26 June 2019
Annual Report update | Sector: Cement
: INR 5,280 (+15
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Profitability impacted by cost pressure
Increase in leverage on account of capacity expansion
Our analysis of UTCEM’s FY19 annual report highlights healthy cement volume
growth led by expansion and acquisitions of the company. However, margins
suffered due to cost pressures. While operating cash flows remained healthy,
net debt/EBITDA increased from 2.3 in FY18 to 2.9 in FY19.
Industry sees 12mt capacity addition in FY19; utilization improves 5pp
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
1261.5 / 18.2
4904 / 3264
According to UTCEM’s management, in FY19, India’s total cement capacity
stood at 480mt; of this, ~12mt was added during the year. Demand in FY19
increased 13%, the highest growth since FY10.
Demand growth from infrastructure was healthy driven by the government’s
focus on roads, metro rail projects, airports renovation, irrigation projects,
etc. While, there has been significant improvement in low-cost houses
constructed under the Pradhan Mantri Awas Yozana (PMAY) in rural areas,
the affordable housing segment in urban areas is also gaining momentum.
As a result, the industry witnessed utilization improvement of 5pp over the
previous year, reaching a utilization of 71%.
The company expects further improvement in utilizations on likely sustained
demand growth with incremental new supplies at a slower pace vis-à-vis the
Financials Snapshot (INR b)
EPS Gr. (%)
Capacity expansions resulting in healthy volume growth
Shareholding pattern (%)
Mar-19 Dec-18 Mar-18
Cost pressure due to higher raw material; fuel prices impact margins
UTCEM’s raw material cost/t increased 4% from INR819/t to 854/t due to
higher slag, iron ore, aluminous clay and fly-ash prices. Also, it faced
additional limestone costs due to transfer of limestone mines.
FII Includes depository receipts
Power and fuel cost/t increased 12% YoY as imported pet coke prices
UTCEM’s total cement capacity reached 94.75mt in India due to the green-
field expansion at Dhar (3.5mt) and the acquisition of Binani’s assets (6.25mt).
Along with its other subsidiary, Star Cement, the company’s total capacity
stands at 98.75mt currently.
Cement production jumped 17%— from 57.23mt in the previous year to
67.20mt currently. The increase in production was on account of healthy
cement demand growth and benefits from increased utilization of the
capacities acquired (JPA) in FY18, where utilization improved from 53% in the
previous year to 72%.
Domestic sales volume registered a 20% growth, which is higher as compared
to the industry growth of ~13%.
increased 6% from USD96/t to USD102/t. Also, there was 8% currency
depreciation over the previous year.
Pradnya Ganar – Research Analyst
(Pradnya.Ganar@motilaloswal.com);+91 22 6129 1537
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.