Result Update August 14, 2015

Rating matrix Rating : Hold Cement (INDCEM) | 81 Target : | 75 Target Period : 12-15 months Potential Upside : -7% Higher prices lead to margin expansion…

• India Cement’s (ICL) Q1FY16 revenues declined 12.7% YoY (up 4.5% What’s changed? QoQ) to | 1,071 crore (above I-direct estimate of | 1,049 crore) due to Target Changed from | 92 to | 75 transfer of IPL division to a trust that reported revenues of | 123 crore EPS FY16E Changed from |3.8 to |4.9 last year. The cement division reported a 2.7% YoY drop in revenue led EPS FY17E Changed from | 5.2 to |5.6 by 18% YoY fall in volumes and 19% YoY rise in realisations Rating Unchanged • Cement EBITDA/tonne stood at | 961/tonne vs. | 448/tonne in Q1FY15 (up~114% YoY). On a QoQ basis, it improved 16.5% QoQ led by an Quarterly performance increase in cement prices coupled with a fall in freight & power costs Q1FY16 Q1FY15 YoY (%) Q4FY15 QoQ (%) • The ED has attached properties worth of | 120 crore with respect to the Revenue 1,071.0 1,226.2 -12.7 1,025.0 4.5 case against YS Jaganmohan Reddy that includes certain shares of EBITDA 195.0 157.8 23.6 182.2 7.0 Trinetra Cement. This, we believe, may lead to some delays in EBITDA (%) 18.2 12.9 534 bps 17.8 43 bps amalgamation of Trinetra Cement into the company. Further, the PAT 40.1 (3.0) LP 36.6 NA management has transferred the entire shareholding in Chennai Super

Kings (CKCSL), which owns team franchise rights, to a trust named India Key financials Cements Shareholder Trust. The trust will distribute CKCSL shares to | Crore FY14 FY15 FY16E* FY17E* shareholders of ICL in proportion to their percentage holding in India Net Sales 4,440.9 4,418.8 4,362.1 4,769.4 Cements. However, monetisation of these shares remains key, which EBITDA 537.1 677.8 803.7 865.5 needs further clarity from a shareholder’s perspective Net Profit (35.9) 29.4 150.3 172.6 Fifth largest player in India with strong presence in south (AP, Karnataka) EPS (|) (1.2) 1.0 4.9 5.6 * excludes revenues from IPL ICL is the fifth-largest cement player in India and largest player in South India. Due to excess capacity in the southern region, particularly Andhra Valuation summary Pradesh (AP) where the company has over 49% of its total capacity, it FY14 FY15 FY16E* FY17E* reported muted revenue growth i.e. at a CAGR of 3.2% during FY10-15. P/E NA 84.6 16.6 14.4 Further, with power problems in AP and low capacity utilisation (~60-62%), Target P/E NA 147.2 28.8 25.1 its operating margins have come down sharply from 21.9% in FY10 to 15.3% EV/EBITDA 9.8 7.6 6.2 5.4 in FY15. With the Telangana issue now resolved, overall utilisation in the EV/Tonne($) 62 56 54 51 southern region is expected to improve over the next two or three years. P/BV 0.6 0.7 0.7 0.7 The management indicated that demand is expected to improve post RoNW (%) (0.9) 0.8 4.1 4.6 Q3FY16E led by a revival of infrastructure spending due to bifurcation of RoCE (%) 3.9 6.7 8.7 9.5 Andhra Pradesh. While the bottoming out of demand in South India is a key positive for India Cement, the utilisation level is unlikely to exceed ~67-68%

till FY17-18E, which will limit volume growth for the company. Stock data Particular Amount Investment in unrelated businesses keeps debt at elevated levels | 2550 crore Mcap ICL has investments worth ~| 2,300 crore in non-cement assets that are low Debt (FY15) | 2691 crore RoE businesses. Further, lower utilisation in cement has kept ICL’s OCF Cash & Invest (FY15) | 3.88 crore under pressure. As a result, the company’s debt has remained at high levels. EV | 5238 crore Going forward, we expect debt levels to remain elevated led by an increase 52 week H/L | 134 / 71 in working capital requirement and capex plans of | 300 crore in FY16E for Equity cap | 307.2 crore refurbishment of old cement capacity. Face value | 10 Ongoing litigation, investments in low RoE business remain concerns Price performance With higher realisations in the south and improved outlook on the demand 1M 3M 6M 12M side on the verge of formation of a new state, we expect utilisation to Heildelberg Cem -1.5 -3.6 -17.9 11.2 improve from here on. However, unrelated investments and ongoing India Cement -4.0 -2.9 -12.3 -14.2 litigation pertaining to the same remain a key concern on the company’s JK Cement 4.7 6.4 -5.2 66.7 long-term growth prospect. Hence, despite attractive valuations, we JK Lakshmi Cem 7.1 0.3 -6.5 33.8 continue to maintain HOLD rating on the stock with a revised target price of Research Analyst | 75 (i.e. valuing at $50/tonne on FY17E capacity and 5x FY17E EV/EBITDA). Rashesh Shah [email protected] Devang Bhatt [email protected]

ICICI Securities Ltd | Retail Equity Research

Variance analysis Q1FY16 Q1FY16E Q1FY15 YoY (%) Q4FY15 QoQ (%) Comments Revenue during the quarter declined 12.7% due to tranfer of IPL to trust, which reported | 123 crore last year while cement revenues during the quarter declined 2.7% Total Operating Income 1071.0 1049.0 1226.2 -12.7 1,025.0 4.5 YoY to | 1056 crore Other Income 4.4 6.0 2.2 100.5 18.1 -75.6 Raw Material Expenses 171.0 159.3 153.3 11.5 152.1 12.4 Employee Expenses 91.0 79.7 78.2 16.5 84.8 7.3 Stock Adjustment 13.3 0.0 43.1 NA -7.9 N.A The decline in power & fuel cost on a YoY basis was due to a sharp fall in imported Power & Fuel 235.2 265.5 304.5 -22.8 273.5 -14.0 coal prices The decline in freight cost was due to a fall in diesel prices (road:rail mix 80:20) and Freight cost 221.0 224.1 255.6 -13.5 207.7 6.4 change in transport mix Others 144.5 138.1 233.8 -38.2 132.6 9.0 EBITDA 195.0 182.3 157.8 23.6 182.2 7.0 Higher realisations and decline in operating cost led to an improvement in margins EBITDA Margin (%) 18.2 17.4 12.9 534 bps 17.8 43 bps during the quarter Interest 93.2 103.0 96.7 -3.7 104.7 -11.0 Depreciation 55.4 61.8 66.2 -16.3 59.0 -6.0 Fall in depreciation charge was due to a change in rate of depreciation PBT 40.1 23.5 -3.0 LP 36.6 N.A Total Tax 0.0 7.7 0.0 NA 0.0 NA Higher operating profit and lower depreciation expenses led to higher PAT during the PAT 40.1 15.7 -3.0 LP 36.6 NA quarter

Key Metrics Volume (MT) 2.10 2.10 2.56 -18.1 2.09 0.0 Sales volume remained in line with our estimates during the quarter Realisation (|) 5,041 4,844 4,244 18.8 4,799 5.0 Cement EBITDA per Tonne Better realisation and lower freight & power cost helped to improve EBITDA/tonne for (|) 961 764 448 114.7 825 16.6 the quarter

Source: Company, ICICIdirect.com Research

Change in estimates FY16E* FY17E* (| Crore) Old New % Change Old New % Change Comments We expect FY16E to be a challenging year in terms of volume growth amid excess capacity in the southern region and low government spending. However, a strong pricing environment would be a key driver for Revenue* 4,409.0 4,380.3 -0.7 4,844.3 4,769.4 -1.5 revenue growth EBITDA 813.3 803.7 -1.2 872.6 865.5 -0.8

Margins are expected to be under pressure due to lower EBITDA Margin (%) 18.4 18.3 -10 bps 18.0 18.1 13 bps utilisation PAT 116.4 150.3 29.1 158.3 172.6 9.0 EPS (|) 3.8 4.9 29.1 5.2 5.6 9.0

Source: Company, ICICIdirect.com Research *Revised estimates are excluding revenue from IPL business which has been transferred to Trust.

Assumptions Current Earlier Comments FY13 FY14 FY15 FY16E FY17E FY15 FY16E FY17E We remain conservative on the volume growth front with a visible Volume (MT) 10.1 10.0 9.1 8.7 9.3 9.1 8.8 10.0 recovery from Q3FY16E onwards Cement Realisation (|) 4,362 4,183 4,605 4,945 5,063 4,605 4,898 5,065 We expect the pricing environment to remain strong Cement EBITDA per Tonne (|) 783 289 500 854 853 500 842 855 Expect EBITDA/tonne to improve due to high cement prices

Source: Company, ICICIdirect.com Research

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Company Analysis Capacity spread Largest manufacturer of cement in South India

India Cement is the largest cement manufacturer in the southern region with Rajasthan an installed capacity of 13.1 MTPA in the southern region. While 1.1 MTPA of 10% Maharastra capacity is in Maharashtra, 1.5 MTPA of capacity is in Banswara, Rajasthan. 7% Tamilnadu Out of total revenue, ~85-90% of sales come from the southern region for 38% the company. Due to the excess capacity in the southern region, the company is vulnerable to the demand-supply mismatch of the southern region. Going ahead, after the resolution of the Telangana issue in the region, we expect demand to improve from here on. However, given the Andhra additional capacity, the utilisation level is unlikely to exceed ~67-68% till Pradesh FY17-18E, which will limit volume growth for the company.

45% Exhibit 1: Demand-supply dynamics of South India Million tonnes FY09 FY10 FY11 FY12 FY13 FY14P FY15E Effective Capacity 67.0 83.0 101.5 110.0 119.0 123 128.0 Production 59.7 63.0 66.0 67.2 68.3 69 73.0 Sales mix Capacity Utilisation (%) 89.1 75.9 65.0 61.1 57.4 56 57.0 Consumption 59.7 62.9 66.0 67.2 68.3 69 71.5 East Consumption Growth(%) 10.4 5.4 4.9 1.8 1.6 1 3.9 West 4% Surplus/Deficit 7.3 20.1 35.5 42.8 50.7 54 56.5 17% Source: ICICIdirect.com Research

Telengana Operationally inefficient; captive power plants to help, going forward 12% and Andhra prdesh The company is one of the least efficient players in the industry. Its power 57% Kerala cost per tonne remained higher at | 1247/tonne in FY15 (i.e. 25% higher than 10% average industry cost).The company currently has 50 MW of power capacity at Sankarnagar to cater to the energy needs of cement plants in Tamil Nadu. Another captive power plant of 50 MW at Vishnupuram in Andhra Pradesh

has been installed and is expected to stabilise from H2FY16. The plant will cater to the requirement of cement plants in Andhra Pradesh. Exhibit 2: EBITDA margin compared to industry Exhibit 3: EBITDA/tonne compared to industry

40 1,200 1,117 32 1,063 1,017

35 962 940 27 28 1,000 931 887 30 879 783

22 754 34 21 724 693 25 19 800 693 16 16 500

20 (|) 600 (%) 25

23 412 15 21

400 289 10 18 200 5 12 11 0 7 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY 15 FY 15

India Cement Industry India Cement Industry

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

Huge investments in unrelated non-cement business remain key concern The company has invested a large sum of money in non-core businesses and other group companies/associates. As of FY14, the company has total loans and advances of | 1,974 crore and other investments of | 1,585 crore, which contributes only ~15% in total EBITDA of the company for FY15. Loans and advances include advances to other body corporates like ICL Financial Services, ICL Securities, Trishul Concrete (RMC business), etc, which have led to low RoEs. The company has several times iterated its intention of restructuring its non-core businesses. However, till that time, this remains an overhang for the company.

ICICI Securities Ltd | Retail Equity Research Page 3

Expect revenue CAGR of 3.9% during FY15-17E The revenues have grown at a CAGR of 6.0% in FY11-15 while in FY12-14, growth was lower at 2.8% led by a slowdown in AP coupled with higher cement capacity. Going forward, with the resolution of the Telangana issue and strong focus towards infrastructure development by the government, we expect revenue CAGR of 3.9% in FY15-17E on account of an improvement in capacity utilisation.

Exhibit 4: Expect revenue CAGR of 3.9% during FY15-17E Exhibit 5: Capacity addition plans State Region MT 6000 Sankarnagar, Tamilnadu South 2.1 4597 4769 5000 4203 4441 4419 4362 Sankari, Salem Tamilnadu South 0.9 3771 4000 3501 Dalavoi, Ariyalur Tamilnadu South 1.9 South 3000 Vallur Village, Tiruvallur Tamilnadu 1.1 Chilamakur, Kadapa Andhra Pradesh South 1.5 2000 Yerraguntla, Kadapa Andhra Pradesh South 0.7 1000 Vishnupuram, Nalgonda Andhra Pradesh South 2.5 0 Malkapur, Ranga Reddy Andhra Pradesh South 2.4 FY10 FY11 FY12 FY13 FY14 FY15 FY16E* FY17E* Parli Vaijnath, Beed Maharashtra West 1.1 banswara Rajasthan North 1.5 Net Sales (| crore) Total 15.7

Source: Company, ICICIdirect.com Research *Ex-IPL revenues Source: Company, ICICIdirect.com Research

Exhibit 6: Volume to grow at CAGR of 0.9% during FY15-17E Exhibit 7: Realisation to grow at CAGR of 4.9% during FY15-17E

15.00 6000 4945 5063 30 10.96 4362 4605 12.00 10.05 10.02 4215 4183 9.97 9.53 9.27 20 9.11 8.70 4000 3266 3375 9.00 10 (%)

(|/tonne) 2000 6.00 0 3.00 0 -10

0.00 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E Cement Realisation (|/tonne) -LS Growth (%) -RS Sales Volumes (In mn)

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

Exhibit 8: Q1FY16 volumes decline 18.1% YoY due to lower demand… Exhibit 9: …but realisations up 19% YoY to | 5041/tonne

3.00 2.78 15.0 5500 50 2.65 2.64 5041 2.56 2.48 2.44 2.42 4799 4795 2.38

2.35 10.0 2.29 2.50 5000 4655 40 2.11 4466 2.09 2.10 4429 4411 5.0 4373 4244 4221 4500 4189 4116

2.00 4027 30 0.0 4000 1.50 -5.0 20 3500 (%) 1.00 -10.0 |/tonne 10 -15.0 3000 0.50 -20.0 2500 ` 0 0.00 -25.0 2000 -10 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16

Sales volumes (In MT) -LHS Growth (%) -RHS Realisation-LHS Growth (%) -RHS

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

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Margins to improve gradually, going forward We expect margins to improve gradually during our forecast period of FY15- 17E led by healthy realisations.

Exhibit 10: Expect EBITDA/tonne of |853 in FY17E Exhibit 11: Margins to improve gradually

1000 887 854 853 35 754 783 30 800 25 21.9 21.5 600 500 20 18.3 18.4 18.1

412 (%) | 15 15.3 12.4 400 289 10 12.1 200 5 0 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16E*FY17E* FY10 FY11 FY12 FY13 FY14 FY15 FY16E*FY17E*

Cement EBITDA/Tonne EBITDA Margin (%)

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

Exhibit 12: Q1FY16 cement EBITDA improved due to higher cement prices Exhibit 13: Margin trend (%)

25 1200 1029 23.1 961 20 1000 19.3 18.3 778 792 825 17.8 17.8 18.2 755 15.4 15.8 15.3 800 15 14.1 13.9 592 618 12.9 569 572 (%) 11.7 600 10 408 448 388 6.9 400 5 200 0 0 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16

Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 EBITDA Margin (%)

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

Expect net margins to improve during FY15-17E After reporting a loss in FY14, we expect net margins to improve to 3.3% in FY17E from 0.7% in FY15. Overall, we expect the company to report a net profit of | 172.6 crore during FY17E from a loss of | 35.9 crore in FY14. Exhibit 14: Profitability trend

400 20 310.8 296.0 300 15 9.4 176.3 200 7.0 161.0 172.6 10

3.6 3.4 3.6 (%)

| crore 100 65.7 5 1.9 29.4 -0.8 0 0.7 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16E* FY17E* -100 -35.9 -5

Net profit - LS Net profit margin -RS

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 5

Outlook and valuation With higher realisations in the South and an improved outlook on the demand side on verge of formation of new state, we expect utilisations to improve from hereon. However, unrelated investments and ongoing litigation pertaining to the same remain key concerns on the company’s long-term growth prospect. Hence, despite attractive valuations, we continue to maintain HOLD rating on the stock with a revised target price of | 75 (i.e. valuing at $50/tonne on FY17E capacity and 5x FY17E EV/EBITDA).

Exhibit 15: Key assumptions | per tonne (Blended) FY12 FY13 FY14 FY15 FY16E FY17E Capacity Utilisation (%) 67.4 71.5 64.7 58.8 59.8 60.4 Realisation 4215 4362 4183 4605 4945 5063 Total Expenditure 3328 3579 3894 4106 4091 4210 Stock Adj 3 -19 -31 38 15 0 Raw material 568 575 604 685 766 790 Power & fuel 1149 1249 1273 1247 1219 1290 Employee 312 332 350 349 389 380 Freight 793 954 1007 1046 1055 1080 Others 503 489 691 741 646 670 EBITDA per Tonne 887 783 289 500 854 853

Source: ICICIdirect.com Research

Exhibit 16: Valuations Sales Growth EPS Growth PE EV/EBITDA EV/Tonne RoNW RoCE (| cr) (%) (|) (%) (x) (x) (x) (%) (%) FY14 4440.9 -3.4 -1.2 -121.9 0.0 9.8 62 -0.9 3.9 FY15 4418.8 -0.5 1.0 -182.1 84.6 7.6 56 0.8 6.7 FY16E 4362.1 -1.3 4.9 410.9 16.6 6.2 54 4.1 8.7 FY17E 4769.4 9.3 5.6 14.8 14.4 5.4 51 4.6 9.5

Source: Company, ICICIdirect.com Research

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Company snapshot

200

180

160

140

120

100 Target price: |75 80

60

40

20

0 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Mar-08 The company revives their shipping business with the purchase of two ships (dry bulk carriers) with a total capacity of 79,843 DWT. Commences commercial production of 1 MT grinding plant at Chennai. Also, the company successfully bids for the Chennai franchise of the DLF-IPL 20/20 Cricket Tournament - 'Chennai Super Kings'. Feb-09 Completes and commences commercial production of 1 MT grinding plant at Parli (Maharashtra). The company's subsidiary, namely, Trishul Concrete Products Ltd gets completed and commences commercial production of 1 lakh cuic metre ready mix concrete plant at Hyderabad (Andhra Pradesh) Apr-09 The company upgrades capacity of kiln I to 3000 TPD (1700 TPD) at Vishnupuram Sep-09 Announces plans to set up two 50 MW power plant in Shankar Nagar, Tamil Nadu and Andhra Pradesh with total capex of | 500 crore Jan-10 ICL Financial Services Ltd (ICLFSL), the company's wholly-owned subsidiary, acquires 60.89% (including shares acquired under open offer) equity share capital in Indo Zinc Ltd (IZL). Consequently, IZL became a subsidiary of ICLFSL and ultimate subsidiary of the company. The company set up PT. Coromandel Minerals Resources as subsidiary in Indonesia for acquiring coal concessions Jun-10 The company completes upgradation of capacity at Chilamakur to 4500 tonnes per day Jun-12 CCI fines company with penalty of | 187.5 crore on alleged cartelisation Sep-12 COMPAT serves notice to CCI in cement cartelisation case May-13 COMPAT directs cement companies to pay 10% penalty Oct-13 Supreme Court bars company promoter N Srinivasan from taking charge as BCCI President till investigation gets complete w.r.t. IPL probe Feb-15 Company transfred IPL division into separate subsidiary company Chennai Super Kings Cricket (CSKC) limited Feb-15 Trinetra cement limited and Trishul concrete products limited amalgamated with Limited May-15 CARE has downgraded India Cements Long term bank facilities from 'CARE A' to 'CARE A-' and Short term facilities from 'CARE A1' to 'CARE A2+'.

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 1 BNY Mellon Asset Management 30-Jun-15 10.55 32.4 4.1 Promoter 28.23 28.23 28.23 28.23 28.23 2 EWS Finance & Investments Ltd. 30-Jun-15 9.00 27.6 0.0 FII 36.12 34.45 32.63 31.80 27.99 3 Prince Holdings Madras Pvt. Ltd. 30-Jun-15 8.30 25.5 0.0 DII 12.15 13.67 12.75 13.55 13.30 4 Subramanian (Vidya) 30-Jun-15 6.50 20.0 0.0 Others 23.50 23.65 26.39 26.42 30.48 5 Life Insurance Corporation of India 30-Jun-15 6.06 18.6 0.0 6 Trishul Investments Pvt. Ltd. 30-Jun-15 5.71 17.5 0.0 7 The Boston Company Asset Management, LLC 1-Jul-14 5.24 16.1 -6.2 8 AfrAsia Capital Management Ltd 30-Jun-15 5.00 15.4 1.4 9 Anna Investments Pvt. Ltd. 30-Jun-15 4.24 13.0 0.0 10 The Dreyfus Corporation 26-Mar-15 2.86 8.8 -6.6

Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Barclays Capital Mauritius, Ltd. 4.51m 3.32m The Dreyfus Corporation -10.50m -6.59m Norges Bank Investment Management (NBIM) 2.57m 1.86m The Boston Company Asset Management, LLC -9.41m -6.15m AfrAsia Capital Management Ltd 1.92m 1.35m HSBC Global Asset Management (Hong Kong) Limited -7.44m -5.38m Excel Funds Management Inc. 1.82m 1.00m Artisan Partners Limited Partnership -2.52m -2.11m Sundaram Asset Management Company Limited 0.43m 0.31m GMO LLC -2.14m -1.86m

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Financial summary

Profit and loss statement | Crore Cash flow statement | Crore (Year-end March) FY14 FY15 FY16E FY17E (Year-end March) FY14 FY15 FY16E FY17E Total operating Income 4,440.9 4,418.8 4,362.1 4,769.4 Profit after Tax -35.9 29.4 150.3 172.6 Growth (%) -3.4 -0.5 -1.3 9.3 Add: Depreciation 276.4 257.9 258.4 270.2 Raw material cost 574.4 658.7 679.5 732.6 (Inc)/dec in Current Assets -166.7 478.4 125.2 330.5 Employee Expenses 351.3 318.2 338.7 352.4 Inc/(dec) in CL and Provisions 270.2 -79.1 -80.1 -136.5 Power, Oil & Fuel 1276.2 1136.4 1060.7 1196.2 CF from operating activities 344.0 686.6 453.8 636.9 Freight cost 1009.1 953.1 917.7 1001.5 (Inc)/dec in Investments 12.3 -639.6 0.0 0.0 Other Expenses 692.7 674.8 561.8 621.3 (Inc)/dec in Fixed Assets -57.6 329.8 -220.0 -250.0 Total Operating Exp. 3,903.7 3,741.1 3,558.4 3,903.9 Others 0.0 0.0 0.0 0.0 EBITDA 537.1 677.8 803.7 865.5 CF from investing activities -45.3 -309.8 -220.0 -250.0 Growth (%) -36.3 26.2 18.6 7.7 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0 Depreciation 276.4 257.9 258.4 270.2 Inc/(dec) in loan funds -97.9 -88.2 -100.0 -100.0 Interest 353.7 419.6 371.1 388.7 Dividend paid & dividend tax 0.0 0.0 -71.9 -71.9 Other Income 57.1 29.1 19.4 20.0 Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0 Exceptional items 0.0 0.0 10.7 0.0 Others -202.5 -287.8 0.0 0.0 PBT -35.9 29.4 182.9 226.6 CF from financing activities -300.4 -375.9 -171.9 -171.9 Total Tax 0.0 0.0 31.7 56.2 Net Cash flow -1.6 0.8 61.9 215.0 PAT -35.9 29.4 151.2 170.4 Opening Cash 4.7 3.1 3.9 65.8 Adjusted PAT -35.9 29.4 161.0 172.6 Closing Cash 3.1 3.9 65.8 280.8

Growth (%) -120.3 -182.1 447.4 7.2 Source: Company, ICICIdirect.com Research Adjusted EPS (|) -1.2 1.0 5.2 5.6

Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios (Year-end March) FY14 FY15 FY16E FY17E (Year-end March) FY14 FY15 FY16E FY17E Liabilities Per share data (|) Equity Capital 307.2 307.2 307.2 307.2 Adjusted EPS -1.2 1.0 5.2 5.6 Reserve and Surplus 3,544.1 3,285.7 3,364.2 3,464.9 Cash EPS 7.8 9.4 13.3 14.4 Total Shareholders funds 3,851.3 3,592.9 3,671.4 3,772.1 BV 125.4 117.0 119.5 122.8 Total Debt 2,779.7 2,691.5 2,591.5 2,491.5 DPS 0.0 0.0 2.0 2.0 Deferred Tax Liability 329.7 329.7 329.7 329.7 Cash Per Share 0.1 0.1 2.1 9.1 Minority Interest / Others 0.0 0.0 0.0 0.0 Operating Ratios (%) Total Liabilities 6,960.7 6,614.1 6,592.6 6,593.3 EBITDA Margin 12.1 15.3 18.4 18.1 Assets PAT Margin -0.8 0.7 3.4 3.6 Gross Block 6,863.5 6,533.8 6,888.8 7,148.8 Inventory days 43.0 47.8 50.0 40.0 Less: Acc Depreciation 2,901.0 3,158.9 3,417.3 3,687.5 Debtor days 34.7 38.5 32.0 28.0 Net Block 3,962.5 3,374.9 3,471.5 3,461.2 Creditor days 141.1 135.3 123.0 103.0 Capital WIP 300.0 300.0 165.0 155.0 Return Ratios (%) Total Fixed Assets 4,262.5 3,674.9 3,636.5 3,616.2 RoE -0.9 0.8 4.1 4.6 Investments 943.5 1,585.1 1,585.1 1,585.1 RoCE 3.9 6.7 8.7 9.5 Inventory 550.9 606.9 588.2 457.1 RoIC 3.9 6.7 8.6 9.7 Debtors 422.5 466.1 382.4 365.9 Valuation Ratios (x) Loans and Advances 2,552.3 1,974.4 1,951.5 1,768.6 P/E NM 84.6 16.6 14.4 Other Current Assets 2.1 0.0 0.0 0.0 EV / EBITDA 9.8 7.6 6.2 5.4 Cash 3.1 3.9 65.8 280.8 EV / Net Sales 1.2 1.2 1.1 1.0 Total Current Assets 3,530.9 3,051.3 2,988.0 2,872.4 Market Cap / Sales 0.6 0.6 0.6 0.5 Creditors 1,716.8 1,638.3 1,470.0 1,345.9 Price to Book Value 0.6 0.7 0.7 0.7 Provisions 59.4 58.8 147.0 134.6 Solvency Ratios Total Current Liabilities 1,776.2 1,697.1 1,617.0 1,480.5 Debt/EBITDA 5.2 4.0 3.2 2.9 Net Current Assets 1,754.7 1,354.2 1,371.0 1,392.0 Debt / Equity 0.7 0.7 0.7 0.7 Application of Funds 6,960.7 6,614.2 6,592.6 6,593.3 Current Ratio 2.0 1.8 1.8 1.9

Source: Company, ICICIdirect.com Research Quick Ratio 2.0 1.8 1.8 1.8

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 8

ICICIdirect.com coverage universe (Cement)

CMP M Cap EV/EBITDA (x) EV/Tonne ($) RoCE (%) RoE (%) Company (|) TP(|) Rating (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E ACC* 1381 1560 Hold 25,949 19.5 14.1 11.1 133 113 110 8.3 9.7 11.8 14.1 10.0 12.4 230 248 Hold 35,644 16.2 17.0 13.8 164 160 150 14.0 11.2 12.0 14.8 11.4 12.0 Ambuja Cement* UltraTech Cem 3211 3650 Buy 88,110 23.5 17.1 13.1 242 206 197 11.0 14.0 17.2 10.7 12.7 15.1 Shree Cement^ 11721 12,500 Hold 40,758 0.0 22.2 18.8 325 271 247 0.0 12.3 12.8 0.0 13.3 14.0 Heidelberg Cem 72 80 Buy 1,632 9.4 11.7 9.2 84 84 82 7.2 5.3 7.5 6.8 3.6 6.9 India Cement 81 75 Hold 2,488 7.6 6.2 5.4 56 54 51 6.7 8.7 9.5 0.8 4.1 4.6 JK Cement 676 710 Hold 4,727 15.4 12.0 9.5 98 95 98 7.3 9.7 12.5 9.5 9.1 13.5 JK Lakshmi Cem 366 NA UR* 4,178 16.2 13.8 10.2 143 102 91 7.8 7.9 11.7 7.2 7.4 15.0 Mangalam Cem 247 212 HOLD 617 12.1 10.3 7.1 48 47 48 5.7 5.9 9.8 4.6 4.3 10.2 SFCL 154 266 Buy 3,421 9.3 7.1 5.1 190 185 129 12.8 20.5 27.3 13.3 16.8 23.0 *CY14E, CY15E, CY16E ; ^JY15E,JY16E,JY17E Source: Company, ICICIdirect.com Research

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;

ICICI Securities Ltd | Retail Equity Research Page 10

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 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 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.

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ICICI Securities Ltd | Retail Equity Research Page 11