Result Update

February 8, 2017
Rating matrix
Rating
Target
:
:
Buy
| 990
JK Cement (JKCEME) | 834
Target Period : 9-12 months
Potential Upside : 19% White cement outshines grey cement
JK Cements Q3FY17 results were above our estimates. JK Cements
Whats changed?
Target Unchanged revenues declined 1.6% YoY to | 887.8 crore (above I-direct estimate of
EPS FY17E Changed from | 35.1 to | 33.9 | 857.3 crore) mainly led by 6.1% YoY decline in grey cement revenues
EPS FY18E Changed from | 45.0 to | 46.4 to | 590 crore (driven by lower volumes: down 5.8% YoY). However,
Rating Changed from Hold to Buy white cement revenues increased 5.2% YoY to | 298 crore driven by
capacity expansion in wall putty
Quarterly performance EBITDA margins improved 267 bps YoY to 16.7% (vs. I-direct estimate
Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%) of 12.3%) mainly led by lower power & fuel expenses (down 15.6% YoY
Revenue 887.8 902.2 -1.6 911.0 (2.5) due to low cost pet coke inventory). Blended EBITDA/tonne came in at
EBITDA 148.2 126.5 17.1 146.2 1.4 | 768/tonne (vs. I-direct estimate: | 556/tonne)
EBITDA (%) 16.7 14.0 267 bps 16.0 65 bps
PAT 66.4 17.7 276.0 40.9 62.4 Key conference call highlights: 1) south operations have normalised to
55-60% utilisation, 2) JK Cement is further increasing wall putty capacity
by 0.2 MT at Katni plant by Q4FY18E, 3) in the UAE, revenues in Q3FY17
Key financials were at AED36 million with EBITDA of AED4 million
| Crore FY15 FY16 FY17E FY18E
Net Sales 3,337.3 3,528.5 3,783.6 4,456.1
Higher government spending to drive growth
EBITDA 444.0 486.8 638.0 756.3 The company sells majority (~75%) of its cement production in the north,
Net Profit 156.9 110.1 227.0 324.7 which witnessed robust volume growth led by an increase in infrastructure
EPS (|) 22.4 15.7 33.9 46.4 spend by the government (especially in road sector and low cost housing)
thereby helping it maintain healthy utilisation. Going forward, we expect JK
Valuation summary Cement to register healthy utilisation level led by the governments thrust on
FY15 FY16 FY17E FY18E
infrastructure development and stabilisation of expanded capacity (3.0 MT)
in North India. Considering this, we expect volumes to grow at a CAGR of
P/E 37.2 53.0 25.7 18.0
9.5% in FY16-18E.
Target P/E 44.1 62.9 29.2 21.3
EV/EBITDA 17.9 16.4 12.5 10.4 Demand environment in south to improve
EV/Tonne($) 114 115 113 111 Total 30% of the companys current capacity is in Karnataka (i.e. 3.0 MT), in
P/BV 3.5 3.4 3.1 2.7 the southern region. The companys major markets in the south are
RoNW (%) 9.5 6.4 11.9 14.9 Maharashtra (with more than 50% share), while balance quantities are sold
RoCE (%) 7.3 7.6 10.6 12.5 in Karnataka and Kerala. During the quarter, the southern region witnessed
an improvement in realisation. Going forward, we expect a better monsoon
Stock data and a pick-up in construction activity to drive volumes and realisation post
Q4FY17E. In addition, the stabilisation of south operation will enable the
Particular Amount
company to maintain its market share. Further, demand in Karnataka and
Mcap | 5832 Crore
Kerala is expected to gain traction leading to better growth in FY18E.
Debt (FY16) | 2644 Crore
Cash & Invest (FY16) | 485 Crore New efficient plants to help in cost rationalisation
EV | 7991 Crore The company has utilised the new capacity at optimum levels while the older
52 week H/L | 847 / 425 three kilns remained partly closed due to lower demand. This has helped the
Equity cap | 69.9 crore company reduce power consumption by ~10 units. Further, railway siding at
Face value | 10 these newer capacities coupled with grid connection & refinancing of loans
at lower interest cost (from Libor plus 5.6% to Libor plus 3.25%) in UAE
Price performance
would help the company to improve margins.
1M 3M 6M 12M
Heildelberg Cem 18.5 -8.8 6.1 85.5 Improving outlook for white cement, southern region to boost financials;
India Cement 29.8 2.6 35.3 82.8
upgrade from HOLD to BUY
JK Cement 4.2 -15.0 5.7 61.8 We expect cement demand to pick up over the next two or three years led
JK Lakshmi Cem 7.5 -18.5 -8.7 37.7 by the governments focus on infra projects, healthy monsoons and a revival
in the rural economy. Apart from improving demand, capacity expansion of
Research Analyst 3 MT (GU) in grey cement and 0.2 MT in white cement is expected to drive
revenues at a CAGR of 12.2% in FY16-18E. In addition, freight cost savings
Rashesh Shah
rashes.shah@icicisecurities.com (led by railway siding), rationalisation of power cost and grid connection in
UAE would help the company improve margins. This, coupled with the
Devang Bhatt recent correction in stock price provides a good entry point. Hence, we
devang.bhatt@icicisecurities.com upgrade the stock from HOLD to BUY and maintain our target price of | 990
(i.e. at 12x FY18E EV/EBITDA, $127/tonne on FY18E capacity of 11.8 MT).

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q3FY17 Q3FY17E Q3FY16 YoY (%) Q2FY17 QoQ (%) Comments
The decline in revenues was mainly due to 4.5% YoY decline in blended volumes
while blended realisation improved 3.0% YoY led by higher realisation in southern
Total Operating Income 887.8 857.3 902.2 -1.6 911.0 -2.5 operations
The increase in other income was due to booking of VAT subsidy in the current
Other Income 44.1 18.0 13.7 221.3 18.8 134.4 quarter
Raw Material Expenses 166.6 170.8 170.1 -2.0 165.6 0.6
Employee Expenses 68.4 66.2 60.4 13.4 68.4 0.0
Stock Adjustments -11.4 0.0 8.4 NA 11.0 NA
Power and fuel expenses declined due to low cost pet coke inventory and lower pet
coke prices on a YoY basis (75% pet coke is used in grey cement and 100% in white
Power & Fuel 154.8 167.0 183.3 -15.6 151.7 2.0 cement) and decline in power unit consumption led by utilisation of efficient plants
Freight cost 182.5 171.3 190.0 -4.0 177.6 2.7
Others 178.8 176.5 163.4 9.4 190.5 -6.1
EBITDA 148.2 105.5 126.5 17.1 146.2 1.4

EBITDA Margin (%) 16.7 12.3 14.0 267 bps 16.0 65 bps The increase in EBITDA margins was mainly due to a fall in power & fuel expenses
Interest 66.2 69.1 66.4 -0.3 69.1 -4.3
Depreciation 44.7 42.0 41.5 7.6 43.7 2.2
PBT 82.2 12.4 32.4 LP 52.1 57.7
Total Tax 15.8 4.1 14.7 NA 11.2 40.3
Net profit during the quarter improved significantly due to better performance at
PAT 66.4 8.3 17.7 276.0 40.9 62.4 operating level and higher other income

Key Metrics
The decline in volumes was due to 5.8% YoY decline in grey cement volumes while
Volume (MT) 1.93 1.90 2.02 -4.5 1.92 0.5 white cement registered volume growth of 5.2% YoY
Realisation (|) 4,600 4,518 4,466 3.0 4,742 -3.0 The increase in realisation was due to higher realisation in southern operations
EBITDA per Tonne (|) 768 556 626 22.6 761 0.9 EBITDA/tonne increased 22.6% YoY led by lower power cost per tonne
Source: Company, ICICIdirect.com Research

Change in estimates
FY17E FY18E
(| Crore) Old New % Change Old New % Change Comments
We expect revenues to increase at a CAGR of 12.2% in FY16-18E
led by higher utilisation of expanded capacity in north and stability
Revenue 3,965.0 3,783.6 -4.6 4,441.2 4,456.1 0.3 in southern operations
EBITDA 660.3 638.0 -3.4 742.5 756.3 1.9
We expect EBITDA margins to improve 318 bps to 16.5% in FY16-
EBITDA Margin (%) 16.7 16.9 21 bps 16.7 17.0 25 bps 18E
PAT 234.6 227.0 -3.3 314.7 324.7 3.2
EPS (|) 35.1 33.9 -3.3 45.0 46.4 3.2

Source: Company, ICICIdirect.com Research

Assumptions
Current Earlier Comments
FY13 FY14 FY15 FY16 FY17E FY18E FY17E FY18E
Volume (MT) 6.4 6.2 7.2 7.8 8.0 9.4 8.3 9.1 Higher government spending to drive volumes over the next two years
We expect realisation to increase over the next two years led by price
Realisation (|) 4,569 4,517 4,659 4,505 4,709 4,748 4,758 4,856 improvement in north and south
EBITDA per Tonne (|) 869 585 620 622 794 806 792 812 We expect EBITDA/tonne of | 806 in FY18E
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Company Analysis
Capacity expansion, revival in demand to drive growth
The company has expanded its cement capacity by 3.0 MTPA through two
split grinding units (1.5 MTPA each), one at Mangrol (Rajasthan) and another
at Jhajjar (Haryana). The total project cost is estimated at | 1,730 crore,
which includes a 25 MW coal-based thermal power plant, a 9 MW waste heat
recovery-based power plant and also a railway siding at both units. Apart
from this, JK Cement has installed a grey cum white cement plant with an
installed capacity of 0.6 MTPA (white cement) and 1.02 MTPA (grey cement)
in Fujairah (UAE). The company has also commissioned 0.2 MT wall putty
plant at Katni village Madhya Pradesh. With these expansions coupled with
demand improvement, we expect revenue CAGR of over 12.2% in FY16-18E.
Demand environment in south to improve
Total 30% of the companys current capacity is in Karnataka (i.e. 3.0 MT), in
the southern region. The companys major markets in the south are
Maharashtra (with more than 50% share), while balance quantities are sold
in Karnataka and Kerala. During the quarter, the southern region witnessed
an improvement in realisation. Going forward, we expect a better monsoon
and a pick-up in construction activity to drive volumes and realisation post
Q4FY17E.
White cement a cash cow
JK Cement has 0.6 MTPA of white cement capacity. With only two major
players manufacturing white cement, the other being UltraTech Cement,
coupled with relatively stable white cement demand, white cement
commands around three times the realisation fetched by grey cement.

Exhibit 1: White cement & grey cement comparative analysis of realisation, margin trends

15000 35
11223 29.9 11343
10545 10874 10719 11041 28.2 30
Realisation (|)

EBITDA Margin (%)

10000 26.2 26.5 25
25.2 25.5
3648 3784 20
15.9 3584 15
3812
5000 3851 3599 12.0 10
10.3
7.5 8.3 7.5 5
0 0
FY13 FY14 FY15 FY16 FY17E FY18E

White Cement (LHS) Grey Cement (LHS)

Grey Cement (RHS) White Cement (RHS)

Source: Company, ICICIdirect.com Research

Cost rationalisation to boost margins

The new expanded capacity of 3 MT has stabilised and the company is
expected to reap its benefits in coming quarters. JK Cement is utilising the
new capacity at 100% while the older three kilns are partly closed/unutilised.
This has helped the company to reduce power consumption by 10 units.
Further, JK Cement commissioned railway siding at these newer capacities,
which is expected to reduce freight cost. This, coupled with grid connection
at the UAE plant will help the company improve profitability by ~| 5 crore
per quarter. Further, refinancing of loans (~| 650 crore) in UAE operation
from Libor plus 5.6% to Libor plus 3.25% will help in reducing interest cost,
thereby boosting margins.

ICICI Securities Ltd | Retail Equity Research Page 3

 Expect revenue CAGR of 12.2% during FY16-18E
Revenues have grown at 8.7% CAGR in FY12-16 where volume has grown at
a CAGR of 7.9% with realisation also growing at a CAGR of 2.6%. Going
forward, with capacity expansion of 3.0 MT and 0.2 MT of wall putty we
expect expansion led revenue CAGR of 12.2% in FY16-18E. We expect
volume CAGR of 9.5% in FY16-18E. We expect realisation to grow annually
at 2.5%.
Exhibit 2: Expect expansion led revenue CAGR of 12.2% during FY16-18E Exhibit 3: Capacity addition plans
State Region MT
5000 4456
Grey Cement
3784 Nimbahera Rajasthan North 3.3
4000 3337 3541
1357 Mangrol Rajasthan North 0.8
2904 2784
3000 2538 1071 1263 Gotan Rajasthan North 0.5
2081 941
719 Muddapur Karnataka South 3.0
546 858
2000 438 Total 7.5
3099 White Cement and Wall Putty
2185 2396 2470 2521
1000 1642 1992 1926 Gotan Rajasthan North 0.6
Wall Putty 0.7
0 Total 1.3
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Grey Cemnet Expansion plan
Mangrol Rajasthan North 1.5
Grey Cement Sales (| crore) White Cement Sales (| crore) Sales (| crore)
Jhajjar Haryana North 1.5
Total (after expansion) 10.5
International Expansion plan Country
Source: Company, ICICIdirect.com Research Habhab, Tawian Fujariah UAE 0.6 white or 1 grey
Source: Company, ICICIdirect.com Research

Exhibit 4: Volume to grow at 9.5% CAGR in FY16-18E Exhibit 5: Realisation to grow at 2.5 % CAGR during FY16-18E
10.0 9.4 4748
5000 4569 4517 4659 4521 4709 14
9.0 7.8 8.0
1.20 4500 4074 12
8.0 7.2 3815
6.4 6.2 0.97 1.12 4000 10
7.0 5.5 5.8 0.88 3500 8
6.0 0.68 0.8 3000 6
0.33 0.35
5.0 2500 4
MT

4.0 8.2 2000 2

6.3 6.9 6.9
3.0 5.4 5.7 5.4 1500 0
5.1
2.0 1000 -2
1.0 500 -4
0.0 0 -6
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Blended Realisation (|/tonne) -LS Growth (%) -RS
Grey Cement Volume White Cement Volume Total Sales Volumes

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Exhibit 6: Volume declines 4.5% YoY in Q3FY17 Exhibit 7: Realisations increase 3.0% YoY in Q3FY17

2.50 2.02
2.18 5000 4669 4560 4765 4742 4703 4742 4600
1.89 1.92 1.93 4483 4466 4362
1.77 1.75 1.91 1.81 1.82
0.28 4500
2.00 0.25
0.23 0.21 0.24 0.26 0.27 0.27
0.23 0.23 4000
1.50
3500
MT

1.00 1.77 1.90

1.55 1.52 1.68 1.61 1.59 1.63 1.65 1.67 3000
0.50
2500
0.00 2000
Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Grey Cement Volume Sales volumes -LHS

Blended Realisation-LHS

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 4

 Margins to improve, going forward
With expanded capacity now in place, the company should be able to benefit
from economies of scale. White cement commands better margins than grey
cement. Hence, we expect blended margins to improve, going forward,
despite concerns over the high cost environment. Focus on two regions
along with enough captive power also bodes well for the company towards
improving margins.
Exhibit 8: Expect EBITDA/tonne of |806 in FY18E Exhibit 9: Higher contribution of white cement to aid in margin expansion

900 794 806

800 35
700 620 622 30
585
600 25
500 20 20.0 19.0

(%)
400 16.9 17.0
|

15 13.3 13.8
12.7 13.0
300 10
200 5
100
0
0
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
FY14 FY15 FY16 FY17E FY18E

Blended EBITDA/Tonne Blended EBITDA Margin (%)

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Exhibit 10: Q3FY17 grey cement EBITDA/tonne at |314 Exhibit 11: EBITDA/T of white cement increases 12.8% YoY in Q3FY17
519 6000 35
600 547 16.0

3798

3623
3409
4500

3212
14.0

3097

2991
500
2819
30

2791
2651

2435
358 12.0
|/tonne

400 320 314 3000

(%)
10.0
258 25
(%)

218 229
|/tonne

300 228 8.0 1500

179 6.0
200
4.0 0 20
100 2.0
Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17
0 0.0
Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

White Cement EBITDA/tonne(|) White Cement EBITDA Margin(%)

Grey Cement EBITDA/tonne (|) Grey Cement EBITDA Margin (%)

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Expect net margin to improve from 3.1% in FY16 to 7.3% in FY18E

After witnessing a sharp decline in profits in FY16, we expect net margins to
improve to 7.3% in FY18E from 3.1% in FY16. Overall, we expect net profit
to grow from | 110.1 crore in FY16 to | 324.7 crore in FY18E.
Exhibit 12: Profitability trend

500
20
400
324.7
15
300 64.1 227.0
| crore

(%)

177.3
10
200 156.9
8.0 91.0 110.1
7.0 7.3 5
100 6.0
4.7 3.1
3.3
0 0
FY12 FY13 FY14 FY15 FY16 FY17E FY18E

Net profit - LS Net profit margin -RS

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 5

 Outlook and valuation
We expect cement demand to pick-up over the next two or three years led
by the governments focus on infra projects, healthy monsoon and revival in
rural economy. Apart from improving demand, capacity expansion of 3 MT
(GU) in grey cement and 0.2 MT in white cement is expected to drive
revenues at a CAGR of 12.2% in FY16-18E. In addition, freight cost savings
(led by railway siding), rationalisation of power cost and grid connection in
UAE would help the company to improve margins. This, coupled with the
recent correction in stock price provides a good entry point for the stock.
Hence, we upgrade the stock from HOLD to BUY. We maintain our target
price of | 990/share (i.e. at 12x FY18E EV/EBITDA, $127/tonne on FY18E
capacity of 11.8 MT).

Exhibit 13: Key assumptions

| per tonne FY13 FY14 FY15 FY16 FY17E FY18E
Sales Volume (mtpa) 6.4 6.2 7.2 7.8 8.0 9.4
Net Realisation 4569 4517 4659 4505 4709 4748
Total Expenditure 3701 3927 4039 3873 3924 3942
EBITDA per Tonne 869 590 620 632 784 806

Source: ICICIdirect.com Research

Exhibit 14: One year forward EV/EBITDA

12000
10000
8000
(| Crore)

6000
4000
2000
0
Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Feb-16

Aug-16

Feb-17
EV 12.4x 10.4x 8.5x 6.5x 2.5x

Source: Company, ICICIdirect.com Research

Exhibit 15: One year forward EV/tonne

1500
1250
1000
Million $

750
500
250
0
Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Feb-16

Aug-16

Feb-17

EV $120 $100 $80 $60 $20

Source: Company, ICICIdirect.com Research

Exhibit 16: Valuations

Sales Growth EPS Growth PE EV/EBITDA EV/Tonne RoNW RoCE
(| cr) (%) (|) (%) (x) (x) ($) (%) (%)
FY15 3337.3 -4.1 22.4 -61.0 37.2 17.9 114.4 9.5 7.3
FY16 3528.5 5.7 15.7 -29.8 53.0 16.4 114.8 6.4 7.6
FY17E 3783.6 7.2 32.5 106.1 25.7 12.5 113.0 11.9 10.6
FY18E 4456.1 17.8 46.4 43.1 18.0 10.4 111.5 14.9 12.5
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

Recommendation history vs. consensus estimate
1,000 90.0
900 88.0
800 86.0
84.0
700
82.0
(|)

600

(%)
80.0
500
78.0
400 76.0
300 74.0
200 72.0
Feb-15 Apr-15 Jul-15 Sep-15 Nov-15 Feb-16 Apr-16 Jul-16 Sep-16 Nov-16 Feb-17

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date Event
Mar-12 The company expands its white putty production capacity from 1 lakh tonne to 3 lakh tonne. White cement constitutes ~20% of total revenue for the company with
high EBITDA margin of more than 25% compared to grey cement EBITDA margin of 15% to 20%
Mar-12 The government proposes to raise excise duty on the building material from 10% to 12% against expectations of a cut in the same
Jun-12 The CCI imposes a fine of 50% of annual profit for the fiscal year ending 2010 and 2011, a total of | 6000 crore on 11 cement companies including JK Cement (|
128.5 crore) for alleged cartelisation
Oct-13 Revenue contribution from white cement reached 33% in Q2FY14. During the quarter, grey cement reported negative EBITDA while white cement reported ~22%
EBITDA margin, thus proving to be a face saviour for the company
Mar-14 Expanding its total grey cement capacity from current 7.5 MTPA to 10.5 MTPA and further capacity of 0.6 MTPA of white cement in UAE. The production from
expanded capacity is expected to start from Q2FY15
Jun-14 Commences grey cement production at Jharli, Haryana having grey cement grinding capacity of 1.5 MT
Sep-14 Commissions 1.5 MT grey cement plant at Mangrol, Rajasthan
Sep-15 Commissions railway siding at mangrol and Haryana
Apr-16 Stoppage of clinker production at Muddapur due to cracks in silo
May-16 Commences operation of wall putty plant in Madhya Pradesh having total capacity of 0.2 MT
Oct-16 Company's clinker silo roof in Karnataka that caved in earlier rebuilt and made operational
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
1 Yadu International, Ltd. 11-Nov-16 42.8 29.9 7.3 Promoter 67.02 66.99 67.02 67.02 67.02
2 Singhania (Yadupati) 25-Jan-17 17.6 12.3 -2.0 FII 9.84 9.49 8.11 8.02 9.83
3 Juggilal Kamlapat Holding, Ltd. 30-Sep-16 10.4 7.3 0.0 DII 15.27 15.75 16.95 16.95 15.54
4 Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Sep-16 5.1 3.6 0.1 Others 7.87 7.77 7.92 8.01 7.61
5 Fidelity Management & Research Company 31-Dec-16 4.8 3.3 0.0
6 Templeton Asset Management Ltd. 31-Dec-16 4.3 3.0 0.0
7 HDFC Standard Life Insurance Company Limited 30-Sep-16 3.8 2.6 -0.2
8 Singhania (Kavita Y) 30-Sep-16 1.9 1.3 0.0
9 Sundaram Asset Management Company Limited 31-Dec-16 1.3 0.9 0.0
10 Singhania (Sushila Devi) 30-Sep-16 1.3 0.9 0.0

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys Sells
Investor name Value Shares Investor name Value Shares
Yadu International, Ltd. 77.33 7.29 Singhania (Yadupati) -21.42 -2.00
Franklin Templeton Asset Management (India) Pvt. Ltd. 0.89 0.07 HSBC Global Asset Management (Hong Kong) Limited -5.83 -0.44
Singhania (Nidhipati) 0.35 0.03 HDFC Standard Life Insurance Company Limited -2.87 -0.22
Kotak Mahindra Asset Management Company Ltd. 0.02 0.00 Kotak Mahindra (UK) Ltd -0.84 -0.06
HSBC Global Asset Management (India) Private Limited 0.01 0.00 General Insurance Corporation of India -0.33 -0.03
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 7

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
(Year-end March) FY15 FY16 FY17E FY18E (Year-end March) FY15 FY16 FY17E FY18E
Total operating Income 3,337.3 3,528.5 3,783.6 4,456.1 Profit after Tax 156.9 110.1 227.0 324.7
Growth (%) 19.9 5.7 7.2 17.8 Add: Depreciation 136.6 156.3 179.0 191.2
Raw material cost 556.3 675.6 700.1 835.4 (Inc)/dec in Current Assets -55.5 -38.9 -133.4 -249.4
Employee Expenses 202.5 234.0 284.2 305.1 Inc/(dec) in CL and Provisions 89.4 109.5 70.1 188.9
Power, Oil & Fuel 793.5 740.8 639.5 765.0 CF from operating activities 327.4 337.0 342.7 455.5
Freight cost 734.4 747.4 755.4 912.1 (Inc)/dec in Investments 0.0 0.0 -1.0 -1.0
Other Expenses 606.7 643.9 766.4 882.3 (Inc)/dec in Fixed Assets -251.2 -270.4 -300.0 -300.0
Total Operating Exp. 2,893.3 3,041.7 3,145.6 3,699.8 Others -3.6 -61.2 0.0 0.0
EBITDA 444.0 486.8 638.0 756.3 CF from investing activities -254.8 -331.6 -301.0 -301.0
Growth (%) 23.1 9.6 31.1 18.5 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Depreciation 136.6 156.3 179.0 191.2 Inc/(dec) in loan funds 256.6 104.8 -200.0 -100.0
Interest 219.5 270.1 269.0 257.8 Dividend paid & dividend tax -28.0 -33.0 -49.5 -49.5
Other Income 71.2 89.5 111.3 109.1 Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0
Exceptional items 0.0 0.0 10.2 0.0 Others -240.8 -0.6 0.0 0.0
PBT 159.1 149.9 291.1 416.3 CF from financing activities -12.2 71.2 -249.5 -149.5
Total Tax 2.2 39.8 64.2 91.6 Net Cash flow 60.4 76.6 -207.8 5.0
PAT 156.9 110.1 227.0 324.7 Opening Cash 347.6 407.9 484.5 276.8
Growth (%) 72.3 -29.8 106.1 43.1 Closing Cash 407.9 484.5 276.8 281.8
Adjusted EPS (|) 22.4 15.7 33.9 46.4 Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY15 FY16 FY17E FY18E (Year-end March) FY15 FY16 FY17E FY18E
Liabilities Per share data (|)
Equity Capital 69.9 69.9 69.9 69.9 Adjusted EPS 22.4 15.7 33.9 46.4
Reserve and Surplus 1,576.6 1,653.2 1,830.6 2,105.9 Cash EPS 42.0 38.1 58.1 73.8
Total Shareholders funds 1,646.6 1,723.1 1,900.6 2,175.8 BV 235.5 246.4 271.8 311.1
Total Debt 2,538.9 2,643.7 2,443.7 2,343.7 DPS 4.0 4.0 6.0 6.0
Deferred Tax Liability 279.8 328.4 328.4 328.4 Cash Per Share 58.3 69.3 39.6 40.3
Minority Interest / Others 0.0 0.0 0.0 0.0 Operating Ratios (%)
Total Liabilities 4,465.3 4,695.3 4,672.7 4,848.0 EBITDA Margin 13.3 13.8 16.9 17.0
Assets PAT Margin 4.7 3.1 6.0 7.3
Gross Block 4,314.5 4,623.6 4,976.0 5,276.0 Inventory days 57.5 50.9 50.9 50.9
Less: Acc Depreciation 978.5 1,134.8 1,313.8 1,505.0 Debtor days 15.2 17.1 17.1 17.1
Net Block 3,336.0 3,488.8 3,662.2 3,771.0 Creditor days 89.5 95.8 95.8 95.8
Capital WIP 191.2 152.4 100.0 100.0 Return Ratios (%)
Total Fixed Assets 3,527.2 3,641.3 3,762.2 3,871.0 RoE 9.5 6.4 12.5 14.9
Intangible Asset 2.0 2.0 2.0 2.0 RoCE 8.5 8.9 12.2 13.9
Investments 314.5 424.3 425.3 426.3 RoIC 8.0 8.1 10.7 12.7
Inventory 509.8 474.2 581.0 661.8 Valuation Ratios (x)
Debtors 139.4 165.7 177.3 208.8 P/E 35.6 50.7 24.6 17.2
Loans and Advances 447.5 495.7 510.8 647.8 EV / EBITDA 17.4 15.9 12.2 10.1
Cash 407.9 484.5 276.8 281.8 EV / Net Sales 2.3 2.2 2.0 1.7
Total Current Assets 1,504.6 1,620.1 1,545.8 1,800.2 Market Cap / Sales 1.7 1.7 1.5 1.3
Creditors 818.5 926.4 993.1 1,169.6 Price to Book Value 3.5 3.4 3.1 2.7
Provisions 64.5 66.0 69.5 81.9 Solvency Ratios
Total Current Liabilities 882.9 992.4 1,062.6 1,251.4 Debt/EBITDA 5.7 5.4 3.8 3.1
Net Current Assets 621.7 627.7 483.2 548.7 Debt / Equity 1.5 1.5 1.3 1.1
Application of Funds 4,465.3 4,695.3 4,672.7 4,848.0 Current Ratio 1.7 1.6 1.5 1.4
Source: Company, ICICIdirect.com Research Quick Ratio 1.2 1.1 1.2 1.2
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 8

ICICIdirect.com coverage universe (Cement)
CMP M Cap EPS (|) EV/EBITDA (x) EV/Tonne ($) RoCE (%) RoE (%)
Company (|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
ACC* 1496 1680 Buy 28,116 31.3 32.2 60.7 22.9 22.0 14.5 146 143 123 6.0 6.7 12.1 7.0 7.0 12.2
Ambuja Cement* 240 280 Buy 47,656 5.2 5.4 6.6 22.4 29.7 27.9 164 157 154 14.0 7.9 9.0 14.8 7.8 10.2
UltraTech Cem 3,701 4300 Buy 101,555 79.3 103.1 127.4 24.1 19.7 16.8 258 244 241 10.8 13.5 16.0 10.5 11.9 13.2
Shree Cement 15,825 17000 Hold 55,071 202 405 565 40.7 22.4 15.9 341 316 316 6.5 13.3 18.3 10.9 18.2 20.5
Heidelberg Cem 131 124 Hold 2,810 1.7 2.6 3.5 19.2 15.8 13.6 125 120 118 6.0 7.5 9.1 4.3 6.1 7.8
India Cement 163 175 Buy 5,038 4.3 5.2 8.3 10.2 9.8 8.2 86 84 82 8.5 8.6 10.3 4.0 4.3 6.4
JK Cement 834 990 Buy 5,587 15.7 32.5 46.4 15.9 12.2 10.1 115 113 111 8.9 12.2 13.9 6.4 12.5 14.9
JK Lakshmi Cem 392 500 Buy 4,626 2.3 6.9 14.3 22.8 15.1 10.3 125 103 76 3.4 7.3 12.0 1.2 5.9 10.8
Mangalam Cem 286 365 Buy 766 -8.3 4.1 16.0 32.6 13.5 8.4 56 45 44 1.6 6.0 11.8 NA 2.3 8.2
SFCL 104 115 Hold 2,264 4.1 2.6 4.6 7.6 8.8 6.7 161 159 120 12.0 9.5 13.0 12.3 7.3 11.8
Source: Company, ICICIdirect.com Research *CY15E, CY16E , CY17E

ICICI Securities Ltd | Retail Equity Research Page 9

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

ICICI Securities Ltd | Retail Equity Research Page 10

ANALYST CERTIFICATION
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ICICI Securities Ltd | Retail Equity Research Page 11