Result Update June 2, 2015

Rating matrix Rating : Hold Cement (INDCEM) | 86 Target : | 92 Target Period : 12-15 months Potential Upside : 7% Higher prices lead to margin expansion…

• India Cement limited’s (ICL) Q4FY15 revenues declined 5.1% YoY (down What’s changed? 1.1 QoQ) to | 1,025 crore (in line with I-direct estimate of | 1,008 crore) Target Changed from |127 to |92 led by 20.7% YoY decline in volumes. However, realisation increased by EPS FY16E Changed from |5.7 to |3.8 19.2% YoY to |4,799. EPS FY17E Changed from |9.3 to |6.6 • Cement EBITDA/tonne stood at |825/tonne vs. | 388/tonne in Q4FY14 Rating Changed from Buy to Hold (up ~112.3% YoY). On a QoQ basis also, it improved 9.2% led by an increase in cement prices and a decline in freight costs. Quarterly performance • Management has approved sale of entire shareholding in Chennai Q4FY15 Q4FY14 YoY (%) Q3FY15 QoQ (%) Super Kings Limited (CKCSL), which owns Chennai Super Kings Revenue 1,025.0 1,080.1 -5.1 1,035.9 -1.1 franchise rights, to a trust named Shareholder Trust. The EBITDA 182.2 74.2 145.6 158.7 14.8 trust will distribute CKCSL shares to the shareholders of ICL in EBITDA (%) 17.8 6.9 1090 bps 15.3 245 bps proportion to their percentage holding in India Cements Limited. From PAT 36.6 (30.6) LP (11.7) NA Q1FY16 onwards, the company will stop reporting revenues from IPL.

Fifth largest player in India with strong presence in south (AP, Karnataka) Key financials | Crore FY14 FY15 FY16E* FY17E* ICL is the fifth-largest cement player in India and the largest player in South Net Sales 4,440.9 4,418.8 4,386.0 5,144.3 India. Due to excess capacity in the southern region, particularly Andhra EBITDA 537.1 677.8 813.3 932.6 Pradesh (AP) where the company has over 49% of its total capacity, it Net Profit (35.9) 29.4 116.4 201.8 reported muted revenue growth i.e. at a CAGR of 3.2% during FY10-15. EPS (|) (1.2) 1.0 3.8 6.6 Further, with power problems in AP and low capacity utilisation (~60-62%), * excludes revenues from IPL its operating margins have come down sharply from 21.9% in FY10 to 15.3% in FY15. With the Telangana issue now resolved, overall utilisation in the Valuation summary southern region is expected to improve over the next two or three years. FY14 FY15 FY16E* FY17E* The management indicated that demand is expected to improve post P/E NA 89.9 22.7 13.1 Q3FY16E led by revival of infrastructure spending resulting from bifurcation Target P/E NA 147.2 37.2 21.5 of Andhra Pradesh. While the bottoming out of demand in South India is a EV/EBITDA 10.1 7.9 6.4 5.5 key positive for India Cement, the utilisation level is unlikely to exceed ~67- EV/Tonne($) 64 58 56 55 68% till FY17-18E, which will limit the volume growth for the company. P/BV 0.7 0.7 0.7 0.7 Margins to remain flattish led by high power costs RoNW (%) (0.9) 0.8 3.2 5.4 RoCE (%) 3.9 6.7 8.9 10.6 Although the company commissioned the 50 MW power plant in AP, it went into maintenance due to some technical problem. This led to further delays

in stabilisation of the power plant. As a result, its power cost per tonne Stock data remained higher at |1247/tonne in FY15 (i.e. 25% higher than average Particular Amount industry cost). We expect the plant to stabilise from H2FY16E. In addition, | 2645 crore Mcap inefficiency of some older plants also remains a structural cost concern for Debt (FY15) | 2691 crore the company. In this situation, we expect a margin expansion to happen Cash & Invest (FY15) | 3.88 crore gradually through price hikes in the next two years. EV | 5333 crore 52 week H/L | 134 / 73 Investment in unrelated businesses has kept debt at elevated levels Equity cap | 307.2 crore ICL has investments worth ~|2,300 crore in non-cement assets which are Face value | 10 low ROE business. Further, lower utilisation in cement has kept ICL’s OCF under pressure. As a result the company’s debt has remained at high levels. Price performance Going forward, we expect debt levels to remain elevated led by increase in 1M 3M 6M 12M working capital requirement and capex plans of |300 crores in FY16E for Heildelberg Cem. -1.3 -17.9 -19.0 71.3 refurbishment of old cement capacities. India Cement 6.7 -19.8 -14.6 27.7 JK Cement -1.3 -10.2 12.8 173.8 High debt, investments in low RoE business remains concern; JK Lakshmi Cem. 2.5 -9.4 0.9 205.1 A slowdown in domestic demand in H1FY16 and muted volume growth due to over capacity in the south is likely to drag overall profitability of the Research Analyst company. This coupled with high debt and investment in low ROE business Rashesh Shah will remain a drag on company’s performance. This prompts us to [email protected] downgrade ICL from Buy to HOLD with a target price of |92 (i.e. valuing at Devang Bhatt $57/tonne on FY17E capacity and 6x FY17E EV/EBITDA). [email protected]

ICICI Securities Ltd | Retail Equity Research

Variance analysis Q4FY15 Q4FY14E Q4FY14 YoY (%) Q3FY15 QoQ (%) Comments Revenues declined 5.1% YoY mainly led by 20.7% YoY decline in volumes, while Total Operating Income 1025.0 1008.4 1080.1 -5.1 1,035.9 -1.1 realisation increased by 19.2% YoY Other Income 18.1 4.7 44.7 -59.5 4.7 285.5 Raw Material Expenses 152.1 150.2 159.1 -4.4 145.2 4.7 Employee Expenses 84.8 78.2 104.9 -19.1 78.3 8.3 Stock Adjustment -7.9 0.0 -7.1 NA 15.1 N.A The decline in power & fuel cost on YoY basis was due to decrease in imported coal Power & Fuel 273.5 259.0 345.0 -20.7 262.0 4.4 prices

Freight cost 207.7 222.1 272.9 -23.9 224.7 -7.5 The decline in freight cost was due to decrease in diesel prices (Road:Rail mix 80:20) Others 132.6 135.6 131.1 1.1 151.9 -12.7 EBITDA 182.2 163.3 74.2 145.6 158.7 14.8

EBITDA Margin (%) 17.8 16.2 6.9 1090 bps 15.3 245 bps Decline in power & fuel cost and lower freight cost led to higher EBITDA margin Interest 104.7 108.7 77.8 34.6 108.7 -3.7 Depreciation 59.0 69.5 71.6 -17.7 66.4 -11.2 Decline in depreciation was due to change in rates of depreciation PBT 36.6 -10.1 -30.6 LP -11.7 N.A Total Tax 0.0 0.0 0.0 NA 0.0 NA Higher operating profit and lower depreciation expenses led to higher PAT during the PAT 36.6 -10.1 -30.6 LP -11.7 NA quarter

Key Metrics Volume (MT) 2.09 2.09 2.64 -20.7 2.11 -0.8 Sales volume declined due to lack of demand in the region Realisation (|) 4,799 4,745 4,027 19.2 4,795 0.1 Cement EBITDA per Tonne Better realisation and lower freight cost helped to improve EBITDA/tonne for the (|) 825 664 388 112.3 755 9.2 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, strong pricing environment would be a key driver for revenue Revenue* 5,040.1 4,409.0 -12.5 5,415.4 5,144.3 -5.0 growth EBITDA 934.8 813.3 -13.0 1,083.3 932.6 -13.9

Margins are expected to be under pressure due to lower EBITDA Margin (%) 18.5 18.4 -10 bps 20.0 18.1 -187 bps utilisation PAT 174.7 116.4 -33.4 286.7 201.8 -29.6 EPS (|) 5.7 3.8 -33.4 9.3 6.6 -29.6

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 visible Volume (MT) 10.1 10.0 9.1 8.8 10.0 9.5 10.0 10.4 recovery from Q3FY16E onwards Cement Realisation (|) 4,362 4,183 4,605 4,898 5,065 4,278 4,735 4,958 However, we expect pricing environment to remain strong Cement EBITDA per Tonne (|) 783 289 500 842 855 323 670 773 Expect EBITDA/tonne to improve due to high cement prices

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

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 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 Telangana issue in the region, we expect demand to improve from here on. However, given the additional capacity, Andhra the utilisation level is unlikely to exceed ~67-68% till FY17-18E, which will Pradesh limit the 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

Operationally inefficient; captive power plants to help, going forward Telengana 12% and Andhra The company is one of the least efficient players in the industry. Its power prdesh cost per tonne remained higher at | 1247/tonne in FY15 (i.e. 25% higher than 57% Kerala average industry cost).The company currently has 50 MW of power capacity 10% 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 30 879 783 754

34 21 22 726 693 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 corporate like ICL Financial Services, ICL Securities, Trishul Concrete (RMC business), etc, which have led to low RoEs. The company has several times iterated its intentions of restructuring its non-core businesses. However, till that time, this remains an overhang for the company.

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Expect revenue CAGR of 7.9% during FY15-17E The company’s revenue has grown at a CAGR of 6.0% during FY11-15 while in FY12-14, the 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 a strong focus towards infrastructure development by the government, we expect revenue CAGR of 7.9% in FY15-17E. We expect volume growth at a CAGR of 4.8% during our forecast period of FY15-17E while realisations are expected to grow at 4.9% on account of an improvement in capacity utilisations.

Exhibit 4: Expect revenue CAGR of 7.9% during FY15-17E Exhibit 5: Capacity addition plans State Region MT 6000 5144 Sankarnagar, Tamilnadu South 2.1 4597 5000 4203 4441 4419 4386 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 Source: Company, ICICIdirect.com Research

Exhibit 6: Volume to grow at CAGR of 4.8% during FY15-17E Exhibit 7: Realisation to grow at CAGR of 4.9% during FY15-17E

15.00 6000 5065 30 4605 4898 12.00 10.96 4215 4362 4183 9.97 9.53 10.05 10.02 10.00 20 9.11 8.81 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: Volumes decline 20.7% YoY Q4FY15 due to lower demand… Exhibit 9: …but realisations up 19.2% YoY to | 4799/tonne 4799 4795 3.00 2.78 15.0 5000 50 2.65 4655 2.64 2.60 2.56 2.48 4466 2.44 4429 2.42 4411 2.38 4373 2.35 10.0 2.29 4245 4241 4244 2.50 4500 4221 40 2.19 4189 4116 2.11 2.09 5.0 4027 2.00 0.0 4000 30 1.50 -5.0 3500 20 (%)

1.00 -10.0 |/tonne 3000 10 -15.0 0.50 -20.0 2500 ` 0 0.00 -25.0 2000 -10 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15

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

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

ICICI Securities Ltd | Retail Equity Research Page 4

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 |855 in FY17E Exhibit 11: Margins to improve gradually

1000 887 842 855 35 754 783 30 800 25 21.9 21.5 600 500 20 18.3 18.5 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: Q4FY15 cement EBITDA improved due to higher cement prices Exhibit 13: Margin trend (%)

25 1200 1029 23.1 1000 862 819 825 20 19.3 778 792 755 18.3 17.8 17.8 800 618 15.4 15.8 15.3 569 572 592 15 14.1 13.9 600 448 12.9 408 388 (%) 11.7 10 400 6.9 200 5 0 0 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15

EBITDA/tonne (|) 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 3.9% in FY17E from 0.7% in FY15. Overall, we expect the company to report a net profit of | 201.8 crore during FY17E from a loss of | 35.9 crore in FY14. Exhibit 14: Profitability trend

400 20 310.8 296.0 300 15 9.4 201.8 176.3 200 7.0 10 116.4

3.6 3.9 (%)

| crore 100 65.7 2.7 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 A slowdown in domestic demand in H1FY16 and muted volume growth due to over capacity in the south is likely to drag overall profitability of the company. This coupled with high debt and investment in low ROE business will remain a drag on company’s performance. This prompts us to downgrade ICL from Buy to HOLD with a target price of |92 (i.e. valuing at $57/tonne on FY17E capacity and 6.0x FY17E EV/EBITDA).

Exhibit 15: Key assumptions | per tonne (Blended) FY12 FY13 FY14 FY15E FY16E FY17E Capacity Utilisation (%) 67.4 71.5 64.7 58.8 56.8 64.5 Realisation 4215 4362 4183 4605 4898 5065 Total Expenditure 3328 3579 3894 4106 4057 4210 Stock Adj 3 -19 -31 38 0 0 Raw material 568 575 604 685 750 790 Power & fuel 1149 1249 1273 1247 1250 1290 Employee 312 332 350 349 365 380 Freight 793 954 1007 1046 1055 1080 Others 503 489 691 741 637 670 EBITDA per Tonne 887 783 289 500 842 855

Source: ICICIdirect.com Research

Exhibit 16: One year forward EV/EBITDA 12000 10000 8000 6000

(| Crore) (| 4000 2000 0 Jan-08 Jan-10 Jan-12 Jan-14 Sep-08 Sep-10 Sep-12 Sep-14 May-07 May-09 May-11 May-13 May-15 EV 10.4x 9.5x 8.5x 7.6x 5.6x

Source: Company, ICICIdirect.com Research

Exhibit 17: One year forward EV/Tonne 4000

3000

2000

Million $ 1000

0 Jan-08 Jan-10 Jan-12 Jan-14 Sep-08 Sep-10 Sep-12 Sep-14 May-07 May-09 May-11 May-13 May-15 EV $150 $130 $100 $80 $50

Source: Company, ICICIdirect.com Research

Exhibit 18: 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 10.1 64 -0.9 3.9 FY15 4418.8 -0.5 1.0 -182.1 89.9 7.9 58 0.8 6.7 FY16E 4386.0 -0.7 3.8 295.5 22.7 6.4 56 3.2 8.9 FY17E 5144.3 17.3 6.6 73.4 13.1 5.5 55 5.4 10.6

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

Company snapshot

180

160

140

120

100 Target price: |92

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 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 India Cements 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 %) Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 1 BNY Mellon Asset Management 31-Mar-15 9.21 28.3 -1.8 Promoter 28.23 28.23 28.23 28.23 28.23 2 EWS Finance & Investments Ltd. 31-Mar-15 9.00 27.6 0.0 FII 35.96 36.12 34.45 32.63 31.80 3 Prince Holdings Madras Pvt. Ltd. 31-Mar-15 8.30 25.5 0.0 DII 11.97 12.15 13.67 12.75 13.55 4 Subramanian (Vidya) 31-Mar-15 6.50 20.0 0.0 Others 23.84 23.50 23.65 26.39 26.42 5 Life Insurance Corporation of India 31-Mar-15 6.06 18.6 0.0 6 Trishul Investments Pvt. Ltd. 31-Mar-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 11-May-15 5.00 15.4 1.4 9 Anna Investments Pvt. Ltd. 31-Mar-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

ICICI Securities Ltd | Retail Equity Research Page 7

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 4,386.0 5,144.3 Profit after Tax -35.9 29.4 116.4 201.8 Growth (%) -3.4 -0.5 -0.7 17.3 Add: Depreciation 276.4 257.9 258.4 270.2 Raw material cost 574.4 658.7 660.5 790.3 (Inc)/dec in Current Assets -166.7 478.4 95.1 -14.6 Employee Expenses 351.3 318.2 321.4 380.1 Inc/(dec) in CL and Provisions 270.2 -79.1 -71.2 -29.0 Power, Oil & Fuel 1276.2 1136.4 1100.8 1290.5 CF from operating activities 344.0 686.6 398.6 428.4 Freight cost 1009.1 953.1 929.1 1080.4 (Inc)/dec in Investments 12.3 -639.6 0.0 0.0 Other Expenses 692.7 674.8 560.8 670.3 (Inc)/dec in Fixed Assets -57.6 329.8 -220.0 -250.0 Total Operating Exp. 3,903.7 3,741.1 3,572.7 4,211.6 Others 0.0 0.0 0.0 0.0 EBITDA 537.1 677.8 813.3 932.6 CF from investing activities -45.3 -309.8 -220.0 -250.0 Growth (%) -36.3 26.2 20.0 14.7 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 353.7 419.6 404.3 388.7 Dividend paid & dividend tax 0.0 0.0 -71.9 -71.9 Other Income 57.1 29.1 20.0 20.0 Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0 Exceptional items 0.0 0.0 0.0 0.0 Others -202.5 -287.8 0.0 0.0 PBT -35.9 29.4 170.7 293.7 CF from financing activities -300.4 -375.9 -171.9 -171.9 Total Tax 0.0 0.0 56.3 94.0 Net Cash flow -1.6 0.8 6.7 6.5 PAT -35.9 29.4 114.4 199.7 Opening Cash 4.7 3.1 3.9 10.6 Adjusted PAT -35.9 29.4 116.4 201.8 Closing Cash 3.1 3.9 10.6 17.1

Growth (%) -120.3 -182.1 295.5 73.4 Source: Company, ICICIdirect.com Research Adjusted EPS (|) -1.2 1.0 3.8 6.6

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 3.8 6.6 Reserve and Surplus 3,544.1 3,285.7 3,330.2 3,460.1 Cash EPS 7.8 9.4 12.2 15.4 Total Shareholders funds 3,851.3 3,592.9 3,637.4 3,767.3 BV 125.4 117.0 118.4 122.6 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 0.3 0.6 Minority Interest / Others 0.0 0.0 0.0 0.0 Operating Ratios (%) Total Liabilities 6,960.7 6,614.1 6,558.6 6,588.5 EBITDA Margin 12.1 15.3 18.5 18.1 Assets PAT Margin -0.8 0.7 2.7 3.9 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 3.2 5.4 Investments 943.5 1,585.1 1,585.1 1,585.1 RoCE 3.9 6.7 8.9 10.6 Inventory 550.9 606.9 594.8 532.7 RoIC 3.9 6.7 8.7 10.3 Debtors 422.5 466.1 384.5 394.6 Valuation Ratios (x) Loans and Advances 2,552.3 1,974.4 1,973.0 2,039.5 P/E NM 89.9 22.7 13.1 Other Current Assets 2.1 0.0 0.0 0.0 EV / EBITDA 10.1 7.9 6.4 5.5 Cash 3.1 3.9 10.6 17.1 EV / Net Sales 1.2 1.2 1.2 1.0 Total Current Assets 3,530.9 3,051.3 2,962.9 2,984.0 Market Cap / Sales 0.6 0.6 0.6 0.5 Creditors 1,716.8 1,638.3 1,478.0 1,451.7 Price to Book Value 0.7 0.7 0.7 0.7 Provisions 59.4 58.8 147.8 145.2 Solvency Ratios Total Current Liabilities 1,776.2 1,697.1 1,625.8 1,596.8 Debt/EBITDA 5.2 4.0 3.2 2.7 Net Current Assets 1,754.7 1,354.2 1,337.1 1,387.2 Debt / Equity 0.7 0.7 0.7 0.7 Application of Funds 6,960.7 6,614.2 6,558.6 6,588.5 Current Ratio 2.0 1.8 1.8 1.9

Source: Company, ICICIdirect.com Research Quick Ratio 2.0 1.8 1.8 1.9

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* 1519 1738 Hold 28,542 21.5 14.6 11.5 147 126 122 8.3 10.9 13.0 14.1 10.9 13.2 239 257 Hold 37,039 16.9 16.8 13.7 164 166 156 14.0 12.4 13.1 14.8 12.0 12.5 Ambuja Cement* UltraTech Cem 2993 3180 Buy 82,128 21.9 16.1 12.4 227 192 184 11.0 13.8 17.0 10.7 12.9 15.3 Shree Cement^ 11416 11,200 Hold 39,728 29.7 21.3 18.0 323 266 241 6.7 11.2 12.4 9.5 13.7 14.4 Heidelberg Cem 69 80 Buy 1,564 9.1 11.2 8.9 82 81 80 7.2 5.5 7.5 6.8 3.7 7.0 India Cement 86 92 Hold 2,645 7.9 6.4 5.5 58 56 55 6.7 8.9 10.6 0.8 3.2 5.4 JK Cement 625 650 Hold 4,371 14.6 10.9 8.5 93 91 91 7.3 9.5 12.8 9.5 9.6 13.9 JK Lakshmi Cem 345 402 Buy 4,061 15.8 13.3 9.3 140 99 89 7.8 7.8 12.2 7.2 8.8 15.7 Mangalam Cem 249 277 Buy 665 12.7 7.5 5.4 50 49 49 5.7 9.9 13.9 4.6 8.4 12.3 SFCL 161 266 Buy 3,595 9.5 7.1 5.1 198 192 134 13.1 20.8 28.9 13.8 17.0 23.2 *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/midca ps, 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, st 1 Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East)

Mumbai – 400 093

[email protected]

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:

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ICICI Securities Ltd | Retail Equity Research Page 11