UltraTech Cement (ULTCEM) | 4,228content.icicidirect.com/mailimages/IDirect_UltraTech... ·...

April 25, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Impact of liquidity crunch easing…

UltraTech reported a good set of Q4FY17 numbers. Revenues increased

3.0% YoY to | 6,595.3 crore (above I-direct estimate of | 5,894.1 crore)

mainly led by 1.0% YoY rise in volumes to 13.7 MT (vs. I-direct estimate

of 12.2 MT) and 2.0% YoY increase in realisation to | 4,801 (vs. I-direct

estimate of | 4,815)

EBITDA/tonne declined 8.1% YoY to | 931/tonne in Q4FY17 (better than

I-direct estimate of | 885/tonne due to operating leverage benefit)

In FY17, revenues increased 0.8% YoY to | 23,891.4 crore mainly due to

1.0% YoY increase in volumes. Further, EBITDA margins increased 130

bps YoY to 20.8% in FY17

The company has recommended a dividend of | 10 per share. For the

acquisition of Jaiprakash Associates, the company has received

sanction of National Law Tribunal and Sebi

Improvement in demand-supply scenario to boost utilisation

Over FY08-17, utilisation in the cement sector witnessed a decline from 83%

in FY08 to 64% in FY17 mainly due to capacity addition (incremental supply

of 223 MT) outpacing demand (incremental demand of 105 MT). As a result,

industry capacity doubled from 198 MT in FY08 to 421 MT in FY17 vs.

demand, which increased from 164 MT in FY08 to 269 MT in FY17. However,

we expect demand-supply balance to improve in the next few years with

slower pace of capacity addition (~21 MT) and likely improvement in

demand (~47 MT) positively impacting utilisation levels. Cement sector

utilisation is expected to improve from 64% in FY17 to 72% in FY19E leading

to higher margins for cement players (driven by operating leverage benefits).

Ultratech a pan India player to be key beneficiary of infra push

The impact of liquidity crunch is slowly receding as witnessed in Q4FY17.

Further, a pick-up in housing on the back of healthy demand from first home

buyers, better monsoon and revival in rural economy will play a key role in

driving cement demand over the next few years. Apart from this, the

company will be a key beneficiary of improving cement demand on account

of higher budgetary allocation towards development of roads & highways

along with government’s focus on rural development & affordable housing.

We expect cement demand to reach 311 MT by FY19E (i.e. at 7.5% CAGR)

vs. (4.7% CAGR over last five years). In addition, we believe a stable pricing

scenario is expected to positively impact revenues and margins over the

next three years.

Consolidation of Jaypee - long term value accretive deal

The consolidation of 21.2 MT cement assets of Jaiprakash Associates

(Jaypee) will take the company’s total capacity to ~95 MT. This will enable

the company to further strengthen its leadership in India, going forward, with

a market share of over ~22% (post the deal) from 17.0% currently and

become the fourth largest player globally. The transaction is subject to

various regulatory approvals resulting in a gestation period of three to four

months. We are yet to incorporate Jaypee acquisitions into our financials.

Well placed to capture upcoming demand; maintain BUY!!!

We expect UltraTech (a pan-India player) to be a key beneficiary of increased

government spend, slowdown in capacity addition and consolidation in the

industry. Further, improving realisation and the company’s focus on cost

rationalisation is expected to aid margins. With industry-leading growth,

higher margins and a healthy balance sheet, we maintain our BUY rating

with a target price of | 4,750/share (i.e. at 19.5x FY19E EV/EBITDA).

UltraTech Cement (ULTCEM) | 4,228

Rating matrix

Rating : Buy

Target : | 4750

Target Period : 9-12 months

Potential Upside : 12%

What’s changed?

Target Price Changed from | 4,300 to | 4,750

EPS FY18E* Changed from | 127.8 to | 118.9

EPS FY19E* Changed from | 139.5 to | 136.2

Rating Unchanged

Quarterly performance

Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)

Revenue 6,595.3 6,402.3 3.0 5,609.1 17.6

EBITDA 1,278.2 1,377.0 -7.2 1,113.5 14.8

EBITDA (%) 19.4 21.5 -213 bps 19.9 -47 bps

PAT 688.3 780.8 -11.8 563.4 22.2

Key financials

| Crore FY16 FY17 FY18E* FY19E*

Net Sales 23708.8 23891.4 26709.1 29986.3

EBITDA 4626.6 4969.0 5718.0 6494.7

Net Profit 2370.2 2627.7 3262.0 3738.0

EPS (|) 86.4 95.8 118.9 136.2

*We have not incorporated Jaypee financials

Valuation summary

FY16 FY17 FY18E* FY19E*

PE (x) 48.9 44.2 35.6 31.0

EV to EBITDA (x) 25.8 23.1 19.9 17.3

EV/Tonne(US$) 294 282 280 277

Price to book (x) 5.5 4.8 4.4 4.0

RoNW (%) 11.3 11.0 12.4 12.8

RoCE (%) 11.6 12.3 14.1 14.8

Stock data

Amount

Mcap | 116702 crore

Consolidated Debt (FY17) | 8474 crore

Cash & Invest (FY17) | 7660 crore

EV | 117517 crore

52 week H/L | 4260 / | 3050

Equity cap | 274.2 crore

Face value | 10

Particular

Price performance

1M 3M 6M 12M

ACC 15.1 18.3 2.6 13.6

Ambuja Cement 7.3 10.4 -0.3 11.7

Shree Cement 14.1 19.2 8.5 47.1

UltraTech Cement 4.2 13.3 4.3 26.6

Research Analyst

Rashesh Shah

[email protected]

Devang Bhatt

[email protected]

mailto:[email protected]


Variance analysis

Q4FY17 Q4FY17E Q4FY16 YoY (%) Q3FY17 QoQ (%) Comments

Net Sales 6,595.3 5,894.1 6,402.3 3.0 5,609.1 17.6

The increase in revenues was driven by 1.0% YoY volume growth and 2.0% YoY

realisation growth

Other Incomes 240.1 160.0 140.2 71.3 97.0 147.5

The significant increase in other income was mainly due to | 138 crore write-back

of excess provisions for royalty on limestone

Raw Material Expenses 1,150.8 997.6 1,126.1 2.2 923.6 24.6

Employee Expenses 344.9 368.4 337.9 2.1 364.7 -5.4

Power and fuel 1,154.3 1,083.2 1,016.5 13.6 968.9 19.1

The increase in power & fuel cost was mainly due to higher pet coke prices

(increased from US$42 to US$87 in Q4FY17), partly offset by reduced power

consumption, improved captive power efficiency and enhanced WHRMS share

Freight 1,664.5 1,468.6 1,636.9 1.7 1,360.6 22.3

Higher usage of sea route, change in market mix (led by higher supply from new

grinding unit) helped restrict rise in freight cost

Others 1,002.7 893.5 907.9 10.4 877.9 14.2

The increase in other expenses was mainly due to higher packaging and

maintenance cost

EBITDA 1,278.2 1,082.8 1,377.0 -7.2 1,113.5 14.8

EBITDA Margin (%) 19.4 18.4 21.5 -213 bps 19.9 -47 bps The decline in margins was mainly led by rise in power cost

Depreciation 335.7 325.6 351.5 -4.5 315.6 6.4

Interest 152.9 129.3 112.6 35.8 129.3 18.3

Interest expenses were higher due to one-time provision of interest on entry tax (|

34 crore)

PBT 1,016.0 787.9 1,053.1 -3.5 765.5 32.7

Total Tax 327.6 255.3 272.3 20.3 202.1 62.1

PAT 688.3 532.6 780.8 -11.8 563.4 22.2 Higher interest cost led to lower PAT

Key Metrics

Volume (MT) 13.74 12.20 13.60 1.0 11.34 21.1

Realisation (|) 4,801 4,815 4,708 2.0 4,946 -2.9 Healthy pricing in company's key markets helped in registering better realisation

EBITDA per Tonne (|) 931 885 1,012 -8.1 982 -5.2 Higher power cost/t and other cost/t led to decline in EBITDA/t

Source: Company, ICICIdirect.com Research

Change in estimates

FY19E

(| Crore) Old New % Change Old New % Change Comments

Revenue 27,881.6 26,709.1 -4.2 30,430.0 29,986.3 -1.5

We expect revenues to increase at a CAGR of 12.0% over the

next two years

EBITDA 5,955.0 5,718.0 -4.0 6,532.2 6,494.7 -0.6

EBITDA Margin (%) 21.4 21.4 5 bps 21.5 21.7 19 bps

We expect the EBITDA margin to improve led by various cost

rationalisation initiatives undertaken by the company

PAT 3,495.9 3,262.0 -6.7 3,828.8 3,738.0 -2.4

EPS (|) 127.4 118.9 -6.7 139.5 136.2 -2.4

FY18E


Assumptions

Comments

FY14 FY15 FY16 FY17 FY18E FY19E FY18E FY19E

Volume (MT) 42.6 45.3 48.4 48.9 53.4 58.2 54.4 58.2

We expect volumes to improve mainly led by higher infra spend and

pick-up in housing

Realisation (|) 4,713 4,995 4,894 4,883 5,001 5,151 5,128 5,231

EBITDA per Tonne (|) 849 863 952 1,015 1,071 1,116 1,095 1,123

We expect EBITDA/tonne to remain healthy on account of cost

rationalisation

EarlierCurrent



Company Analysis

Improving industry dynamics indicate long term up cycle in cement

Over FY08-17, utilisation in the cement sector witnessed a decline from 83%

in FY08 to 64% in FY17 mainly due to capacity addition (incremental supply

of 223 MT) outpacing demand (incremental demand of 105 MT). As a result,

industry capacity doubled from 198 MT in FY08 to 421 MT in FY17 vs.

demand, which increased from 164 MT in FY08 to 269 MT in FY17. However,

we expect demand-supply balance to improve in the next few years with

slower pace of capacity addition (~21 MT) and likely improvement in

demand (~47 MT) positively impacting utilisation levels. Cement sector

utilisation is expected to improve from 64% in FY17 to 72% in FY19E leading

to higher margins for cement players (driven by operating leverage benefits).

Exhibit 1: Demand supply scenario

198216

276304

319

357 368392

409421 424 430

311

164178

203214

229241

247255

264 269288

0

100

200

300

400

500

FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18E FY19E

0

20

40

60

80

100

Capacity Demand Utilisation (%)


Demand expected to register strong growth in FY17-19E

UltraTech derives majority of its revenue from northern, western India, at

29%, 31%, respectively. Other than this, 17% of revenue is from eastern

India where prices remain strong while 23% of its revenue comes from

southern India where prices are improving. On the whole, the sales mix

across India is well distributed, indicating lower volatility in blended

realisation, going forward. The company has indicated that demand will

improve in the south mainly led by an improvement in infrastructure,

irrigation especially in Andhra Pradesh, Telangana and Amaravati. Further,

the western region is expected to witness healthy growth led by a pick-up in

demand from Mumbai. However, demand in the north is expected to remain

subdued led by a slowdown in construction activities.

Key takeaways on demand in Q4FY17 from the conference call

South: The growth is driven by irrigation projects in AP and

Telangana. However, drought in Tamil Nadu will impact cement

demand

North: This region was impacted by a slowdown in the housing

segment and lower demand from UP & Punjab

West: Metro rail and affordable housing drove growth in Q4FY17

East: Cement demand in the region improved mainly due to

improvement in infra spending by the government

The company is witnessing some demand improvement in Tier-1

cities while Tier-2 cities are still lagging in terms of demand growth

Jaypee’s cement assets are operating at 42.0% utilisation. Post

acquisition Ultratech plans to ramp the utilisation to 60.0% in first

year and 75.0% in second year.

Regional presence

North

29%

West

31%

South

23%

East

17%


The trade: non trade mix was at 68:32

In terms of transport mix, 70.0% was through road while 26.0% was

through rail. Every 10 km reduction in lead distance leads to

| 25/tonne savings in cost

Average prices of petcoke for Q4FY17 were at US$87/tonne with the

current price according to the company at ~US$94

The company is planning to increased WHRMS capacity by 9 MW to

68 MW

Largest pan-India player in cement Industry

UltraTech Cement is the largest player in capacity terms (~70 MT) with a

market share of over ~17% in India. The acquisition of 21.2 MT cement

assets of Jaiprakash Associates (Jaypee) will enable the company to

maintain its leadership in India, going forward. This move will increase its

capacity by 30% to 91.1 MT, making it the largest cement player in the

domestic market (fourth largest player globally) with a market share of over

22%. With this deal, UltraTech will have a presence across regions (except

North East). Jaypee’s cement assets are spread across regions viz. 1) Central

region (11.4 MT), 2) North (4.8 MT) and 3) South (5 MT). The location of 11

plants of Jaypee complements the existing 40 of UltraTech. The acquisition

is expected to give Ultratech access to newer markets of Satna (11.4 MT)

and coastal Andhra Pradesh (5.0 MT). In addition, the expansion of 3.5 MT in

Dhar, Madhya Pradesh will further increase the company’s capacity to ~95.0

MT.

Operates at healthy EBITDA/tonne vis-à-vis industry

With lower lead distances due to a pan-India presence, captive power plants

and higher sales realisations due to a higher trade mix coupled with higher

white cement sales realisation, the company generates highest

EBITDA/tonne in the industry. It has also been able to reduce its power

consumption per tonne gradually through various initiatives to ~76/kwh.

Further, the company is taking various cost saving initiatives like increasing

WHRMS capacity (from 59 MW to 68 MW), increased usage of pet coke,

which will further help in lowering power cost. Apart from this, the company

has recently set up various grinding units, which will help reduce freight

cost. Further, higher utilisation of grinding unit will further aid margins.

Exhibit 2: Gradual reduction in power requirement

83.1

82.081.3 81.1 81.0

80.0

76.0

72

74

76

78

80

82

84

FY10 FY11 FY12 FY13 FY14* FY15 FY16

Kwh/T of cement

Source: Company, ICICIdirect.com Research,*FY14,FY16 figures provisional

Exhibit 3: Higher EBITDA/tonne vis-à-vis peer group

781

1,0

39

882

832

894 1,0

12

1,0

40

978

982

644

851

704

755

682 789

968

846

751

-

200

400

600

800

1,000

1,200

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

EB

ITD

A/tonne (

|)

Ultratech Industry


Peer set includes ACC, Ambuja, Shree cement and India cement


Expect revenue CAGR of 12.0% in FY17-19E

Revenues have grown at a CAGR of 5.6% in FY12-17 mainly led by moderate

growth in volumes of 3.3% CAGR and realisation growth of 2.2% CAGR in

FY12-17. However, in FY17-19E, we expect volume CAGR of 9.1% in FY17-

19E mainly led by higher infra spend by the government. Further, we expect

realisation to increase at 2.7% CAGR in FY17-19E led by a pick-up in

demand. Consequently, revenues are expected to grow at 12.0% CAGR in

the next two years.

Exhibit 4: Expect volume led revenue CAGR of 12.0% in FY17-19E

20021 20078

2265223709 23891

26709

29986

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Sales (| crore)


Exhibit 5: Capacity addition plans (standalone)

Unit Clinker Grey Cement

Opening FY15 48 61.5

Additions Q1FY16 - -

Q2FY16 Jhajar, Haryana - 1.6

Q2FY16 Dankuni, WB - 1.6

Q4FY16 - -

Q1FY17 Bihar - 1.6

Q2FY17 -

Q4FY19 Dhar, MP - 3.5

Closing FY20 48 69.8


Exhibit 6: Volume to grow at CAGR of 9.1% in FY17-19E

42.645.3

48.4 48.9

53.4

58.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

FY14 FY15 FY16 FY17 FY18E FY19E

Sales Volumes


Exhibit 7: Realisation to pick up led by uptick in demand

4713

4995

4894 4883

5001

5151

4400

4500

4600

4700

4800

4900

5000

5100

5200

FY14 FY15 FY16 FY17 FY18E FY19E

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Realisation (|/tonne) -LS Growth (%) -RS


Exhibit 8: Volume increases 1.0% YoY in Q4FY17…

10.811.9

12.4

11.111.6

13.6 13.2

11.2 11.3

13.7

0

2

4

6

8

10

12

14

16

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Million T

onne

Sales Volume


Exhibit 9: Quarterly realisation trend

5172

4794 4984

4872

4708

4684

4827

4946

4801

4000

4250

4500

4750

5000

5250

5500

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

(|

)

Realisation



Margins to improve led by operating efficiency

Going forward, cost/tonne is expected to increase led by higher pet coke

prices (increased from US$42/t to US$94/t). However, with the pick-up in

demand we expect realisation to improve in coming quarters leading to an

improvement in margins.

Exhibit 10: Expect EBITDA/tonne of | 1,116 in FY19E

1084

849 863

9521015

10711116

0

200

400

600

800

1000

1200


EBITDA/Tonne


Exhibit 11: Margins to improve led by improvement in realisations

22.6

18.017.3

19.5

20.821.4 21.7

10.0

15.0

20.0

25.0

30.0


EBITDA Margin (%)


Exhibit 12: Q4FY17 EBITDA per tonne at | 931/t

1039

882832

894

1012 1040978 982

931

0

200

400

600

800

1000

1200

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

| p

er t

onne


Exhibit 13: Pick-up in margins expected, going forward

20.118.4

16.718.3

21.5

22.2

20.3

19.9

19.4

0

5

10

15

20

25Q

4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

(%

)

EBITDA Margin


Expect net profit CAGR of 16.4% during FY17-19E

After witnessing a sharp decline in profit in FY15, we expect net margins to

improve to 12.6% in FY19E, which is still lower than the average NPM of

13.3% in FY13.

Exhibit 14: Profitability trend

2174.7

3828.8

3495.9

2830.4

2014.72144.5

2655.6

12.612.511.6

9.18.9

10.7

13.3

0

1000

2000

3000

4000

5000

FY13 FY14 FY15 FY16 FY17E FY18E FY19E

| c

rore

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

(%

)

Net profit - LS Net profit margin -RS



Outlook and valuation

We believe the industry’s capacity utilisation bottomed at ~64% in FY17.

With the government taking measures to boost infrastructure development

through steps like long-term fund availability for major infra projects, higher

budgetary allocation towards public infrastructure development, we expect

robust cement demand growth in FY17-19E to reach 311 MT by FY19E (i.e.

at CAGR of 7.5%) vs. (CAGR of 4.7% over last five years). The company

expects government infra spends to gain momentum, especially on

construction of concrete roads and creation of new capital city of Amaravati

in Andhra Pradesh. UltraTech is well positioned to reap the benefit of a

recovery in demand and generate healthy free cash flows in future. We

assign premium valuations multiple to UltraTech vs. its peer companies due

to its ability to generate higher margins and healthy cash flows. Hence, we

continue to maintain our positive view on the stock with a BUY

recommendation and a target price of | 4,750 per share (i.e. at 19.5x FY19E

EV/EBITDA).

Exhibit 15: Key assumptions

| per tonne FY15 FY16 FY17E FY18E FY19E

Sales Volume* 45 48 49 53 58

Net Realisation* 4995 4894 4883 5001 5151

Total Expenditure 4132 3939 3867 3930 4035

Raw material 785 820 822 825 850

Power & Fuel 1046 875 802 850 925

Freight 1190 1225 1195 1195 1200

Employees 269 277 289 295 295

Others 842 741 759 765 765

EBITDA per Tonne 863 955 1015 1071 1116

Source: ICICIdirect.com Research; * Blended (grey + white + clinker)


Exhibit 16: One year forward EV/EBITDA

10000

30000

50000

70000

90000

110000

130000

Apr-10

Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

(|

Crore)

EV 21.5x 18.5x 16.5x 14.5x 10.5x


Exhibit 17: One year forward EV/Tonne

0

5000

10000

15000

20000

25000

Apr-10

Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Million $

EV $270 $225 $175 $125 $80


Exhibit 18: Valuation

Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) ($) (x) (%) (%)

FY15 22651.5 0.3 73.4 -19.2 57.6 318 30.8 10.7 10.6

FY16 23708.8 4.7 86.4 17.6 48.9 294 25.8 11.3 11.6

FY17 23891.4 0.8 95.8 10.9 44.2 282 23.1 11.0 12.3

FY18E 26709.1 12.7 118.9 37.6 35.6 280 19.9 12.4 14.1

FY19E 29986.3 25.5 136.2 42.3 31.0 277 17.3 12.8 14.8



Recommendation History vs. Consensus Estimates

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Apr-17Mar-17Jan-17Dec-16Oct-16Sep-16Jul-16Jun-16May-16Mar-16Feb-16Dec-15Nov-15

(|

)

0.0

20.0

40.0

60.0

80.0

100.0

(%

)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events

Date Event

Sep-13 Announces that the company will acquire 4.8 MT of Gujarat Cement plant of Jaypee Cement. Other than this, ~ 10 MTPA capacity will be commissioned by FY15.

Total cement capacity is expected to reach ~70 MTPA

Jun-14 Company starts including Jaypee Cement operations in quarterly result from Q1FY15

Sep-14 Commissions 1.4 MT cement mill at Karnataka and 25 MW power plant at AP

Dec-14 Board approves acquisition of cement business of Jaiprakash Associates in MP with capacity of 4.9 MT

Aug-15 Commissions a bulk terminal with a capacity of 2 MT in Pune, Maharashtra.

Sep-15 Commissions a cement grinding unit with a capacity of 1.6 MT at Jhajjar, Haryana.

Sep-15 Commissions a cement grinding unit with a capacity of 1.6 MT at Dankuni, West Bengal.

Dec-15 Compat sets aside the Competition Commission of India (CCI) order of alleged cartelisation

Feb-16 The company signs binding MoU with Jaiprakash Associate to acquire 22.4 MT cement capacity

Apr-16 Commissions a cement grinding unit with a capacity of 1.6 MT at Patliputra, Bihar.

Jan-17 The board approves setting up of 3.5 mt integrated plant at Dhar, Madhya Pradesh and is expected to be operational by Q4FY19


Top 10 Shareholders Shareholding Pattern

Rank Name Last filing date % O/S Position (m) Change (m)

1 Aditya Birla Group 31-Dec-16 60.2 165.3 0.00

2 Life Insurance Corporation of India 31-Dec-16 2.21 6.07 0.18

3 Aberdeen Asset Management (Asia) Ltd. 28-Feb-17 1.70 4.66 0.00

4 OppenheimerFunds, Inc. 31-Dec-15 1.41 3.88 0.00

5 Aberdeen Asset Managers Ltd. 28-Feb-17 1.30 3.56 (0.03)

6 Capital World Investors 31-Mar-17 1.21 3.32 3.32

7 Franklin Advisers, Inc. 28-Feb-17 0.94 2.58 0.22

8 BlackRock Institutional Trust Company, N.A. 31-Mar-17 0.88 2.42 0.14

9 The Vanguard Group, Inc. 28-Feb-17 0.86 2.35 0.01

10 JPMorgan Asset Management U.K. Limited 28-Feb-17 0.81 2.24 0.00

(in %) Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Promoter 62.50 62.27 62.26 62.26 62.26

FII 19.01 19.64 20.61 20.83 21.87

DII 7.09 6.80 6.06 6.27 5.51

Others 11.40 11.29 11.07 10.64 10.36

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor Name Value Shares Investor Name Value Shares

Capital World Investors 204.29 3.32 Lyxor Asset Management -20.18 -0.33

Franklin Advisers, Inc. 12.35 0.22 Franklin Templeton Asset Management (India) Pvt. Ltd. -11.80 -0.19

Life Insurance Corporation of India 8.55 0.18 DSP BlackRock Investment Managers Pvt. Ltd. -10.85 -0.18

BlackRock Institutional Trust Company, N.A. 8.53 0.14 RBC Investment Management (Asia) Ltd. -8.33 -0.17

Carnegie Fonder AB 5.89 0.10 FIL Investment Management (Singapore) Ltd. -7.70 -0.14

Buys Sells

Source: Reuters, ICICIdirect.com Research


Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17* FY18E* FY19E*

Total operating Income 23,708.8 23,891.4 26,709.1 29,986.3

Growth (%) 4.7 0.8 11.8 12.3

Raw material cost 3972.8 4024.5 4406.5 4948.7

Power & Fuel cost 4240.8 3926.6 4540.1 5385.3

Freight cost 5934.9 5845.2 6382.8 6986.4

Employees cost 1343.0 1413.4 1575.7 1717.5

Others 3590.7 3712.8 4086.1 4453.8

Total Operating Exp. 19,082.2 18,922.5 20,991.1 23,491.6

EBITDA 4,626.6 4,969.0 5,718.0 6,494.7

Growth (%) 18.2 7.4 15.1 13.6

Depreciation 1,297.0 1,267.9 1,267.2 1,381.0

Interest 511.7 571.4 458.6 458.6

Other Income 480.7 660.0 804.9 842.0

PBT 3,298.6 3,789.6 4,797.0 5,497.1

Total Tax 928.4 1148.2 1535.1 1759.1

PAT 2,370.2 2,641.4 3,262.0 3,738.0

Growth (%) 17.6 11.4 23.5 14.6

Adjusted EPS (|) 86.4 96.3 118.9 136.2


Cash flow statement | Crore


Profit after Tax 2,370.2 2,627.7 3,262.0 3,738.0

Add: Depreciation 1,297.0 1,267.9 1,267.2 1,381.0

(Inc)/dec in Current Assets 224.0 1,016.0 -1,127.6 -11.5

Inc/(dec) in CL and Provisions 70.6 -490.8 1,935.5 277.3

CF from operating activities 3,961.8 4,420.7 5,337.1 5,384.8

(Inc)/dec in Investments 495.4 -3,378.3 0.0 0.0

(Inc)/dec in Fixed Assets -2,224.1 -1,429.8 -3,500.0 -3,499.4

Others 435.4 111.2 0.0 0.0

CF from investing activities -1,293.4 -4,696.9 -3,500.0 -3,499.4

Issue/(Buy back) of Equity 0.0 0.1 0.0 0.0

Inc/(dec) in loan funds 252.7 -1,396.3 -1,000.0 0.0

Dividend paid & dividend tax -313.8 -321.0 -802.6 -866.8

Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0

Others 17.5 702.7 0.0 0.0

CF from financing activities -43.5 -1,014.5 -1,802.6 -866.8

Net Cash flow 2,230.1 -212.9 34.5 1,018.5

Opening Cash 200.5 2,430.6 2,217.7 2,252.3

Closing Cash 2,430.6 2,217.7 2,252.3 3,270.8


Balance sheet | Crore


Liabilities

Equity Capital 274.4 274.5 274.5 274.5

Reserve and Surplus 20,657.1 23,666.5 26,125.9 28,997.1

Total Shareholders funds 20,931.5 23,941.0 26,400.4 29,271.6

Total Debt 7,667.9 6,271.6 5,271.6 5,271.6

Deferred Tax Liability 3,227.4 3,338.6 3,338.6 3,338.6

Minority Interest / Others 0.0 0.0 0.0 0.0

Total Liabilities 31,826.8 33,551.2 35,010.6 37,881.8

Assets

Gross Block 35,812.1 37,241.9 40,741.9 44,241.9

Less: Acc Depreciation 11,864.4 13,132.3 14,399.5 15,780.5

Net Block 23,947.7 24,109.6 26,342.3 28,461.4

Capital WIP 0.6 0.6 0.6 0.0

Total Fixed Assets 23,948.3 24,110.2 26,342.9 28,461.4

Investments 5,108.1 7,408.7 7,408.7 7,408.7

Inventory 2,426.1 2,225.0 2,970.5 2,862.5

Debtors 1,414.9 1,276.2 1,738.7 1,646.1

Loans and Advances 2,676.0 643.9 691.6 747.8

Other Current Assets 43.5 1,399.5 1,271.4 1,427.3

Cash 2,430.6 2,217.7 2,252.3 3,270.8

Total Current Assets 8,991.1 7,762.3 8,924.4 9,954.5

Creditors 5,094.1 1,713.8 5,896.5 2,647.6

Provisions 1,126.7 4,016.1 1,768.9 5,295.2

Total Current Liabilities 6,220.7 5,729.9 7,665.4 7,942.7

Net Current Assets 2,770.4 2,032.4 1,259.0 2,011.7

Others Assets 0.0 0.0 0.0 0.0

Application of Funds 31,826.8 33,551.2 35,010.6 37,881.8


Key ratios


Per share data (|)

EPS 86.4 96.3 118.9 136.2

Cash EPS 133.6 142.0 165.1 186.6

BV 762.8 872.5 962.1 1,066.7

DPS 9.5 10.0 25.0 27.0

Cash Per Share 88.6 80.8 82.1 119.2

Operating Ratios (%)

EBITDA Margin 19.5 20.8 21.4 21.7

PBT / Total Operating income 13.9 15.8 18.0 18.3

PAT Margin 10.0 11.0 12.2 12.5

Inventory days 39.9 35.5 35.5 35.5

Debtor days 20.2 20.6 20.6 20.6

Creditor days 76.5 52.0 52.0 52.0

Return Ratios (%)

RoE 11.3 11.0 12.4 12.8

RoCE 11.6 12.3 14.1 14.8

RoIC 12.2 14.3 16.3 17.5

Valuation Ratios (x)

P/E 48.9 44.2 35.6 31.0

EV / EBITDA 25.8 23.1 19.9 17.3

EV / Net Sales 5.0 4.8 4.3 3.8

Market Cap / Sales 4.9 4.9 4.3 3.9

Price to Book Value 5.5 4.8 4.4 4.0

Solvency Ratios

Debt/EBITDA 1.7 1.3 0.9 0.8

Debt / Equity 0.4 0.3 0.2 0.2

Current Ratio 1.4 1.4 1.2 1.3

Quick Ratio 1.1 1.0 0.9 0.8



ICICIdirect.com coverage universe (Cement)

CMP M Cap

(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E

ACC* 1604 1850 Buy 29,356 31.3 35.6 63.7 24.0 22.3 14.9 153 153 131 6.0 6.9 11.4 7.0 7.7 12.7

Ambuja Cement* 246 280 Buy 49,244 5.2 4.9 5.7 30.8 29.7 28.6 170 175 172 7.9 3.8 5.1 7.8 5.1 5.8

UltraTech Cem 4,228 4750 Rating 116,016 86.4 0.0 118.9 25.8 0.0 19.9 294 282 280 11.6 12.3 14.1 11.3 11.0 12.4

Shree Cement 19,000 17000 Hold 66,120 202 366 565 48.7 28.6 19.1 413 384 384 6.5 12.3 18.5 10.9 16.8 20.8

Heidelberg Cem 135 135 Hold 3,059 1.7 1.8 3.6 13.4 19.7 18.7 124 120 113 8.4 6.0 6.2 6.8 4.3 4.4

India Cement 202 175 Buy 6,236 4.3 5.9 8.5 11.7 11.3 9.4 99 98 95 8.5 8.8 10.4 4.0 4.8 6.5

JK Cement 979 990 Hold 6,643 15.4 32.7 31.4 18.1 14.3 14.9 127 124 125 8.9 12.2 11.4 6.3 12.6 10.6

JK Lakshmi Cem 484 550 Buy 5,579 2.0 6.9 12.3 20.2 26.4 18.4 144 123 88 7.8 5.4 9.0 7.2 1.8 5.8

Mangalam Cem 374 340 Buy 1,006 -7.8 13.0 25.2 39.5 12.1 7.9 69 55 53 1.7 9.4 15.2 NA 6.8 11.8

SFCL 140 115 Hold 3,114 4.1 4.5 4.4 9.7 10.3 8.8 173 173 170 12.0 11.8 12.3 12.3 12.0 11.0

RoCE (%) RoE (%)

Company

EV/Tonne ($)EV/EBITDA (x)EPS (|)

*CY15E, CY16E CY17E



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 [email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


ANALYST CERTIFICATION

We /I, Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately

reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this

report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities

Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has

its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which

are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking

and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts

and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and

meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without

prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.

Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended

temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this

company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This

report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their

receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific

circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate

the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any

loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the

risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to

change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment

in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in

respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned

in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any

compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts

and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding

twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month

preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject

company/companies mentioned in this report.

It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities

described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and

to observe such restriction.

UltraTech Cement (ULTCEM) | 4,228content.icicidirect.com/mailimages/IDirect_UltraTech... ·...

Documents

Transcript of UltraTech Cement (ULTCEM) | 4,228content.icicidirect.com/mailimages/IDirect_UltraTech... ·...