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04 AUG 2016
Ramco Cements
SELL
INDUSTRY
CEMENT
CMP (as on 03 Aug 2016) Rs 533
Target Price
Rs 447
Nifty
8,545
Sensex
27,698
TRCL IN
238
127/1,895
132
Promoters
42.30
24.88
FIIs
15.91
16.91
(Rsmn)
Net Sales
EBITDA
PAT
Diluted EPS (Rs)
P/E(x)
EV/EBITDA(x)
RoE (%)
Rs 595 / 291
3M
6M
12M
Absolute (%)
13.0
40.1
49.2
Relative (%)
3.2
25.8
50.9
Source : BSE
Ankur Kulshrestha
ankur.kulshrestha@hdfcsec.com
+91-22-6171 7346
Sarfaraz Singh
sarfaraz.singh@hdfcsec.com
+91-22-6171 7331
1QFY17
9,721
3,042
1,559
6.55
1QFY16
9,474
2,538
992
4.17
YoY(%)
2.6
19.9
57.1
57.1
4QFY16
10,149
3,454
2,044
8.59
Key highlights
QoQ(%)
(4.2)
(11.9)
(23.7)
(23.7)
FY14
36,321
6,192
1,376
5.8
95.6
25.9
5.7
FY15
35,939
7,920
2,424
10.2
54.3
20.0
9.5
FY16
35,872
11,414
5,821
24.5
22.6
13.4
20.3
FY17E
39,196
12,345
5,961
25.0
22.1
11.8
17.9
FY18E
42,705
13,403
6,920
29.1
19.0
10.4
17.9
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
(Rs mn)
Net Sales
Other operating income
Power & Fuel
Freight Expenses
RM Costs
Employee costs
Other Operating Expenses
Changes in stock
EBITDA
Other Income
Interest Cost
Depreciation
PBT
Tax
RPAT
E/o(adj for tax)
APAT
1QFY17
9,721
292
1,293
2,130
1,259
707
1,233
57
3,042
19
291
663
2,106
547
1,559
1,559
1QFY16
9,474
433
1,457
2,218
1,278
623
1,196
165
2,538
18
493
667
1,396
403
992
992
YoY(%)
2.6
(11.3)
(4.0)
(1.5)
3.1
19.9
57.1
57.1
4QFY16
10,149
361
1,302
2,175
1,298
653
1,287
(19)
3,454
28
444
652
2,386
342
2,044
(175)
1,868
QoQ(%)
(4.2)
4QFY16
2.09
4,686
623
1,041
621
312
607
1,481
3,205
QoQ(%)
(0.6)
(3.1)
(0.1)
(1.4)
(2.4)
9.0
2.5
(10.5)
0.4
(0.7)
(2.1)
(3.0)
(4.1)
(11.9)
(23.7)
(16.5)
1QFY17
2.08
4,542
623
1,026
606
340
622
1,325
3,217
1QFY16
1.81
4,987
804
1,224
705
344
751
1,161
3,826
YoY(%)
14.5
(8.9)
(22.5)
(16.1)
(14.0)
(0.9)
(17.2)
14.2
(15.9)
Page | 2
Peer valuations
Company
MCap
(Rs bn)
CMP
(Rs)
TP
(Rs)
Reco.
UltraTech Cement
Shree Cement
Ambuja Cement1
ACC1
Ramco Cements
Birla Corp
Orient Cement
Sanghi Industries
1,009.6
584.6
407.4
314.0
127.7
42.3
34.0
14.7
3,668
16,780
263
1,669
533
549
166
67
2,973
13,140
190
1,224
447
550
180
83
NEU
NEU
SELL
SELL
SELL
NEU
NEU
BUY
EV/EBITDA (x)
FY17E FY18E
16.7
14.1
21.9
16.8
16.2
11.6
16.2
10.8
11.8
10.4
8.0
5.1
17.0
7.0
6.5
4.1
P/E (x)
FY17E FY18E
32.7
26.9
56.5
39.3
29.5
21.3
35.1
21.0
22.1
19.0
12.8
9.2
119.0
10.6
12.1
6.4
EV/T (US$)
FY17E FY18E
220
213
265
245
174
166
131
128
160
147
57
48
80
76
70
62
FY17E
7.6
5,042
773
580
1,144
1,521
FY18E
8.2
5,093
769
589
1,147
1,535
Key Assumptions
We retain our estimates of
strong profitability
FY14
8.6
4,073
969
647
1,085
595
FY15
7.7
4,542
1,015
687
1,234
864
FY16
7.2
4,896
814
571
1,094
1,451
Page | 3
YoY (%)
mnT
2.5
Realisations (Rs/T)
2.0
40.0
6,000
30.0
5,000
20.0
1.5
10.0
-
1.0
(10.0)
0.5
(20.0)
Freight cost/T
Oth. Exp/T
20.0
-
2,000
(20.0)
1,000
-
3QFY10
1QFY11
3QFY11
1QFY12
3QFY12
1QFY13
3QFY13
1QFY14
3QFY14
1QFY15
3QFY15
1QFY16
3QFY16
1QFY17
(40.0)
Rs/T
YoY (%)
%
350.0
1,600
300.0
1,400
250.0
1,200
200.0
1,000
150.0
800
100.0
600
50.0
400
200
(50.0)
(100.0)
3QFY10
1QFY11
3QFY11
1QFY12
3QFY12
1QFY13
3QFY13
1QFY14
3QFY14
1QFY15
3QFY15
1QFY16
3QFY16
1QFY17
1QFY17
3QFY16
1QFY16
3QFY15
1QFY15
3QFY14
1QFY14
3QFY13
1QFY13
3QFY12
1QFY12
3QFY11
40.0
RM cost/T
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
1QFY11
60.0
3,000
1QFY17
3QFY16
1QFY16
3QFY15
1QFY15
3QFY14
1QFY14
3QFY13
1QFY13
3QFY12
1QFY12
3QFY11
1QFY11
P&F Costs/T
Empl. Cost/T
YoY (%)
Rs/T
4,000
(30.0)
3QFY10
0.0
3QFY10
Page | 4
Income Statement
Year ending March (Rs mn)
Balance Sheet
FY14
FY15
FY16
FY17E
FY18E
FY14
FY15
FY16
FY17E
FY18E
Net sales
36,321
35,939
35,872
39,196
42,705
SOURCES OF FUNDS
Growth %
Material Expenses
(4.1)
18,466
(1.1)
16,860
(0.2)
13,959
9.3
15,310
9.0
16,734
Share Capital
Reserves
238
24,583
238
26,214
238
30,688
238
35,598
238
41,298
Employee Expenses
SG&A Expenses
Other operating expenses
2,218
10,291
230
2,287
9,889
281
2,592
8,558
258
2,801
9,332
258
3,093
10,105
258
24,821
15,204
26,452
17,100
30,926
10,586
35,836
4,824
41,536
4,824
5,116
6,622
10,504
11,495
12,515
14,085
10,019
11,470
16,403
13,110
14.1
18.4
29.3
29.3
29.3
Total Debt
29,288
27,119
22,056
21,226
17,933
1,076
6,192
1,298
7,920
910
11,414
850
12,345
889
13,403
7,374
4,241
8,271
4,448
8,521
5,375
8,521
5,375
8,521
5,375
EBITDA %
EBITDA Growth %
Depreciation
17.0
(40.4)
3,063
22.0
27.9
2,499
31.8
44.1
2,670
31.5
8.2
2,699
31.4
8.6
2,441
65,723
66,289
66,877
70,958
73,365
46,415
48,755
47,585
46,386
45,445
EBIT
Other Income (including EO
items)
Interest
3,129
5,422
8,744
9,646
10,962
3,857
2,747
3,053
2,553
2,053
295
81
89
94
98
1,881
1,938
1,802
1,224
1,175
PBT
Tax
RPAT
1,543
166
1,376
3,564
1,141
2,424
7,030
1,448
5,583
8,515
2,555
5,961
9,886
2,966
6,920
2,173
3,084
55,529
2,385
3,646
57,533
3,654
2,939
57,231
3,654
2,939
55,532
3,654
2,939
54,091
Inventories
6,855
5,206
5,490
6,155
6,046
(238)
Debtors
Other Current Assets
3,040
2,802
3,802
2,154
4,685
2,370
4,435
1,938
3,699
1,938
APAT
APAT Growth (%)
Adjusted EPS (Rs.)
1,376
(65.9)
5.8
2,424
76.1
10.2
5,821
140.2
24.5
5,961
2.4
25.0
6,920
16.1
29.1
1,108
13,804
1,877
1,792
12,955
2,198
908
13,453
2,091
6,710
19,239
2,530
10,615
22,298
1,741
(65.9)
76.1
140.2
2.4
16.1
1,086
2,216
1,283
1,283
1,283
2,962
10,842
65,723
4,414
8,541
66,289
3,374
10,079
66,877
3,813
15,426
70,958
3,024
19,274
73,365
Operating profits
Operating Profit Margin (%)
Deferred Taxes
Long Term Provisions & Others
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Investments
LT Loans and Advances
Total Non-current Assets
Page | 5
Cash Flow
Key Ratios
FY14
FY15
FY16
FY17E
FY18E
Reported PBT
1,543
3,564
7,030
8,515
9,886
PROFITABILITY (%)
(85)
1,881
816
1,938
161
1,802
(94)
1,224
(98)
1,175
EBITDA Margin
APAT Margin
Depreciation
Working Capital Change
Tax paid
3,063
(473)
(166)
2,499
1,208
(1,141)
2,670
(1,274)
(1,448)
2,699
23
(2,555)
2,441
56
(2,966)
RoE
Core RoCE
RoCE
5,762
8,884
8,943
9,814
10,494
EFFICIENCY
(4,481)
(4,290)
(1,806)
(1,000)
(1,000)
1,281
(177)
4,594
(724)
7,137
(95)
8,814
-
9,494
-
Non-operating Income
INVESTING CASH FLOW ( b )
Debt Issuance/(Repaid)
295
(4,363)
2,618
81
(4,934)
(2,169)
89
(1,812)
(5,063)
94
(906)
(830)
Interest expenses
(1,881)
(1,938)
(1,802)
FCFE
Share Capital Issuance
Dividend
(5,099)
(279)
(826)
(430)
457
Capex
Free cash flow (FCF)
Investments
FY14
FY15
FY16
FY17E
FY18E
17.0
3.8
22.0
6.7
31.8
16.2
31.5
15.2
31.4
16.2
5.7
8.0
7.9
9.5
9.1
9.0
20.3
16.8
16.5
17.9
17.5
15.9
17.9
21.3
17.0
10.8
32.0
20.6
33.0
33.0
0.5
89
0.5
89
0.5
98
0.6
95
0.6
91
98
(902)
(3,293)
Debtors (days)
Payables (days)
Cash Conversion Cycle (days)
27
23
92
35
30
94
43
39
102
42
38
100
35
32
94
(1,224)
(1,175)
Debt/EBITDA (x)
4.5
3.6
2.2
1.8
1.5
5,053
(839)
1,148
(1,051)
3,566
(1,220)
Net D/E
Interest Coverage
PER SHARE DATA
1.16
2.7
1.00
3.4
0.68
5.8
0.41
9.4
0.18
10.7
(4,537)
(7,704)
(3,105)
(5,687)
EPS (Rs/sh)
5.8
10.2
24.5
25.0
29.1
1,857
1,955
(587)
(1,271)
(574)
311
5,803
3,905
CEPS (Rs/sh)
DPS (Rs/sh)
18.7
1.0
20.7
1.5
34.7
3.0
36.4
3.8
39.3
4.4
1,108
1,792
907
6,710
10,615
BV (Rs/sh)
VALUATION
P/E
104.3
111.1
129.9
150.6
174.5
95.6
54.3
22.6
22.1
19.0
5.3
5.0
4.3
3.7
3.2
25.9
3.7%
0.8%
(4.3%)
0.2
20.0
5.5%
2.9%
1.4%
0.3
13.4
5.7%
4.5%
7.9%
0.5
11.8
6.4%
5.8%
6.6%
0.7
10.4
7.2%
6.5%
9.0%
0.8
P/BV
EV/EBITDA
OCF/EV (%)
FCF/EV (%)
FCFE/Market Cap (%)
Dividend Yield (%)
Page | 6
RECOMMENDATION HISTORY
Ramco Cements
Date
6-Aug-15
9-Nov-15
7-Jan-16
10-Feb-16
8-Apr-16
23-May-16
8-Jul-16
4-Aug-16
TP
560
510
460
410
360
310
CMP
364
367
398
374
443
493
578
533
Reco
SELL
NEU
SELL
NEU
SELL
NEU
SELL
SELL
Target
299
342
352
352
352
447
447
447
Rating Definitions
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
260
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
Page | 7
Disclosure:
We, Ankur Kulshrestha, PGDBM & Sarfaraz Singh, PGDM 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.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
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Institutional Equities
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Page | 8