Sagar Cements Ltd. - Moneycontrol

Sagar Cements Ltd. BUY Target Price ₹941

CMP ₹680

Sensex

27,144

Nifty

8,328

BSE 100

8,486

Industry

Cement

Scrip Details Mkt Cap (₹cr)

1,184

BVPS (₹)

316.1

O/s Shares (Cr)

1.7

Av Vol (Lacs)

0.2

52 Week H/L

719/305

Div Yield (%)

0.4

FVPS (₹)

10.0

Shareholding Pattern Shareholders

%

Promoters

56.93

Public

43.07

Total

100.0

Sagar Cements Ltd. (Sagar) is a cement manufacturer with a dominant presence in South India. We believe that the cement industry is on an up-turn and expect Sagar to be a key beneficiary. We are positive on the company given that: i) The cement industry is on the verge of a turn-around: South India (which accounts for ~ 70% of Sagar’s revenues) has witnessed a five year lull in cement demand owing to surplus capacities, subdued demand and political unrest over the creation of a separate state, Telangana. However, with the political resolution of Telangana, limited planned capacity additions in the area and an anticipated pick-up in construction and irrigation projects, cement demand in the South is expected to see a revival going forward. We expect key markets of AP, Karnataka and TN to clock 8% CAGR during FY18-19. ii) Sagar has recently completed the acquisition of BMM cements which has a grinding capacity 1 mtpa for Rs 540 crores. It has also received the approval to acquire a 0.2 mtpa grinding unit of Toshali Industries for Rs 60 crores. Post these acquisitions, the grinding capacity of the company will increase to ~4.3 mtpa from 2.75 mtpa. Inorganic growth at the start of the potential cement up-cycle will help the company fully capitalize on the demand potential. Accordingly, we expect revenues to grow at a 3 year CAGR of 16% to Rs 1178 crore by FY19.

Sagar vs. Sensex 31000

740

29000

640

27000

540

25000

440

23000 340

21000

Sagar (RHS)

Jun-16

Apr-16

May-16

Mar-16

Jan-16

Feb-16

Dec-15

Oct-15

Sensex

Nov-15

Sep-15

Jul-15

40 Aug-15

140

15000 Jun-15

240

17000 May-15

19000

iii) Freight cost as a % of total revenues is expected to decline from 16% in FY16 to ~13% in FY19 owing to: a) BMM Cements is strategically located such that it can service the Southern markets, while Sagar’s standalone plant can focus on supplies to Maharashtra and Orissa. This arrangement has the potential to reduce the lead distance by ~20% and b) Commencement of the railway siding unit is expected to help the company save ~ Rs 12 crore annually.

Key Financials (₹ in Cr) Net Y/E Mar EBITDA Sales 753 124 2016 869 147 2017E 1,019 192 2018E 2019E 1,178 230 - 1 of 21 -

Adj PAT 46 50 80 111

EPS (Rs) 26.5 28.8 45.7 64.1

EPS Growth (%) -38.5 8.7 58.7 40.2

RONW (%) 8.4 8.5 12.3 15.4

ROCE (%) 9.7 10.7 15.1 18.4

P/E (x) 14.7 24.0 15.1 10.8

EV/EBITDA (x) 8.5 10.7 7.8 6.1 st

Friday 01 July, 2016 This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.

STOCK POINTER

Index Details

FY19E EV/EBITDA 6.1x

ii) Power cost is expected to decline given that: a) BMM has a 25 MW captive power plant with a surplus of 15 MW which is sold to AP Genco b) Coal prices are declining due to increasing emphasis on cleaner fuels. iii) With the uptick in demand coupled with lower freight and power costs, we expect Sagar’s EBITDA margin to expand from 16.5% in FY16 to 19.5% by FY19.

We initiate coverage on Sagar as a BUY with a Price Objective of ₹941, representing a potential upside of 38% over a period of 18 months. We have arrived at our target price by assigning an EV/EBITDA multiple of 8x to FY19E EBITDA of Rs 230 crores.

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 Company Background Incorporated in 1981, Sagar Cements is a south based cement manufacturer with a cement capacity of 3 mtpa and a clinker capacity of ~ 2.3 mtpa. It earns ~70% of its revenues from sales to south India. The company primarily manufacturers the OPC variety of cement from its plant situated in the Nalgonda district of Telanga and has a dealership strength of ~1600. In FY15, it acquired BMM Cements for Rs 540 crores which has a cement capacity of 1 mtpa and a clinker capacity of 0.7 mtpa. BMM Cements has a 25 MW thermal captive power plant and a 20 year limestone mining lease. In June 2016, Sagar received an approval to acquire a 0.2 mtpa grinding unit of Toshali Cements for Rs 60 crores. It further plans to increase the capacity of this unit to 0.3 mtpa at a cost of Rs 6 crore post acquisitions. Post both these acquisitions, Sagar Cement’s consolidated capacity will increase ~4.3 mtpa from 2.75 mtpa in FY16.

Sagar Cements– Snapshot

Sagar Cements (Standalone)

FY16 Revenues: Rs 622 crores

Capacity Cement:3.0 mtpa Clinker: 2.3 mtpa Capacity Utilization:55%

Geography Mix AP & T: 42% Karnataka:10.5% TN: 16.8% Maharashtra: 19% Orrisa: 9%

Channel Mix Trade: 75% Non-Trade: 25%

Freight Mix Road: 100%

Source: Sagar Cements, Ventura Research

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 Key Investment Highlights  Well poised to capture demand revival in the South Sagar Cements, with a grinding capacity of 4 mn tones (including 1 mn tones post acquisition of BMM industries) is a dominant player in south India with presence across all five key states – AP, Telangana, Tamil Nadu, Kerala and Karnataka. In addition, it has also expanded its geographic wings to Maharashtra and Orrisa. However, it continues to earn nearly~70% of its revenues from the south. Diversifying geographic base, but South continues to dominate 100.0% 90.0% 80.0% 70.0%

4.1% 9.3% 5.3% 7.0%

3.8%

3.9%

6.0%

11.8%

13.5%

16.0%

11.8% 13.9%

60.0%

13.3%

10.0%

14.0%

11.0%

50.0%

7.1%

8.7%

20.0%

19.0%

16.1%

16.8%

15.1%

10.5%

38.8%

41.7%

FY15

FY16

40.0% 70.8% 30.0%

53.7%

51.0%

54.0%

20.0%

10.0% 0.0% FY11

FY12 AP & T

Karnataka

FY13 TN

FY14 Maharashtra

Orrisa

Others


South India has witnessed a five year lull in cement demand owing to surplus capacities, subdued demand and political unrest over the creation of a separate state, Telangana. However, with the political resolution of Telangana, limited planned capacity additions in the area and an anticipated pick-up in construction and irrigation projects, cement demand in the south is expected to revive going forward.

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South Industry: Demand likely to revive after a subdued period of 5 years, utilizations to cross 60% 160

FY16-FY18 Estimated: Capacity CAGR: 1.6% Demand CAGR: 7.9% Average utilization level: 63%

FY11-FY15: Capacity CAGR: 6.1% Demand CAGR: 0.9% Average utilization level: 59.3%

in m n tonnes

140

70% 68%

66% 120

64% 100

62%

80

60% 58%

60

56% 40 54%

20

52%

0

50% FY 11

FY 12

FY 13

Capacity

FY 14

Dem and

FY 15

FY 16E

FY 17E

FY 18E

Utiliz ation (RHS )

Source: Ventura Research

Our industry interactions suggest that while there has been an increase in project clearances, on-the ground construction activity is yet to pick-up. Barring roads, which has seen a significant improvement in pace of execution, other infrastructure projects are yet to take-off. Accordingly, we believe that a real-uptick in cement offtake will happen from FY18 onwards, when construction of most projects is likely to be in full swing. Accordingly, we expect cement demand to grow at 6.7% in FY17; this is primarily attributable to the low base (-1.3% in FY16). We expect an 8% CAGR from FY18 onwards. Diversification to faster growing areas a plus The management has strategically reduced its exposure to Andhra Pradesh from ~71% of total revenues in FY11 to ~40% in FY16. It has expanded its presence in the Tamil Nadu and Kerala markets which are relatively faster growing, coupled with an enhanced presence in Maharashtra and Orissa, which are historically lucrative markets owing to favorable demand-supply dynamics. This strategic shift has enabled the company to report a 5% revenue CAGR during FY11-16 (standalone) despite the fact that AP has de-grown at a CAGR of 6% during the same period.

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Re-alignment of markets augurs well for future prospects in mn tonnes 30.00

25.00

Only market to de-grow

20.00 15.00 10.00 5.00 0.00 AP & T

Karnataka

TN

FY11

Maharashtra

Orrisa

FY16


Major infra activity lined up in key markets


- 6 of 21-

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South markets to recover from de-growth

Orrisa and Maharashtra to maintain growth pace

Erro r ! Not a valid link.

20.0%

15%

15.0%

10%

10.0%

5%

5.0%

0% FY11

FY12

FY13

FY14

FY15

FY16e

FY17e

FY18e

FY19e

0.0%

-5%

FY11 -10%

-5.0%

-15%

-10.0% AP & T

Karnataka

FY12

FY14

FY15

Maharashtra

TN


FY13

FY16e

FY17e

FY18e

FY19e

Orrisa


Sagar’s plant in Nalgonda, Telangana is within 100 kms of Amravati, the proposed state capital of Andhra Pradesh. Amravati is expected to witness construction activities towards enhancement of road and housing infrastructure. With close proximity to the city, Sagar Cements is expected to emerge as the biggest beneficiary of the development of the new state capital.  Acquisition of BMM results in multiple synergies In June 2008, Sagar invested Rs 86 crores in a JV with Vicat SA, France in order to set up a 5.5 mtpa cement plant in Karnataka. In September 2014, Sagar sold its entire 47% stake in the JV for Rs 435 crores, thus multiplying its investment by more than 5x. In August 2015, Sagar completed its acquisition of BMM Cements for Rs 570 crores, funded primarily from the profits booked through the JV. About BMM: Capacity: 1 mn ton Location: Karnataka- Andhra Pradesh Border Capacity Utilization: 45% in FY16 Power: 25 MW Captive Power Plant Limestone: 20 years mining lease granted in 2016

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BMM – Key Financials in Rs crs Volumes ( in mn tonnes) Realisations (Rs/Tonne) Revenues EBITDA PAT Fixed Asset

FY14 FY15 0.348 0.158 4110.0 4321.0 149.5 115.5 -9.7 6.0 -65.7 -23.4 396.2 439.9


Acquisition of BMM provides multiple synergies for Sagar, as enumerated below: i) Reduction in freight cost: BMM, located at the AP-Karnataka border, is well positioned to service the southern markets of Karnataka, Tamil Nadu and AP, while Sagar’s plant in Nalagoda, can focus on supplies to Maharashtra and Orissa. This arrangement has the potential to bring down Sagar’s lead distance from 650-700 kms to 500-550 kms, a reduction of nearly 20%. Sagar’s freight cost which ranges between Rs 650-700 per tone, is expected to come down to Rs 550-600 per tone by FY18-19 owing to the anticipated benefits of reduced lead distance post acquisition of BMM. Pre-acquisition distribution model – High lead distance as far off markets services

Sagar Cements, Mattampally


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Post BMM acquisition– Same markets can now be serviced through a shorter lead distance

Sagar Cements, Mattampally

BMM, Gudipadu


Commencement of captive railway siding to further reduce freight cost: Sagar has completed the construction of its captive railway siding, at a cost of Rs 123 crores. Currently, 100% of its cement dispatches are via road in the absence of railway connectivity to its plant. Hence, the railway siding was constructed with the aim of reducing freight cost, enhancing its presence in far away markets at competitive rates. The management has indicated that the trial run of the unit has begun. However, the railway minister is yet to re-classify the freight cost of the railway siding to industrial rates, as a result of which the company has not yet derived significant cost savings. The rates are expected to be revised in FY17, post which, the company is expected to derive savings of ~Rs 12 crores annually, translating to 150-200 bps expansion in operating margin. ii) Reduction in power cost: Unlike Sagar, BMM has a 25 MW captive coal based power plant. With captive requirements of only 10 MW, BMM has a PPA to sell 15 MW to AP Genco @ Rs 5.4/unit. Sagar is evaluating the options of continuing its contract with AP Genco - 9 of 21-

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versus increasing captive consumption. Either way, the company stands to benefit either through sale of power which compensates for higher cost power purchased or through the consumption of low cost electricity – as captive power consumption will cost ~Rs 4/unit as compared to Rs 6.3/unit in case of purchased electricity. Accordingly, Sagar’s power and fuel cost which stands at ~Rs 1250-1300 per tone is expected to reduce to ~ Rs 1100 per ton. Sagar’s power cost per tone reduced from Rs 1220 per tone in FY15 to Rs 1120 per tone in FY16 owing to: i) Captive consumption in BMM’s plant, and ii) Fall in coal prices. Sagar has a PPA with Singareni coal field for the supply of coal. However, Sagar’s consumption is skewed towards international coal – domestic: international coal mix stood at 25:75. According to the management, the quality of the international coal grade variety is far superior, thereby increasing the price competitiveness of the same when adjusted on gross calorific value basis. Coal prices have nearly havled from ~$130/tone to $60/tone from May 2011 to May 2016 as the emphasis, globally, has shifted to cleaner fuels. Coal prices are expected to remain subdued in $/Ton 140

120 100 80 60 40 20

Mar-16

May-16

Jan-16

Nov-15

Jul-15

Sep-15

May-15

Jan-15

Mar-15

Nov-14

Jul-14 Sep-14

Mar-14

May-14

Sep-13

Nov-13 Jan-14

May-13 Jul-13

Mar-13

Sep-12

Nov-12 Jan-13

May-12 Jul-12

Jan-12

Mar-12

Jul-11

Sep-11 Nov-11

May-11

0

Australian Coal Price


Also, thanks to technology initiatives, the electricity consumption per unit of production has been on a declining trend adding to the savings in power and fuel costs.

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Declining electricity consumption per unit…

…power cost per tone also declining


98

in Rs per tonne 1600

96

1400

in KWH

1200

94

1000 92

800

90

600

88

400

86

200 0

84 FY11

FY12

FY13

FY14

FY15

Electrcity consumption per unit of production


FY11

FY12

FY13

FY14

FY15

FY16

Power Cost per tonne


iii) Reduce tax liability: BMM reported a net loss of Rs 57 crores and Rs 65 crores in FY13 and FY14 respectively. Sagar can use these accumulated losses to lower its tax liability. In FY16, Sagar’s tax rate stood at 12% and is expected to remain at 12% in FY17, before increasing to 28% in FY18-19. 

Limestone reserves adequate to support any expansions

Around 1.4 tonnes of limestone is required to manufacture 1 tonne of cement. South India has abundant limestone reserves, which is also the reason for surplus cement capacities in that region. Sagar’s limestone mine is within 4 kms of its plant. The mine has reserves of more than 1000 mt, which can serve Sagar’s requirements for 100+ years. BMM, too, has received a 20 year mining lease in 2016, with reserves of 155 mt. Prior to the grant of the mining lease, the company had to purchase limestone externally thereby incurring high expenditure. Hence, BMM operated at only 16% utilization levels in FY15. Even so, Sagar’s (consolidated) raw material expenses shot up from Rs ~400 per tone to Rs 680 per tone in FY16. As the mining lease is now obtained for BMM, we expect raw material costs to reduce to Rs 450 per tone by FY19.

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

Well-thought out expansion strategy

We derived great comfort from our interaction with the management. With a handson management approach to the situation on the ground, they have adopted a strategy to double their capacity every 12 years, timing it with the next up-cycle in the cement industry. The cement industry, is inherently, cyclical in nature, with demand growth of ~6% indicting a down-cycle and a demand growth of ~10%, indicating an up-cycle. Cement cycles since 1990 in mn tonnes 300

~6% CAGR

250

~10% CAGR

~10% CAGR 200

~6% CAGR 150

~6% CAGR 100 50

FY15

FY14

FY13

FY12

FY11

FY10

FY09

FY08

FY07

FY06

FY05

FY04

FY03

FY02

FY01

FY00

FY99

FY98

FY97

FY96

FY95

FY94

FY93

FY92

FY91

FY90

0


Sagar completed the acquisition of BMM in 2015, at the start of the potential next up-cycle in the cement sector. This strategy ensures that the company expands and consolidates its capacity during a down-cycle and maximizes the demand potential in an up-cycle, thereby ensuring that equity investors are awarded with high RoEs. Key Risks:  Lower than anticipated rainfall: While the Met department has forecast above normal monsoons for this year, any deviation will hurt the rural economy to a great extent. This will adversely impact all underlying sectors, including cement.  Increase in coal prices: Sagar is entirely dependent on coal for its fuel requirements. Any increase in coal prices will put pressure on the operating margins.

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Financial Performance In Q4FY16, Sagar reported revenue de-growth of 15% YoY owing to 5% decline in volumes and 8% decline in realizations. The decline in volume and pricing was on account of subdued demand conditions. Q4FY16 volumes stood at 0.46 mn tones, while net realization stood at Rs 4670 per tone. EBITDA margin contracted 600 bps to 16.8% in Q4FY16 owing to lower realizations, higher employee and operating costs. The company reported a PAT of Rs 15.2 crores, down 30% YoY owing to contraction in operating margin.

Quarterly Financial Performance (₹ in crore) Particulars Net Sales Growth % Total Expenditure EBIDTA EBDITA Margin % Depreciation EBIT (EX OI) Other Income EBIT Margin % Interest Exceptional items PBT Margin % Provision for Tax PAT PAT Margin (%)

Q4FY16 153.4 -15.4 127.6 25.8 16.8 7.5 18.3 7.93 26.2 17.1 8.6 0.00 17.6 11.4 2.4 15.2 9.9

Q4FY15 181.3

FY15 575.6

139.8 41.5 22.9 5.9 35.6 5.30 40.9 22.5 4.9 0 36.0 19.9 14.3 21.7 12.0

519.2 56.4 9.8 21.5 34.9 366.3 401.2 69.7 23.1 0.0 378.1 65.7 81.4 296.7 51.5

FY16 753.4 30.9% 629.4 124.0 16.5 33.7 90.4 4.1 94.5 12.5 41.8 0.0 52.7 7.0 6.6 46.1 6.1


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Financial Outlook  Revenues expected to grow at a CAGR of 16% We expect Sagar’s revenues to grow at a 3 year CAGR of 16% to Rs 1178 crore in FY19E on the back of a ~12% CAGR in volumes. We expect sales volume to touch 2.8 mn tones and net realization to clock at Rs 4250 per ton by FY19. The steady volume growth will be driven by: i) Pick-up in construction activity in the South ii) Ramp up of production from BMM Cements and iii) Incremental sales volumes from the recently acquired Toshali cements. For a long period, the utilization of players in the South remained at sub 50% levels owing to political disputes. However, with the resolution of the dispute and anticipated pick-up in key markets, led by creation of a new capital state Amravati ( within 100 kms from Sagar’s plant) , we expect Sagar’s utilization level to increase to ~64% by FY19 from 52% in FY16.

Utilizations to gradually improve…

Volumes and realizations to pick up


in mtpa 5.0

70.0%

in Rs per tonne

in mtpa 3.0

4500 4000

4.5

60.0%

2.5

50.0%

2.0

3500

4.0 3.5 3.0

40.0%

2.5

2500 1.5 2000

30.0%

2.0

1.0

1.5

1500

20.0%

1.0

1000 0.5 500

10.0%

0.5 0.0

0.0% FY14

FY15

FY16

Capacity


- 14 of 21-

3000

FY17E

FY18E

Capacity Utilisation (RHS)

FY19E

0.0

0 FY14

FY15

Volumes

FY16

FY17E

FY18E

FY19E

Net Realisation per tonne


st


Cement prices in Chennai and Bengaluru relatively firm in Rs per bag 450 400 350 300 250 200

Hyderabad

Bengaluru

Bidar

Bellary

Chennai

Sholapur

Pune

Mumbai

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

150


Revenues to grow at a 3 year CAGR of 16%

Rs crs 1400

35% 30%

1200

25% 1000

20% 15%

800

10% 600

5% 0%

400

-5% 200

-10%

0

-15% FY14

FY15

FY16

Revenues

FY17E

FY18E

FY19E

% Growth (RHS)

Source: Ventura Research - 15 of 21-

st


 EBITDA and PAT to grow at a steady pace EBITDA is expected to grow at a 3 year CAGR of 23% to Rs 230 crore by FY19 on the back of savings in freight and power costs as the synergies from BMM’s acquisition starts to kick in. Accordingly EBITDA margin is expected to expand from ~16.5% in FY16 to ~19.5% by FY19. We expect the company to report a PAT of Rs 111 crores and EPS of Rs 64 in FY19. EBITDA margin set to expand

PAT to grow at a robust pace

in Rs crs 250

25.0%

200

20.0%

150

15.0%

in Rs crs 350

14.0%

300

12.0%

250

10.0%

200 8.0% 150

100

10.0%

50

5.0%

6.0% 100 4.0%

50

2.0%

0 0

0.0% FY14

FY15

FY16

EBITDA

FY17E

FY18E

FY19E

FY14

FY15

FY16

FY17E

FY19E

-50

0.0%

EBITDA margin (RHS)

PAT


FY18E

PAT margin (RHS)


Debt levels comfortable

Return ratios to improve

Erro r ! Not a valid lin k.

in Rs crs 0.8

1.0

70.0% 60.0%

0.7 0.5

0.6

50.0% 40.0%

0.5

0.0

0.4

20.0% -0.5

0.3

10.0% 0.0%

0.2

-1.0 -10.0%

0.1 0.0

-1.5 FY14

FY15

FY16

D/E


- 16 of 21-

30.0%

FY17E

FY18E

FY14

FY15

FY16

FY17E

FY18E

-20.0%

FY19E RoE

Interest Coverage (RHS)

RoCE


st


FY19E

 Valuation We initiate coverage on Sagar Cements as a BUY with a Price Objective of ₹941, representing a potential upside of 38% over a period of 18 months. We have arrived at our target price by assigning an EV/EBITDA multiple of 8x to FY19E EBITDA estimate of Rs 230 crores. We believe Sagar is a good play in the boom of the cement cycle given its latest acquisitions to enhance capacities and provide synergy benefits in the form of lower freight and power costs, imminent pick-up in cement demand in South and strong balance sheet strength. The assigned valuation implies a EV/Tonne of $64, which is in-line with similar sized peers. Sagar’s EV/EBITDA multiple trend 1600 1400 1200 1000

800 600 400 200

EV

7X

8.5X

10X

11.5X

13X


- 17 of 21-

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Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

0

Sagar’s Price/Book multiple trend 800 700 600 500 400 300 200 100

CMP

1X

1.2X

1.4X

1.6X

Jun-16

Jun-15

Jun-14

Jun-13

Jun-12

Jun-11

Jun-10

0

1.8X


Peer comparison on operational parameters Company

Capacity FY16 Capcity Utilisation RM per tonne Freight cost per tonne Power & Fuel cost per tonne EBITDA per tonne in mn tonnes FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 Sagar Cements 3.8 46% 52% 395 684 633 616 1,226 1,126 329 634 Sanghi Industries 4.1 82% 83% 217 291 1125 1190 1040 892 664 783 Mangalam Cements 3.3 71% 71% 807 970 1092 1068 1100 790 328 149 Deccan Cements 2.3 48% 58% 325 376 871 952 1248 1123 606 870 Saurashtra Cements 2.4 62% NA 256 NA 530 NA 1045 NA 599 NA Star Ferro & Cement 3.7 68% 71.1% 1052 1314 1118 NA 793 NA 1880 1448 Source: Ventura Research

- 18 of 21-

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Sagar reasonably priced compared to peers 30.0

EV/TTM EBITDA Mangalam Cements

25.0

20.0

15.0 Sanghi Industries Sagar Cements 10.0

Star Ferro

Deccan Cements

Saurashtra Cements

5.0

EBITDA/Ton 0.0 0

200

400

600

800

1,000

1,200

1,400

1,600


Peer comparison on financial parameters In Rs Cr Indian Peers

Sales

EBITDA

PAT

EBITDA Mgn

PAT Mgn

EPS

ROE

P/E (x)

56 124 147 192

297 46 50 80

9.8% 16.5% 16.9% 18.8%

51.5% 6.1% 5.8% 7.8%

157.4 141.0 236.0 287.0

30.6 1.5 70.5 59.3

16.9% 18.2% 19.7% 21.9%

77.1 35.0 130.3 156.1

17.9 -20.5 51.4 74.8

435.0 395.0 503.9 620.5

83.4 92.0 141.4 196.7

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

43.1 26.5 28.8 45.7

56.9% 8.4% 8.5% 12.3%

6.9 14.7 24.0 15.1

20.3 41.9 54.1 48.6

9.0 8.5 9.9 7.1

3.3% 0.2% 5.9% 4.5%

1.4 3.2 3.2 2.7

3.2% 0.2% 7.2% 5.7%

40.3 19.2 21.4 25.4

88.4 69.4 68.6 82.5

10.9 13.5 8.0 7.9

8.5% 4.2% 13.4% 14.1%

2.0% -2.5% 5.3% 6.7%

8.0 -7.7 19.2 28.0

4.2% -4.3% 9.7% 12.5%

39.0 0.0 13.6 9.4

53.3 41.4 45.3 45.3

13.3 29.4 7.7 5.8

30.4% 23.1% 23.8% 24.0%

5.8% 5.4% 6.7% 7.6%

3.8 4.2 6.4 8.9

12.3% 12.3% 16.3% 19.0%

30.6 27.8 18.1 13.0

215.3 132.8 132.9 132.9

7.4 8.3 6.4 5.2

Sagar Cements 2015 2016 2017E 2018E

576 753 869 1019

Sanghi Industries 2015 2016 2017E 2018E

932.3 776.7 1198.1 1309.4

Managlam Cements 2015 2016 2017E 2018E

908.4 833.0 976.0 1108.6

Star Ferro Cements 2015 2016 2017E 2018E

1430.0 1712.0 2115.0 2586.0

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Financials and Projections Y/E March, Fig in ` Cr

FY16

FY17E

FY18E

FY19E

Net Sales

753.4

869.4

1019.5

1177.7

% Chg.

-19.2

15.4

35.3

35.5

Total Expenditure

629.4

722.7

827.4

935.9

% Chg.

-18.8

14.8

31.5

29.5

124

147

192

242

EBDITA EBDITA Margin %

Y/E March, Fig in ` Cr

FY16

FY17E

FY18E

FY19E

Per Share Data (Rs)

Profit & Loss Statement

Adj. EPS

26.5

28.8

45.7

69.0

Cash EPS

45.9

53.5

71.0

94.8

DPS Book Value

7.5

4.3

11.4

17.2

316.1

339.8

372.1

420.7

Capital, Liquidity, Returns Ratio

16.5

16.9

18.8

20.5

Debt / Equity (x)

0.7

0.7

0.7

0.7

Other Income PBDIT

4.1 128.1

4.7 151.4

5.5 197.6

6.4 248.1

Current Ratio (x) ROE (%)

0.7 8.4

0.7 8.5

0.8 12.3

1.0 16.4

Depreciation

33.7

42.9

44.0

44.8

ROCE (%)

9.7

10.7

15.1

19.4

Interest

41.8

51.6

43.2

36.7

Dividend Yield (%)

1.1

0.6

1.7

2.5

Valuation Ratio (x)

Exceptional items PBT

0.0

0.0

0.0

0.0

52.7

57.0

110.5

166.6

P/E

14.7

24.0

15.1

10.0

P/BV

2.2

2.0

1.8

1.6

EV/Sales

1.4

1.8

1.5

1.2

8.5

10.7

7.7

5.7

Tax Provisions

6.6

6.8

30.9

46.7

Reported PAT

46.1

50.1

79.5

120.0

Minority Interest

0.0

0.0

0.0

0.0

EV/EBIDTA

Share of Associate

0.0

0.0

0.0

0.0

Efficiency Ratio (x)

46.1

50.1

79.5

120.0

Inventory (days)

44

42

40

40

PAT Margin (%)

PAT

6.1

5.8

7.8

10.2

Debtors (days)

39

35

35

35

Power/ Sales (%)

29.3

28.5

27.4

26.1

Creditors (days)

64

58

55

55

Balance Sheet Share Capital

Cash Flow Statement 17.4

17.4

17.4

17.4

532.2

573.5

629.6

714.2

Long Term Borrowings

295.4

295.4

245.4

195.4

Deferred Tax Liability

47.4

47.4

47.4

47.0

Other Non Current Liabilities

70.1

70.0

70.0

70.0

Reserves & Surplus Minority Interest

Total Liabilities

Profit Before Tax

52.7

57.0

110.5

166.6

Depreciation

33.7

42.9

44.0

44.8

Working Capital Changes

127.9

6.2

2.7

5.4

Others

-58.4

-2.9

15.9

30.8

Operating Cash Flow

155.8

103.1

173.0

247.6

Capital Expenditure

-488.0

-74.8

-31.0

-25.0

962

1005

1010

1046

Other Investment Activities

0.0

-2.5

-45.0

-93.0

1139.8

1224.8

1255.8

1280.8

Cash Flow from Investing

-488.0

-77.3

-76.0

-118.0

Less: Acc. Depreciation

255.1

297.9

341.9

386.7

Changes in Share Capital

0.0

0.0

0.0

0.0

Net Block

884.7

926.9

913.9

894.1

Changes in Borrowings

173.2

0.0

-50.0

-50.0

15.2

5.0

5.0

5.0

0.0

-15.4

-8.9

-23.4

Gross Block

Capital Work in Progress Other Non Current Assets Net Current Assets

Dividend and Interest

95.5

95.4

74.4

74.4

Cash Flow from Financing

173

-15

-59

-73

-110.0

-105.8

-70.4

-19.5

Net Change in Cash

-189.2

10.4

38.2

56.2

195.8

6.6

17.0

55.1

6.6

17.0

55.1

111.4

Long term Loans & Advances

77.3

86.9

101.9

117.8

Opening Cash Balance

Total Assets

963

1009

1025

1073

Closing Cash Balance

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