Result Update

November 5, 2015

Star Ferro & Cement (STAFER)

Rating Matrix
Rating

Buy

Target

| 215

Target Period

Potential Upside

12-15 months
64%

Volume growth to drive revenues

Whats Changed?
Target

Changed from |266 to |215

EPS FY16E

Changed from | 6.9 to | 5.8

EPS FY17E

Changed from | 11.9 to | 10.6

Rating

Unchanged

Quarterly Performance
Revenue
EBITDA
EBITDA (%)
PAT

Q2FY16
311.5
55.2
17.7
-7.9

Q2FY15 YoY (%)

262.7
18.6
50.3
9.9
19.1 -140 bps
-21.2
NA

Q1FY16 QoQ (%)

408.7
-23.8
121.3
-54.5
29.7 -1196 bps
41.5
PL

Key Financials
| crore
FY14*
FY15*
Net Sales
1,171.4 1,426.8
EBITDA
254.9
414.9
Net Profit
6.1
63.4
EPS (|)
0.3
2.9
* Previous figures include ferro alloy business

FY16E
1,716.5
516.8
129.7
5.8

FY17E
2,265.4
693.3
235.0
10.6

FY16E
22.4
36.8
6.8
161.6
3.5
17.1
15.7

FY17E
12.4
20.3
4.7
111.9
2.8
26.7
22.7

Valuation Summary
P/E
Target P/E
EV / EBITDA
EV / Tonne
Price/Book value
RoCE
RoNW

FY14
NA
NA
14.7
222.7
4.2
5.2
0.9

FY15
45.8
75.2
8.7
166.3
4.3
11.3
9.4

* Previous figures include ferro alloy business

Stock Data
Market Capitalization
Total Debt (FY15)

| 2910.5 Crore
| 691.8 Crore

Cash and Investments (FY15)

EV
52 week H/L
Equity capital
Face value
MF Holding (%)
FII Holding (%)

| 9.1 Crore
| 3593.1 Crore
185 / 22
| 22.2 Crore
|1
Nil
0.3

Price Performance (%)

Return (%)
Star Cement
Shree Cement
Heidelberg
JK Lakshmi

1M
2.7
3.3
1.2
(2.8)

3M
(14.4)
8.1
5.4
1.7

| 131

6M
(16.0)
20.1
1.6
2.1

12M
100.8
36.0
(17.4)
(1.3)

Research Analysts
Rashesh Shah
rashes.shah@icicisecurities.com
Devang Bhatt
devang.bhatt@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Star Ferros consolidated revenues increased 6.6% YoY to | 311.5

crore (below I-direct estimate of | 347.7 crore). However, adjusting
for the ferro business, cement revenues increased 18.6% YoY led by
10.2% YoY increase in volumes to 0.5 MT (in line with I-direct
estimate of 0.5 MT) and 7.6% YoY increase in realisation to | 6,254
(below I-direct estimate of | 6,687 led by | 20/bag decline in east and
| 5/bag decline in North East). The company sold 63% of its volume
in the North East and remaining outside north east
EBITDA margin declined 140 bps YoY to 17.7% (below I-direct
estimate of 24.6%) due to an increase in other expenses (up 42.7%
YoY) and raw material cost (up 47.3% YoY). EBITDA/tonne was flat at
| 1,109/tonne vs. our estimate of | 1,645/tonne
Net loss of | 7.9 crore remained lower than the last year (loss of
| 21.2 crore) due to low depreciation charge and lower tax expenses
Growth momentum to continue led by favourable environment
Improved capacity utilisation backed by the governments thrust on
infrastructure development in the North East region, better pricing power
and limited capacity addition are likely to remain key drivers for growth
over FY15-17E. For SFCL, the adequate capacity is currently in place to
capture the growth opportunity.
Operates at healthy margins vs. its peer set
The company has constantly remained ahead of the industry in terms of
margins in the past two years. The company enjoys an advantage of
geographical complexity and various fiscal benefits under NE industrial
policy (NEIIPP 2007). This includes 100% excise exemption, 100% income
tax exemption, capital investment subsidy up to 30% of the investment in
plant & machinery, interest subsidy at 3% of working capital loan and
transport subsidy to boost investments. The company has also achieved
self-sufficiency in terms of power requirement through setting up a 51
MW power plant. As a result, it generates healthy EBITDA/tonne, which is
over ~2.2x of cement players at pan-India level.
Financial leverage to improve led by strong operating cash flow
After doing major capacity addition during FY12-14, the company plans to
achieve optimum capacity utilisation of over 80% by FY17E. This, in turn,
would help the company to generate an operating cash flow of ~| 600
crore over the next two years, which would be used to fund its major
capex programme. At present, SFCL is adding 1.0 MT of grinding unit in
West Bengal at a capex of only ~| 180 crore and has leased 0.3 MT
grinding unit in Durgapur. Star Ferro is expected to receive | 225 crore of
subsidy in FY16E. Hence, with limited capex plans, Star Ferro is better
placed to reduce its debt significantly over FY15-17E.
Expansion in market share and margins; compelling valuations
The company aims to increase its market share in NER from ~23% to
~30% over the next five to seven years led by aggressive marketing
efforts. Further, we expect its revenues to grow at a CAGR of 26% in the
next two years. In addition, given the companys ability to generate over
2.2x EBITDA/tonne of its peer set and capability to expand through
internal accruals, we believe SFCL is better placed compared to its
competition. Hence, we continue to maintain our BUY rating. However,
the companys key markets are expected to be under pricing pressure in
the near term. Hence, we have revised our target price downwards to
| 215/share (i.e. 8.0x FY17E EV/EBITDA).

Variance analysis
Q2FY16 Q2FY16E

Q2FY15

YoY (%)

Q1FY16

QoQ (%)

Total Operating Income

Other Income
Increase/Decrease in Stock
Raw Material Expenses
Employee Expenses

311.5
1.2
-16.4
62.7
30.5

347.7
1.0
0.0
51.6
23.4

262.7
0.2
20.1
42.5
24.0

18.6
18.6
-181.5
47.3
26.8

408.7
1.7
-24.8
79.7
23.1

-23.8
N.A
-34.0
-21.4
31.8

Other Expenses
EBITDA

179.5
55.2

187.2
85.5

125.8
50.3

42.7
9.9

209.4
121.3

-14.3
-54.5

EBITDA Margin (%)

17.7

24.6

19.1 -140 bps

29.7 -1196 bps

Depreciation
Interest
PBT
Total Tax
Minority Interest

42.8
21.6
-7.9
1.6
-1.6

41.7
20.3
24.5
3.7
6.5

55.3
20.8
-26.6
2.8
-8.3

-22.5
4.1
-70.3
-44.6
-80.4

41.7
20.2
61.1
0.5
19.0

2.6
7.0
-113.0
194.5
-108.5

PAT

-7.9

14.3

-21.2

-62.9

41.5

PL

Volume (MT)
Realisation (|)

0.50
6,254

0.52
6,687

0.45
5,812

10.2
7.6

0.65
6,261

-23.7
-0.1

EBITDA per Tonne (|)

1,109

1,645

1,112

-0.3

1,859

-40.4

Comments
Cement revenues increased 18.6% YoY led by 10.2% YoY growth in volumes
and 7.6% YoY increase in realisation

The increase in other expenses was led by higher coal cost and marketing
expenses

Increase in RM cost and higher other expenses led to lower EBITDA margins
Change in useful life of asset led to a reduction in depreciation. A similar
depreciation charge is expected to continue in the forthcoming quarters

Net loss was lower compared to the previous quarter due to a decline in
depreciation expenses

Key Metrics
Strong demand in the NE and outside NE region led to an increase in volume
growth
EBITDA/tonne was lower than our estimate due to lower-than-expected
realisation and a sharp rise in RM cost

Source: Company, ICICIdirect.com Research

Change in estimates
(| Crore)

Old*

Revenue
EBITDA

FY16E
New

% Change

Old*

FY17E
New

% Change

1,733.3
564.6

1,716.5
516.8

-1.0
-8.5

2,276.5
747.4

2,265.4
693.3

-0.5
-7.2

32.6
152.6
6.9

30.1
129.5
5.8

-247 bps
-15.1
-15.4

32.8
264.6
11.9

30.6
235.0
10.6

-223 bps
-11.2
-11.1

EBITDA Margin (%)

PAT
EPS (|)

Comments
We have revised our revenue estimates marginally
downwards led by pricing pressure in the near term.
Despite pricing pressure, we expect SFCl's revenues to
grow at a CAGR of 26% in FY15-17E

We expect the company to maintain margins of 30%

Source: Company, ICICIdirect.com Research * Previous figures include ferro alloy business

Assumptions

Volume (MT)
Realisation (|)
EBITDA per Tonne (|)

FY13
1.1
6,167
1,106

FY14
1.8
6,697
1,455

FY15
2.4
6,032
1,750

Current
FY16E
2.8
6,251
1,889

FY17E
3.6
6,381
1,953

FY15
2.4
6,032
1,750.0

Earlier
FY16E
2.8
6,303
2,053.0

Comments
FY17E
3.6
6,413
2,105.0

Volume is expected to improve led by capacity expansion

Realisation have been revised marginally downwards
EBITDA/tonne to improve to | 1,953/tonne in FY17E

Source: Company, ICICIdirect.com Research * Earlier figures include ferro alloy business

ICICI Securities Ltd | Retail Equity Research

Page 2

Company Analysis
Dominant player in North-East region
At present, the Star Cement unit is the largest cement unit in the North
East followed by Dalmia Bharat Cement and has a twin advantage of
proximity to raw material and close proximity to the highest price-end
market with ~23% market share. The company enjoys an advantage of
geographical complexity and various fiscal benefits under NE industrial
policy (NEIIPP 2007). This includes 100% excise exemption, 100% income
tax exemption, capital investment subsidy up to 30% of the investment in
plant & machinery, interest subsidy at 3% of working capital loan,
transport subsidy, etc. to boost investments. As a result, it generates
healthy EBITDA/tonne, which is over ~2.2x of cement players at a panIndia level.
Operates at healthy margins vs. its peer set
The company has constantly remained ahead of the industry in terms of
margins in the past two years. This is evident from the fact that SFCL
enjoys the advantage of its own captive limestone mines, which is
situated at a close proximity of large reserves of coal at a distance of only
25 km. The unit uses state-of-the art dry process rotary kiln technology to
manufacture high grade ordinary Portland cement (OPC), Pozzolana
Portland cement (PPC) required for infrastructure projects. The company
has also achieved self sufficiency in terms of power requirement through
setting up a 51 MW power plant.
Exhibit 1: Cement EBITDA/tonne comparison
2.2x

2500
1.5x

2000
1500
1000

1315

1.6x

1867

1349

1130
879

1.9x

693

724

724

500
0
FY12

FY13

FY14

Star Ferro & Cement

All India average

FY15

Source: Company, ICICIdirect.com Research

Focus on strengthening distribution, marketing initiatives, brand image

SFCL has been able to grow sales volume by 35% in FY15. This has also
helped the company to achieve a market share of 23%. Going forward,
the company is planning to increase its market share from 23% to 30% in
the coming years. Apart from strengthening its footprint in the NER
region, the company has also expanded its dealer network in the West
Bengal and Bihar market. A huge marketing and visibility campaign has
been put in place to have better brand visibility and top of the mind recall
among users of cement in all these markets. In addition, the company is
also exploring the possibility of introducing its product in the markets of
neighbouring countries viz. Nepal, Bhutan and Bangladesh.

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 2: Dealer network has grown at robust rate of 38.5% in FY12-9MFY15

1842

2000
1368

1500
1000

803

693

500
0
FY12

FY13

FY14

Dec-14

Dealer network

Source: Company, ICICIdirect.com Research

Financial leverage to improve led by strong operating cash flow

After doing major capacity addition during FY12-14, the company plans to
achieve optimum capacity utilisation of over 80% by FY17E. This, in turn,
would help the company to generate an operating cash flow of ~| 600
crore over the next two years, which, in turn, can be used to fund its
major capex programme, going forward. At present, SFCL is adding 1.0
MT of grinding unit in West Bengal at a capex of only ~| 180 crore and
has leased 0.3 MT grinding unit in Durgapur. The company is also
expected to receive | 225 crore of subsidy in FY16E. Hence, with limited
capex plans, the company is currently better placed to reduce its debt
significantly over the next two years.
Exhibit 3: D/E ratio to improve, going forward
1.5

1.2

1.2

1.0

1.0

0.7
0.4

0.5
0.0
FY13*

FY14*

FY15*

FY16E

FY17E

D/E

Source: Company, ICICIdirect.com Research, *Previous figures include ferro alloy business

ICICI Securities Ltd | Retail Equity Research

Page 4

Expect cement revenue CAGR of 25.9% during FY15-17E

The company has increased its total cement capacity from 1.27 MT in
FY12 to 3.1 MT in FY14. SFCL has also taken three grinding units on hire
with total capacity of 0.76 MT. This leads to a total capacity of ~3.9 MT.
Further, the company is planning to have one own grinding unit of 1.0
MT, which will be expected to be operational by October 2016. Moreover,
SFCL is exploring opportunities in Bangladesh. Given this backdrop, we
expect cement revenues to grow at a CAGR of 25.9% in FY15-17E.
Exhibit 4: Cement revenues to grow at CAGR of 25.9% during FY15-17E
2265

2500
2000

1716

1430
1173

1500
1000

660

500

Exhibit 5: Capacity addition plans (standalone)

Sr no
1
2
3
4
6
5

Cement
Capacity
(MT)
0.62
0.70
1.80
0.46
0.30
1.00

Location
Meghalaya
Meghalaya
Guwhati (Assam)
West Bengal
West Bengal
West Bengal

Capacity at the end of FY17E

0
FY13*

FY 14*

FY 15*

FY 16E

FY 17E

Remarks
Category
Integrated unit
Clinker unit
Grinding unit
Grinding unit
Grinding unit
Grinding unit

Q4FY13
Q4FY13
On lease from Q3FY15
On lease from Q3FY16
FY17E

4.88

Source: Company, ICICIdirect.com Research

Sales (| crore)

Source: Company, ICICIdirect.com Research, * Figures include ferro alloy business

Exhibit 6: Volume to grow led by capacity expansion

3.6
2.8

2.4
1.8
1.1

FY13

FY14

FY15E

FY16E

Sales volume (In MT) - LHS

70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
-10.0

318

320

310

310
300

301
291

293

FY13

FY14

290
280
270

FY17E

Growth (%) - RHS

FY15E

FY16E

Realisations (|/50kg bag)

0.50

0.40
0.20

Sales Volume

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Q2FY16

Q1FY16

Q4FY15

Q4FY14

Q3FY14

0.00

8000
7000
6000
5000
4000
3000
2000
1000
0

7211

6787

6041

5812

5858

6274

6261

Q1FY16

0.65

Q4FY15

0.81

Q3FY15*

Q3FY15

0.47

0.58

Q2FY15

0.60

0.56

0.45

Q1FY15

0.80

0.53

Q2FY15*

Exhibit 9: realisation at |6,254 during the quarter

Q1FY15

Exhibit 8: Q2FY16 volume at 0.5 MT

Q4FY14*

Source: Company, ICICIdirect.com Research

Q3FY14*

Source: Company, ICICIdirect.com Research

1.00

FY17E

6254

Q2FY16

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

Exhibit 7: Realisation to pick up

Realisation

Source: Company, ICICIdirect.com Research,* Figures include ferro alloy business

Page 5

Margins to improve with better utilisations & fiscal benefits

We expect EBITDA margins at 30.6% in FY17E from 21.7% in FY14 on
account of an improvement in utilisation rates of the expanded capacity of
the North-East plant and a healthy pricing environment.
Exhibit 10: Expect EBITDA/tonne of |1,953 in FY17E
2500
1750

2000
1500

1106

1889

Exhibit 11: EBITDA growth trend

1953

35.0
30.0
25.0
20.0
15.0
10.0
5.0
-

1455

1000
500

FY13*
FY13*

FY 14*

FY 15*

FY 16E

21.7

17.9

30.6

30.1

29.0

FY14*

FY15*

FY16E

FY17E

FY 17E
EBITDA margin (%)

EBITDA/Tonne

Source: Company, ICICIdirect.com Research * Previous figures include ferro alloy

Source: Company, ICICIdirect.com Research * Previous figures include ferro alloy

business

business

Exhibit 12: EBIDA margin at 17.7% in Q2FY16

40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-

29.7

34.7

31.1

30.5

29.0

27.3

19.1

Q2FY16

Q1FY16

Q4FY15

Q3FY15*

Q2FY15*

Q1FY15

Q4FY14*

Q3FY14*

17.7

EBITDA Margin

Source: Company, ICICIdirect.com Research * Previous figures include ferro alloy business

Net profit to grow 3x in next two years due to healthy demand outlook
With a sharp rise in capacity and operating leverage benefits, we expect
net profit to jump 3x over next two years to | 235 crore by FY17E.

ICICI Securities Ltd | Retail Equity Research

Page 6

Exhibit 13: Profitability growth trend

235.0

250.0

| crore

200.0
129.7

150.0
100.0
50.0

63.4
24.9

6.1

FY13*

FY14*

FY15*

FY16E

FY17E

Net profit

Source: Company, ICICIdirect.com Research* Previous figures include ferro alloy business

ICICI Securities Ltd | Retail Equity Research

Page 7

Valuations
A high entry barrier due to geographical complexity and limited resources
for the cement industry in the NER coupled with the new governments
focus towards infrastructure development augur well for Star Ferro. Being
the largest player in the NER, we feel the company will continue to be the
leader as it has already met its major capacity requirements over the next
three to four two years. Better capacity utilisation along with export
opportunities in Bangladesh are expected to lead to revenue growth and
margin expansion, going forward.
We expect SFCL to witness a sharp improvement in capacity utilisation
(through aggressive marketing efforts) and higher cash flow generation.
With this, the debt to equity is expected to come down significantly by
FY17E. We expect the company to report revenue CAGR of 25.9% over
the next two years (FY15-17E).
The company aims to increase its market share in NER from ~23% to
~30% over the next five to seven years led by aggressive marketing
efforts. Further, we expect its revenues to grow at a CAGR of 26% in the
next two years. In addition, given the companys ability to generate over
2.2x EBITDA/tonne of its peer set and capability to expand through
internal accruals, we believe SFCL is better placed compared to its
competition. Hence, we continue to maintain our BUY recommendation.
However, the companys key markets are expected to be witness pricing
pressure in the near term. Hence, we have revised our target price
downwards to | 215/share (i.e. 8.0x FY17E EV/EBITDA).
Exhibit 14: Key assumptions
| per tonne

FY13*

FY14*

FY15*

FY16E

1.1

1.8

2.4

2.8

3.6

Net Realisation*

6167

6697

6032

6251

6381

Total Expenditure

5061

5242

4282

4363

4428

Raw material

1116

1196

954

1109

1003

Changes in Inventory

-227

-44

23

-150

Employee cost

384

448

391

341

296

Other expenses

3788

3642

2914

3062

3130

EBITDA per Tonne

1106

1455

1750

1889

1953

Sales Volume

FY17E

Source: ICICIdirect.com Research, * Previous figures include ferro alloy business

ICICI Securities Ltd | Retail Equity Research

Page 8

Exhibit 15: One year forward EV/EBITDA

18x

15x

12x

10x

8x

4x

Jun-15

Apr-15

Feb-15

Dec-14

Oct-14

Aug-14

Jun-14

Apr-14

Feb-14

Dec-13

Oct-13

10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0

EV

Source: Company, ICICIdirect.com Research

Exhibit 16: Valuation

FY14*
FY15*
FY16E
FY17E

Sales
(| cr)
1171.4
1426.8
1715.3
2261.2

Growth
(%)
77.9
21.8
20.2
31.8

EPS
(|)
0.3
2.9
5.8
10.6

Growth
PE
(%)
(x)
N.A 476.5
939.5 45.8
104.2 22.4
81.2 12.4

EV/Tonne
($)
222.7
166.3
161.6
111.9

EV/EBITDA
(x)
15
9
7
5

RoNW
(%)
0.9
9.4
15.7
22.7

* Previous figures include ferro alloy business

ICICI Securities Ltd | Retail Equity Research

Page 9

RoCE
(%)
5.2
11.3
17.1
26.7

Company snapshot
250

Target price: | 215

200
150
100
50

Nov-16

May-16

Nov-15

May-15

Nov-14

May-14

Nov-13

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Mar-05

Event
Commences operations with cement capacity of 0.40 MT and power capacity of 8 MW

Mar-12

Increases clinker capacity from 0.80 MT to 2.60 MT, cement capacity from 1.27 MT to 3.0 MT and power capacity from 8 MW to 51 MW

Apr-15
Oct-15

Completes process of de-merger of ferro alloys division of Star Ferro and Cement (SFCL) into Shyam Century Ferrous Ltd
Hires 0.3 MT grinding unit in West Bengal

Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Shareholding Pattern

Name
Bhajanka (Prem Kumar)
Agarwal (Sanjay)
Bhajanka (Sajjan)
Bhajanka (Santosh)
Agarwal (Divya)
Agarwal (Subham)
Sriram Vanijya Pvt. Ltd.
Agarwal (Brij Bhushan)
Brijdham Merchants Pvt. Ltd.
Sumangal International Pvt. Ltd.

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

30-Sep-15 12.32
27.37
0.00
30-Sep-15 8.77
19.5
0.0
30-Sep-15 7.48
16.6
0.0
30-Sep-15 6.77
15.1
0.0
30-Sep-15 6.52
14.5
0.0
30-Sep-15 4.68
10.4
0.5
30-Sep-15 3.83
8.5
0.0
30-Sep-15 3.76
8.3
0.0
30-Sep-15 3.49
7.7
0.0
30-Sep-15 3.45
7.7
0.0

(in %)
Promoter
FII
DII
Others

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

66.99 67.00 66.48 66.37 66.37
0.34
0.34
0.11
0.11
0.11
0.00
0.00
0.00
0.02
0.01
32.67 32.66 33.41 33.50 33.52

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor Name
Agarwal (Hari Prasad & Others) HUF
Agarwal (Subham)
Agarwal (Girish)
Bhajanka (Nancy)
Bhajanka (Keshav)

Sells
Value
1.06m
0.98m
0.34m
0.17m
0.06m

Shares
1.53m
0.50m
0.20m
0.14m
0.12m

Investor Name
Khemani (Vishnu)
Khemani (Sudha)
Agarwal (Rajesh Kumar)
Subham Capital Pvt. Ltd.
Agarwal (Sanjay)

Value
-2.98m
-1.36m
-0.98m
-0.47m
-0.05m

Shares
-7.49m
-3.42m
-0.68m
-0.50m
-0.03m

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 10

Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
Raw material cost
Inc/dec in stock
Employees cost
Others
Total Operating Exp.
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
Total Tax
PAT
Growth (%)
Adjusted EPS (|)

| Crore
FY13*
659.6
119.4
-24.3
41.0
405.2
541.3
118.3
50.3
28.6
3.9
43.4
3.7
24.8
1.1

FY14*
1,173.3
77.9
209.6
-7.8
78.9
637.7
918.4
254.9
115.4
161.6
87.2
4.3
10.4
2.7
6.1
-75.3
0.3

FY15*
1,430.3
21.9
226.1
5.4
92.8
691.0
1,015.4
414.9
62.8
225.1
87.7
4.2
106.4
5.0
63.4
939.5
2.9

FY16E
1,716.5
20.0
305.0
-41.2
93.8
842.1
1,199.7
516.8
24.5
212.3
85.2
5.1
224.5
56.6
129.7
104.4
5.8

FY17E
2,265.4
32.0
355.9
0.0
105.0
1111.2
1,572.1
693.3
34.2
196.4
96.0
8.5
409.5
95.2
235.0
81.2
10.6

Cash flow statement

(Year-end March)
Profit after Tax
Add: Depreciation
(Inc)/dec in Current Assets
Inc/(dec) in CL and Provisions
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in Fixed Assets
Others
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Dividend paid & dividend tax
Inc/(dec) in Sec. premium
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash

Source: Company, ICICIdirect.com Research, * Previous figures include ferro alloy

business

| Crore
FY13*
24.9
50.3
-737.5
201.8
-460.5
-1.5
-1,343.7
337.9
-1,007.3
22.2
856.1
0.0
0.0
-28.6
849.6
-618.2
645.2

FY14*
6.1
161.6
-183.8
260.4
244.3
0.0
-139.5
-7.8
-147.2
0.0
-11.8
-12.2
0.0
-87.5
-111.5
-14.4
27.1

FY15*
63.4
225.1
-178.3
142.3
252.6
0.0
-25.6
87.5
61.9
0.0
-152.5
-26.0
-51.8
-87.7
-318.0
-3.5
12.7

FY16E
129.7
212.3
-32.8
-31.2
278.0
0.0
-154.0
37.2
-116.9
0.0
-100.0
-26.0
51.8
-85.2
-159.4
1.7
9.1

FY17E
235.0
196.4
-290.3
141.4
282.4
0.0
-35.0
75.0
40.0
0.0
-200.0
-26.0
0.0
-96.0
-322.0
0.4
10.9

27.1

12.7

9.1

10.9

11.3

Source: Company, ICICIdirect.com Research, * Previous figures include ferro alloy

business

Balance sheet
(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Minority Interest / Others
Total Liabilities
Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Creditors
Provisions
Total Current Liabilities
Net Current Assets
Others Assets
Application of Funds

| Crore
FY13*

FY14*

FY15*

FY16E

FY17E

22.2
670.5
692.7
856.1
84.1
253.8
1,886.6

22.2
664.1
686.3
844.3
77.3
252.9
1,860.7

22.2
649.7
671.9
691.8
94.6
323.1
1,781.3

22.2
805.2
827.4
591.8
94.6
360.3
1,874.0

22.2
1,014.2
1,036.4
391.8
94.6
435.3
1,958.0

1,415.4
251.0
1,164.5
128.9
1,293.4
1.5
150.0
42.7
222.2
322.7
27.1
764.6
72.3
100.9
173.3
591.4
0.0
1,886.3

1,582.4
410.7
1,171.7
99.5
1,271.2
1.5
175.5
109.7
286.8
349.4
12.7
934.0
148.7
197.7
346.4
587.6
0.0
1,860.3

1,666.5
635.8
1,030.7
41.0
1,071.7
1.5
109.1
309.8
680.2
0.4
9.1
1,108.8
77.0
324.0
401.0
707.7
0.0
1,781.0

1,736.5
848.1
888.4
125.0
1,013.4
1.5
123.6
372.4
634.7
1.7
10.9
1,143.3
87.4
197.2
284.7
858.6
0.0
1,873.6

1,796.5
1,044.5
752.1
100.0
852.1
1.5
162.9
491.0
746.2
22.6
11.3
1,434.0
115.2
214.8
330.0
1,104.0
0.0
1,957.6

Source: Company, ICICIdirect.com Research, * Previous figures include ferro alloy

business

ICICI Securities Ltd | Retail Equity Research

Key ratios
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios (%)

FY13*

FY14*

FY15*

FY16E

FY17E

1.1
3.4
31.2
0.0
1.2

0.3
7.6
30.9
0.5
0.6

2.9
13.0
30.3
1.0
0.4

5.8
15.4
37.2
1.0
0.5

10.6
19.4
46.6
1.0
0.5

EBITDA Margin

18.0

21.8

29.1

30.1

30.7

PBT / Total Operating income

PAT Margin
Inventory days
Debtor days
Creditor days
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio

6.3
3.8
83.3
23.7
40.2

0.6
0.5
54.7
34.2
46.3

7.2
4.4
27.9
79.3
19.7

13.0
7.6
26.3
79.3
18.6

17.9
10.4
26.3
79.3
18.6

3.6
3.8
3.9

0.9
5.2
5.3

9.4
11.3
11.0

15.7
17.1
17.5

22.7
26.7
26.9

116.7
31.6
5.7
4.4
4.2

476.5
14.7
3.2
2.5
4.2

45.8
8.7
2.5
2.0
4.3

22.4
6.8
2.0
1.7
3.5

12.4
4.7
1.5
1.3
2.8

7.2
1.2
4.4

3.3
1.2
2.7

1.7
1.0
2.8

1.1
0.7
4.0

0.6
0.4
4.3

3.5

2.2

2.5

3.6

3.9

Quick Ratio

Source: Company, ICICIdirect.com Research, * Previous figures include ferro alloy

business

Page 11

ICICIdirect.com coverage universe (Cement)

CMP
M Cap
Company
(|)
TP(|) Rating
(| Cr) FY15
1397
1475
Hold
25,367 61.8
ACC*
210
225
Hold
32,235
9.7
Ambuja Cement*
2921
3600
Buy
76,036 73.4
UltraTech Cem
12340 12,500
Hold
43,674 122.5
Shree Cement^
74
81
Buy
1,836
2.6
Heidelberg Cem
84
90
Hold
2,568
1.0
India Cement
652
710
Hold
4,559 22.4
JK Cement
371
373
Hold
4,390
8.1
JK Lakshmi Cem
225
212
Hold
566
8.9
Mangalam Cem
131
215
Buy
2,948
2.9
SFCL
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

EPS (|)
FY16E FY17E
47.2 69.6
7.7
9.3
103.8 143.4
118.7 240.8
1.4
2.9
5.0
5.7
23.8 41.0
-0.2
7.4
-17.3 17.6
5.8 10.6

EV/EBITDA (x)
FY15 FY16E FY17E
19.0
15.2
11.6
14.2
15.7
13.2
20.3
14.6
11.1
33.2
29.3
20.7
9.7
12.5
9.9
7.8
6.2
5.5
15.1
11.5
9.3
16.9
21.0
15.8
12.2
59.8
8.2
8.8
6.8
4.8

EV/Tonne ($)
FY15 FY16E FY17E
133
119
117
164
146
140
221
188
180
297
247
227
86
87
86
57
54
52
95
92
100
143
102
93
45
46
48
166
162
112

RoCE (%)
FY15 FY16E FY17E
13.7 15.3 18.4
17.8 15.9 17.9
12.1 14.7 18.1
8.3
9.4 14.8
9.2
7.6 10.0
6.8
9.2 10.4
8.5 10.6 12.6
8.3
5.0
8.2
7.2
-0.9 10.4
11.2 17.2 26.8

RoE (%)
FY15 FY16E FY17E
14.1
12.2
14.1
14.4
11.2
12.8
10.6
13.3
15.7
8.8
7.4
13.1
-0.1
3.5
6.8
0.8
4.5
4.6
9.5
9.3
14.0
12.0
0.2
6.6
5.3
-9.7
9.1
9.4
15.7
22.7

Page 12

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 13

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:

Securities Limited (ICICI Securities) is a SEBI registered Research Analyst having registration no. INH000000990.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 is a wholly-owned subsidiary of ICICI Bank which is Indias 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 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 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 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.

ICICI Securities Ltd | Retail Equity Research

Page 14