board Approval received for acquisition of Jaiprakash Associates cement units: The board of directors at its meeting on 31/03/2016 approved signing of definitive
agreements for the acquisition of identified cement plants of Jaiprakash Associates Limited and its subsidiaries in the states of Madhya Pradesh, Uttar Pradesh, Himachal
Pradesh, Uttarkhand and Andhra Pradesh having cement capacity of 21.20 MPTA at an enterprise value of Rs. 15,900 crores. The transaction is subject to approval from
shareholders and creditors, sanction of scheme of amalgamation by the High Courts, approval of the Competition Commission of India and all other statutory approvals.
Projects commissioned during Q1 FY2017: During Q1 FY2017, UCL commissioned grinding units at Nagpur, Maharashtra and Patliputra, Bihar.
Update on coal block: As per Supreme Court order dated 24.09.2014, two coal blocks in Chattisgarh which were awarded to UCL jointly with other parties have been cancelled.
No mining activities had commenced in these blocks.
UCL participated in the e-auction of coal blocks conducted by the nominated authority of the Ministry of Coal, Government of India and won the auction conducted for the
Coal Block at Bicharpur, Madhya Pradesh. Its bid of Rs. 3003/ MT was the highest. UCL has started the process of possession of the mines. Commercial production from this
mine is expected to commence from FY2018.
Penalty by CCI: In August 2016, CCI has reconfirmed the penalty imposed on UCL which was to the tune of Rs. 11.8 billion for cartelization in cement industry. Earlier, during
June 2012, CCI against ten cement manufacturers, including RCL, has imposed penalty. UCL has subsequently filed an appeal before COMPAT for setting aside the said order of
the CCI. The COMPAT passed an interim order granting stay on the penalty imposed by the CCI. In December 2015, COMPAT passed an order setting aside the order of the CCI
and told CCI to take up the matter for fresh adjudication.
In August 2016, CCI, after hearing the matter afresh, has again published an order against the same cement manufacturers while adding one more to the list, including UCL,
levying the same penalty of Rs. 11.8 billion on UCL. UCL is examining the order and is to decide about filing its appeal against the order at appropriate forum in due course.
ICRA LIMITED
50
ICRA LIMITED
51
ICRA Limited
CORPORATE OFFICE
Building No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002
Tel: +91 124 4545300; Fax: +91 124 4545350
Email: info@icraindia.com, Website: www.icra.in
REGISTERED OFFICE
1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001
Tel: +91 11 23357940-50; Fax: +91 11 23357014
Branches: Mumbai: Tel.: + (91 22) 24331046/53/62/74/86/87, Fax: + (91 22) 2433 1390 Chennai: Tel + (91 44) 2434 0043/9659/8080, 2433 0724/ 3293/3294, Fax + (91 44)
2434 3663 Kolkata: Tel + (91 33) 2287 8839 /2287 6617/ 2283 1411/ 2280 0008, Fax + (91 33) 2287 0728 Bangalore: Tel + (91 80) 2559 7401/4049 Fax + (91 80) 559 4065
Ahmedabad: Tel + (91 79) 2658 4924/5049/2008, Fax + (91 79) 2658 4924 Hyderabad: Tel +(91 40) 2373 5061/7251, Fax + (91 40) 2373 5152 Pune: Tel + (91 20) 2552
0194/95/96, Fax + (91 20) 553 9231
ICRA LIMITED
52