1

Stock Data

Sector Cement

Face Value(Rs) 2.00

52 wk. High/Low (Rs.) 144.35/93.60

Volume (2 wk. Avg.) 8895

BSE Code 502165

Market Cap(Rs in Mn) 7084.1

Financials (Rs in Mn) FY10A FY11E FY12E

Net Sales 13908 15994 17913

EBIDTA 4197 4676 5233

PAT 1637 1858 2102

EPS 28.7 32.6 36.9

P/E 4.33 3.81 3.36

OCL INDIA LTD BUY F

I

R

S

T

C

A

L

L

R

E

S

E

A

R

C

H

SYNOPSIS

We initiated the coverage of OCL India Ltd

and set a target price of Rs.148.00 for

medium to long term gains.

OCL India Limited, (formerly ORISSA

CEMENT LIMITED), widely known as OCL,

was incorporated as Public Limited

Company. Initially it was set up for

manufacturing cement. Later on, under a

major diversification progarmme, it entered

the field of refractory manufacturing in the

year 1954.

OCL India started producing cement

through wet process technology under the

brand name of ‘Konark’.

The revenue of the company for the year

ended on March 31st increased 23.23% YoY

while Profit increased 41.4% YoY.

The topline & bottomline of the company

are expected to grow at a CAGR of 17% &

22% over 2009A to 2012E respectively.

1 Year Comparative Graph

OCL INDIA LTD BSE SENSEX

V.S.R. Sastry

Equity Research Desk

vsrsastry@firstcallindiaequity.com

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

drsastry@firstcallindia.com

C.M.P: Target Price: Rs.124.50 Rs.148.00

Share Holding Pattern

Date: 16 July 2010

2

Peer Group Comparison

Name of the company CMP(Rs.)

Market Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

OCL India 124.50 7084.1 28.7 4.33 0.89 200

Dalmia Cement 210.25 17017.5 16.9 12.43 1.27 150

Madras Cements 101.90 24249.1 14.8 6.86 1.56 50

India Cements 108.00 33175.0 11.5 9.36 0.80 20

Investment Highlights

FY10 Performance

Net profit of the company has increased at 41.4% yoy Rs.1637.00mn from

Rs.1157.40mn of same period of last year. Total revenue for the year stood at

Rs.13908.20 mn from Rs.11286.00 which is 23.23% increased than that of a year

ago. EPS for the year stood at Rs.28.77 per equity share of Rs.2.00 each.

Operating profit of the company stood at Rs.4197.20mn. OPM for the year stood at

30%. Expenditure of the company increased 14.9% YoY to Rs.9890.70 mn.

Interest expenses for the year stood at Rs.506.7mn.

3

Results Updates (Q4 FY10)

The bottomline of the company for the quarter increased at 138% yoy

Rs.554.00mn from Rs.232.70mn of same period of last year. Total revenue for the

fourth quarter stood at Rs.4265.40 mn from Rs.3204.30 which is 33% increased

than that of a year ago.EPS for the quarter stood at Rs.9.74 per equity share of

Rs.2.00 each.

Expenditure of the company increased 22.7% YoY to Rs.2992.80mn from

Rs.2440.10mn of same period of last year. Interest expenses for the quarter stood

at Rs.135.5mn. OPM & NPM for the quarter stood at 32% and 13% respectively.

4

Quarterly Results - Standalone (Rs in mn)

As At Mar-10 Mar-09 %Change

Net sales 4265.40 3204.30 33

PAT 554.00 232.70 138

Basic EPS 9.74 4.09 138

Equity Capital 113.80 113.80

5

6

Board recommends Dividend

The Board of Directors of the Company has recommended dividend of Rs. 4.00 per

share (200%) for the Financial Year ended March 31, 2010.

Company Profile

OCL India Limited, (formerly ORISSA CEMENT LIMITED), widely known as OCL, was

incorporated as Public Limited Company on October 11,1949 under the Companies

Act, 1913 and obtained certificate of commencement of business on February

10,1950. Initially it was set up for manufacturing cement. Later on, under a major

diversification progarmme, it entered the field of refractory manufacturing in the year

1954.

OCL India started producing cement through wet process technology under the brand

name of ‘Konark’. Keeping a steady progress with time and technology it has

modernized to fully automate dry process plant in 1988. OCL commands the position

of market leadership in the state of Orissa since its inception and today it is the

premier lead brand in the state of Orissa. ‘Konark' brand cement enjoys brand

advantage in the region. It is a name cemented to Quality. OCL diversified from

Cement to the field of Refractories in 1954. Over the years, it has become one of the

largest and well-equipped state of the art Refractory plant in India covering a wide

range of products for use in the Ferrous & the non-ferrous Industries. Its customer

base spreads from iron and steel to cement, aluminum, glass, copper, chemicals and

hydrocarbon industries. Today, OCL enjoys a huge market share in India and overseas

extending to five continents across the globe. During the year 2001-02 OCL

diversified its activities into Sponge Iron and now forayed further into Steel making. In

line with this vision, the Company has already installed a Captive Power plant and is

going to commission 0.25 million tons steel billet plant. OCL, as per scheme of

7

arrangement approved by the honourable High Court of Orissa demerged its Steel

undertaking and Real Estate undertaking by transferring the assets and liabilities as

on 1st January 2007 into OCL Iron and Steel and Landmark Property Development

Company (formerly Konark Minerals) respectively. The scheme of arrangement also

involved merger of the business of Dalmia Cement (Meghalaya) Limited, a wholly

owned subsidiary of Dalmia Cement (Bharat) Ltd, as on 1st July 2007 with the

approval of the honourable Court of Guwahati.

The initial technical know how came from Dr.C.Otto of Germany for Coke Oven Silica

bricks and from TYK Corporation of Japan for Magnesia-Carbon, Alumina-Mag-

Carbon, Alumina-Silicon Carbide-Carbon, Concast Refractories, Lance-pipe, Precast,

Purging Plug, & BF Runner castables. All the other products were developed in-house.

To keep pace with ever-growing expectation of customers for quality Refractories, our

highly experienced & well-equipped technology & research teams upgrade these on a

continuous basis. With intensive R&D efforts, OCL has registered a number of patents

to its credit.

Product range of the company includes:Cement

• Portland Cement

• 43 Grade (IS:8112-1989)

• 53 Grade (IS:12269-1987)

• 53 S Grade (Railway Sleeper Cement, IS:12269-1987)

Blended Cement

• Portland Slag Cement (IS:455-1989)

• Portland Pozzolana Cement (Fly ash based, IS:1489(Part 1)1991)

• Special Cement

• Sulphate Resisting Portland Cement (IS:12330-1988)

• Oil Well Cement (Class G type HSR/MSR, IS:8229-1986)

8

Refactory

Over the years, OCL has grown into one of the largest refractory plants in the country,

producing widest spectrum of high quality refractories in the following categories

:Silica Refractories for coke Ovens, High Temperature Blast Furnace Stoves and Glass

Industries.

• High Alumina Refractories for blast Furnace Stoves

• Basic Refractories

• Magnesia Carbon bricks

• Continuous Casting Refractories

• New generation high performance Castables and Precast Blocks for various

application

• Purging Refractories

Achievements/ Recognition

• OCL happens to be the first Refractory Company in India to be certified under

ISO 9001, by RWTUV of Germany in 1994, now updated to 2000 version for all

range of its products.

• OCL received third prize in Air Quality Management in 7th Mines Enviornment

and Mineral Conservation Week 2004-05.

• OCL is ISO 9001:2000, EN ISO 9001:2000 by TUV CERT certification body.

• The company was awarded the certificate of merit for their export achievement

in refectories for the year 2003-04.

• Company received first position in the Productivity Award for 2003-04

organised by Confederation of Indian Industry.

9

Financials Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY09A FY10A FY11E FY12E

Description 12m 12m 12m 12m

Net Sales 11,286.00 13,908.20 15994.43 17913.76

Other Income 49.4 179.7 197.67 217.44

Total Income 11,335.40 14,087.90 16192.10 18131.20

Expenditure -8,610.80 -9,890.70 -11515.99 -12897.91

Operating Profit 2,724.60 4,197.20 4676.11 5233.29

Interest -385 -506.7 -557.37 -613.11

Gross profit 2,339.60 3,690.50 4118.74 4620.18

Depreciation -568.9 -1,145.00 -1259.50 -1385.5

Profit Before Tax 1,770.70 2,545.50 2859.24 3234.73

Tax -613.3 -908.5 -1000.73 -1132.2

Net Profit 1,157.40 1,637.00 1858.51 2102.58

Equity capital 113.8 113.8 113.80 113.80

Reserves 6,478.00 7,849.60 9,708.11 11,810.68

EPS 20.34 28.77 32.66 36.95

10

Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) Sep-09A Dec-09A Mar-10A June-10E

Description 3m 3m 3m 3m

Net sales 2,963.20 3,156.80 4,265.40 4606.63

Other income 18.9 30.8 77.6 81.48

Total Income 2,982.10 3,187.60 4,343.00 4688.11

Expenditure -2,073.20 -2,463.10 -2,992.80 -3270.71

Operating profit 908.90 724.50 1,350.20 1417.40

Interest -110.2 -144.1 -135.5 -142.28

Gross profit 798.70 580.40 1,214.70 1275.13

Depreciation -279.2 -319.8 -292.2 -306.81

Profit Before Tax 519.50 260.60 922.50 968.32

Tax

-185.4 -85.6 -368.5 -348.59

Net Profit 334.10 175.00 554.00 619.72

Equity capital 113.8 113.8 113.8 113.80

EPS 5.87 3.08 9.74 10.89

11

Key Ratio

Particulars FY09 A FY10 A FY11 E FY12 E

EBIDTA % 24% 30% 29% 29%

PAT % 10% 12% 12% 12%

P/E ratio (x) 6.12 4.33 3.81 3.37

ROCE - % 16% 19% 18% 17%

ROE - % 18% 21% 19% 18%

Price/Book Value 1.07 0.89 0.72 0.59

Debt Equity Ratio 1.08 1.03 0.96 0.91

Book Value (Rs.) 115.85 139.95 172.62 209.57

EV/EBIDITA (x) 2.60 1.69 1.67 1.62

Charts:

12

13

14

Outlook and Conclusion

• At the current market price of Rs.124.50, the stock trades at a P/E of 3.81x and

3.37x for FY11E and FY12E respectively. On the basis of EV/EBDITA, the stock

trades at 1.67x and 1.62x for FY11E and FY12E respectively.

• EPS of the company is expected to be at Rs.32.66 and Rs.36.95 for the earnings of

FY11E and FY12E respectively. Price to Book Value of the stock is expected to be

at 0.72 and 0.59 respectively for FY11E and FY12E.

• We recommend ‘BUY’ in this particular scrip with a target price of Rs.148.00 for

Medium to Long Term Gains.

Industry Overview

India is the world's second largest producer of cement with total capacity of 224

million tonnes (MT) as on April 30, 2010, according to the Cement Manufactuer's

Association.

During May 2010, the cement production touched 14.50 MT as compared to 13.28 MT

in May 2009. The cement despaches quantity was 14.21 MT in May 2010 over 13.06

MT in the corresponding month in May 2009.

Moreover, the government's continued thrust on infrastructure will help the key

building material to maintain an annual growth of 9-10 per cent in 2010, according to

India's largest cement company, ACC.

In January 2010, rating agency Fitch predicted that the country will add about 50

million tonne cement capacity in 2010, taking the total to around 300 million tonne.

15

Further, speaking at the Green Cementech 2010, a seminar jointly organised by the

Confederation of Indian Industry (CII) and the Cement Manufacturer's Association in

Hyderabad in May 2010, G Jayaraman, Executive President, Birla Corporation Ltd,

said that in 2009, 40 MT of capacity was added and he expects a similar trend to

follow this year.

New Investments

• Cement and gypsum products have received cumulative foreign direct

investment (FDI) of US$ 1708.69 million between April 2000 and March 2010,

according to the Department of Industrial Policy and Promotion.

• Madras Cements Ltd is planning to invest US$ 178.4 million to increase the

manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT from 2 MT

by April 2011.

• Surya Group plans to invest US$ 873.3 million in a new 5 million MT cement

plan to be set up in Gujarat.

• My Home Industries Limited (MHI), a 50:50 joint venture (JV) between the

Hyderabad-based My Home Group and Ireland's building material major CRH

Plc, plans to scale up its cement production capacity from the existing 5 million

tonne per annum (mtpa) to 15 mtpa by 2016. The company would undertake

this capacity expansion at a cost of US$ 1 billion.

• Shree Cement, plans to invest US$ 97.13 million this year to set up a 1.5

million MT clinker and grinding unit in Rajasthan. Moreover, in June 2010,

Shree Cement signed a memorandum of understanding (MoU) with the

Karnataka government to invest US$ 423.6 million for setting up a cement unit

and a power plant. US$ 317.7 million will be used to set up a cement

manufacturing unit with an annual capacity of 3 mtpa while the balance will be

for the 100 mega watt power plant.

• Jaiprakash Associates plans to invest US$ 640 million to increase its cement

capacity.

• Swiss cement company Holcim plans to invest US$ 1 billion in setting up 2-3

greenfield manufacturing plants in the country in the next five years to serve

the rising domestic demand. Holcim is present in the country through ACC and

Ambuja Cements and holds around 46 per cent stake in each company. While

16

ACC operates 16 cement plants, Ambuja Cements controls five plants in India.

The Aditya Birla group is the largest cement-making group by capacity in the

country and controls Grasim Industries and Ultratech Cement.

Mergers and Acquistion (M&A), PE deals

• KKR- Dalmia Cement signed a deal worth US$ 159.57 million in May 2010.

• French cement company Vicat acquired a 51 per cent stake in Bharathi Cement

Company Ltd, promoted by Y S Jagan Mohan Reddy, Member of Parliament, to

tap the southern markets, which represent 40 per cent of the total Indian

cement market.

Government Initiatives

The cement industry is pushing for increased use of cement in highway and road

construction. The Ministry of Road Transport and Highways has planned to invest

US$ 354 billion in road infrastructure by 2012. Housing, infrastructure projects and

the nascent trend of concrete roads would continue to accelerate the consumption of

cement.

• Increased infrastructure spending has been a key focus area. In the Union

Budget 2010-11, US$ 37.4 billion has been provided for infrastructure

development.

• The government has also increased budgetary allocation for roads by 13 per

cent to US$ 4.3 billion.

17

_____________ ____ _________________________

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

18

Firstcall India Equity Research: Email – info@firstcallindia.com

B. Harikrishna Banking

B. Prathap IT

A. Rajesh Babu FMCG

C.V.S.L.Kameswari Pharma

U. Janaki Rao Capital Goods

E. Swethalatha Oil & Gas

D. Ashakirankumar Auto

Kavita Singh Diversified

Nimesh Gada Diversified

Priya Shetty Diversified

Neelam Dubey Diversified

Firstcall India also provides

Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover

Offers, Offer for Sale and Buy Back Offerings.

Corporate Finance Offerings include Foreign Currency Loan Syndications,

Placement of Equity / Debt with multilateral organizations, Short Term Funds

Management Debt & Equity, Working Capital Limits, Equity & Debt

Syndications and Structured Deals.

Corporate Advisory Offerings include Mergers & Acquisitions(domestic and

cross-border), divestitures, spin-offs, valuation of business, corporate

restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &

Execution, Project Financing, Venture capital, Private Equity and Financial

Joint Ventures

Firstcall India also provides Financial Advisory services with respect to raising

of capital through FCCBs, GDRs, ADRs and listing of the same on International

Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and

other international stock exchanges.

For Further Details Contact:

3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071

Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089

E-mail: info@firstcallindiaequity.com

www.firstcallindiaequity.com