Detailed Report | Sector: Cement
13 Annual Global Investor Conference
TP: INR22,360 (+19%)
Mr H M Bangur
MD and CEO
Financials Snapshot (INR b)
2017 2018E 2019E
384.4 460.4 547.8
2,210 2,622 3,121
Slowing capacity addition to drive utilization improvement
Takeaways from CEO track; limestone resources – a constraint
We hosted Mr H M Bangur, MD and CEO of Shree Cement (SRCM), as part of ‘CEO Track’ at
our annual conference. Key takeaways:
Capacity addition will likely slow down from 5% over FY12-17 to sub-2% in the next
five years. This, coupled with stable demand, should drive utilization improvement in
the next 3-4 years.
Per capita cement consumption in India continues to be among the lowest in the
world, the improvement in which could drive structural growth in India’s cement
Limestone reserves in India are scarce and can support demand only for the next 6-7
years before getting fully utilized.
Import of cement does not pose a major threat for India due to the relatively cheap
price of delivered cement.
The company is likely to report growth at 1.5-2x that of industry average, led by
capacity addition ahead of industry.
SRCM will continue enjoying cost efficiency due to its capability to put up cement
plants at 30-40% lower cost than industry. Hence, it will not bid for any expensive
Given its relatively healthy balance sheet, the company is likely to reward investors
with a dividend payout.
Pace of capacity addition slowing down
Management expects capacity addition of ~50mt over the next five years, lesser
than +85-90mt over FY12-17. This translates into a capacity addition rate of 2% over
FY17-22, as against 5% over FY12-17. Demand growth over FY12-17 was sub-5% due
to weak demand from the housing and rural segments. This, coupled with higher
supply addition, led to flat utilization during that period.
With slowing supply addition and increasing demand, we expect industry utilization
to increase meaningfully over the next 3-4 years.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Abhishek Ghosh – Research analyst
(Abhishek.Ghosh@MotilalOswal.com); +91 22 3982 5436
Pradnya Ganar – Research analyst
(Pradnya.Ganar@motilaloswal.com); +91 22 3980 4322
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.