Motilal Oswal Financial Services

Company

2024

Thematic | July

name

Cement

Sanjeev Kumar Singh - Research analyst

(Sanjeev.Singh@MotilalOswal.com)

Sanjeev Kumar Singh - Research analyst

(Sanjeev.Singh@MotilalOswal.com)

Jayant Gautam - Research analyst

(Jayant.Gautam@MotilalOswal.com)

Mudit Agarwal - Research analyst

(Mudit.Agarwal@MotilalOswal.com)

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.

Cement: Stronger Together!

01

Page 2: Summary

02

Page 5: Story in charts

03

Page 8: Consolidation intensifies

04

Page 12: Long-term capacity

addition estimates

05

Page 13: Clinker utilization to

improve to 81% by FY27E

06

Page 15: Increasing green

power share to reduce costs

07

Page 18: Companies Section

Companies covered in the report

Ultratech Cement:

Well positioned to capture the growing cement demand ...........................Pg19

Ambuja Cement:

Growing capacity; focusing on profitability improvement .............................Pg24

ACC:

Improving profitability; valuations attractive ..................................................................Pg29

Shree Cement:

Expensive valuation limits upside.....................................................................Pg34

Dalmia Bharat:

Growth slowdown factored in; cost benefits to drive earnings ........................Pg39

JK Cement:

Improving market reach; regional mix improves too..............................................Pg44

The Ramco Cement:

Capacity constraint and higher leverage restrict upside ...........................Pg49

Birla Corporation:

Operating performance improves ...............................................................Pg54

JK Lakshmi Cement:

Profitability improves; focusing on capacity expansion ............................Pg59

Cement

Stronger Together!

◼

Consolidation benefiting larger players:

A slowdown in capacity addition by small

players and a pick-up in M&A in the Indian cement industry should favor larger

players. A few regional players have historically been reluctant to add capacity

and, hence, have lost market share. It is possible that a few of these entities might

consider exiting the industry if they are offered favorable valuations.

Clinker capacity addition…:

We estimate that 78.7mtpa of clinker capacity will be

commissioned during FY25-27. Out of the total clinker capacity addition, 56.8mtpa

(~72%) is estimated to be added by the top four players.

…and

improved utilization to bode well:

Clinker utilization improved to ~78% in

FY24 (vs. the average of ~70% over FY13-23), as demand has been high for the

third consecutive year. We estimate clinker utilization to improve to ~81% by

FY27, aided by strong cement demand and rising consolidation in the industry.

Cement Capacity and growth

Cement capacity (mtpa)

YoY Growth (%)

6.0 6.7

7.0 7.3 6.7

4.5 4.8

1.9

5.0

2.9

We believe that

consolidation will emerge as a new theme

for the industry in the

next few years. There are three key triggers for consolidation: 1) a few regional

players have been

conservative in capacity additions

over the years; 2)

the entry

of Adani Group

into the cement business and its

aggressive capacity expansion

plan

(aims to double the capacity to 140mtpa by FY28); and 3) other players

(UTCEM, SRCM and JSW Cement)

increasing their capacity targets.

Companies

such as UTCEM and Adani Group have been eager to increase capacities through

inorganic routes. JSW Group also

aspires

to be a serious player in the industry and

was one of the key contenders to acquire Holcim's stake in ACEM (news

article).

SRCM remains conservative about the acquisition of cement capacity and is

growing capacity consistently through organic routes. However, it is open to any

strategic inorganic opportunity that can create value for the company. DALBHARA

also indicated that it will raise its capacity to 110-130mtpa by 2030, however, it

has yet to announce the next leg of expansion to reach the target milestone.

◼

Consolidation intensifies:

A few regional players have been conservative in

capacity additions over the years. Several regional players, mainly in the

south and central regions, have not expanded their capacities since FY15.

Secondly, M&A activity in the Indian cement industry has increased over the

last few years, as the country's leading cement producers are looking to

strengthen their positions. Large players with steady expansions, organically

as well as inorganically, have been consolidating their positions. DALBHARA

and UTCEM have expanded 48-58% of their cement capacities through

inorganic routes over the last decade. Adani (to date) has added 100%

capacity through acquisitions.

◼

Long-term capacity estimates:

The top four players would add the most

clinker capacity during FY25-27E. We estimate 78.7mtpa of clinker capacity

will be commissioned during FY25-27. Out of the total clinker capacity

addition, 56.8mtpa (~72%) is estimated to be added by the top four players.

◼

Clinker utilization to improve to ~81% by FY27E:

All-India clinker capacity

clocked a 4.0% CAGR vs. a demand CAGR of 6.2% over FY18-24. As a result,

the industry’s clinker utilization improved to ~78% in FY24 from ~70% in

FY18. We estimate clinker utilization to further improve to ~81% by FY27,

aided by strong cement demand and increasing consolidation in the

industry. This should also lead to an improvement in the

industry’s pricing

power over the long run.

3

July 2024

Cement demand and growth

Cement Demand (mt)

YoY Growth (%)

11.9

10.0 9.3

7.5 7.4 7.6

-0.9

-3.2

◼

11.0

5.9

◼

Increasing green power share to help reduce costs:

The cement companies

have been making efforts to reduce power costs by installing waste heat

recovery systems (WHRS) and other renewable energy sources (solar and

wind power plants). Over FY15-24, the cement

industry’s

WHRS/other

renewable energy capacities posted a CAGR of 21%/39% (on a low base) to

1.1GW/1.6GW. The

industry’s green power share

in total power

consumption rose to 35% in FY24 from 7% in FY15. Over FY24-27, we

estimate WHRS/other renewable energy capacities to report a CAGR of

11%/37% to reach 1.6GW/4.1GW. Moreover,

the industry’s green energy

share is estimated to climb to 50% by FY27E.

Valuation and view:

We believe that acceleration in consolidation and

higher clinker utilization can improve the industry’s pricing power in the

long run. We estimate that large players will benefit the most from the

larger scale of operations, brand equity, and cost-saving measures. This, in

our view, will help these players maintain/improve their premium

valuations. We have ascribed higher-than-historical valuation multiples and

assigned premium over other companies to UTCEM and ACEM, as we

believe that these companies would benefit from inorganic opportunities, as

seen in last few deals in the sector. Higher capacity additions will also help

to improve cost structures, e.g., operating efficiencies, reduction in lead

distance, etc. In the 1QFY25 preview, we rolled over the valuation multiples

for our coverage companies to Jun’26E from Mar’26E. We value UTCEM and

ACEM at 20x Jun'26E EV/EBITDA. Our target multiple of 12x Jun'26E

EV/EBITDA for ACC is in line with DALBHARA and TRCL. We reiterate our

BUY rating

on UTCEM, DALBHARA, JKCE, BCORP and JKLC and maintain our

Neutral rating

on TRCL and SRCM. We upgrade

ACEM to BUY

from Neutral

given its value-accretive acquisitions in last one year, which will help ACEM

balance its market presence and ambitious organic expansion plans. We

value

ACEM at 20.0x Jun’26E EV/EBITDA to arrive at our TP of INR800. We

also upgrade

ACC to BUY

from Neutral given its attractive valuation and

expected improvement in profitability, driven by cost-saving initiatives,

strong brand positioning, and structural changes in the operations (higher

volume under MSA and leveraging group synergies). We value ACC at 12.0x

Jun’26E EV/EBITDA to arrive at our TP of INR3,300.

Exhibit 1:

Valuation summary

M-cap CMP

(USD b) (INR)

UTCEM

ACEM

SRCM

ACC

DALBHARA

JKCE

TRCL

BCORP

JKLC

ICEM

44.7

18.1

13.4

6.7

4.7

4.5

2.5

1.7

1.4

1.3

Rating

P/E (x)

FY26E

33.3

32.2

44.5

19.6

27.7

29.7

28.0

18.4

18.9

51.2

FY27E

27.5

27.4

39.8

16.9

21.5

23.2

24.0

14.6

16.4

27.5

EV/EBITDA (x)

FY25E

22.4

21.2

18.7

11.3

11.8

16.3

12.7

9.3

10.0

34.7

FY26E

17.8

17.9

17.2

9.8

10.0

13.3

11.3

7.7

8.6

17.8

FY27E

14.7

15.7

7.9

8.4

11.4

10.2

6.7

7.8

13.1

EV/t (USD)

FY25E

265

230

219

136

96

204

126

97

79

104

FY26E

231

189

190

124

94

177

119

86

72

102

FY27E

209

177

168

109

90

159

120

80

67

99

ROE (%)

FY25E

12.7

7.3

10.6

13.6

5.9

15.5

6.7

7.5

14.5

(1.0)

FY26E

13.8

7.7

9.8

13.2

7.2

17.4

8.6

9.1

14.4

3.4

FY27E

14.3

8.5

10.1

13.5

8.7

19.1

9.3

10.5

14.6

6.1

FY25E

11,555 Buy 41.4

679

Buy

40.5

27,790 Neutral 44.4

2,664

Buy

21.5

1,866

Buy

35.3

4,342

Buy

37.8

797 Neutral 38.4

1,605

Buy

24.0

888

Buy

21.2

305

Sell

Loss

Net debt/

EBITDA (x)

FY25E FY26E FY27E

(0.1) (0.3) (0.6)

(3.6) (1.8) (1.9)

(1.1) (0.8) (0.5)

(1.8) (2.0) (2.3)

0.4 0.2 (0.3)

2.0 1.7 1.1

3.0 2.7 2.5

1.7 1.2 0.9

1.4 1.6 1.7

6.7 3.2 2.0

Source: MOFSL, Company; Note: ACEM estimates and valuation on a consolidated basis

July 2024

4

STORY IN CHARTS

Region-wise capacity share of top 5 players over FY17/FY21/FY26E

FY17

79

81

74

78

76

73

FY21

78

77

FY26E

77

80

67

60

46

52

43

44

54

All-India

North

Central

East

West

South

Source: MOFSL, Industry, Company; Note: recently UTCEM acquired KSI and ACEM acquired PCIL, the same is estimated in FY26E;

Clinker/grinding capacity additions

Region

FY22

North

East

West

Central

South

Total

3.8

3.2

5.4

1.4

1.9

15.7

FY23

5.5

7.4

-

3.7

3.5

20.1

Clinker (mtpa)

FY24

FY25E

9.6

5.9

-

5.9

2.6

24.0

3.7

8.6

-

4.7

8.9

25.8

FY26E

10.3

5.9

6.0

3.3

3.7

29.2

FY27E

2.8

3.0

-

7.3

10.7

23.8

FY22

5.3

7.1

5.0

6.1

2.8

26.2

FY23

2.9

9.4

7.7

7.6

5.8

33.4

Cement (mtpa)

FY24

FY25E

14.2

12.3

4.0

4.6

4.4

39.5

3.2

13.2

5.4

6.7

15.7

44.1

FY26E

6.8

11.7

5.4

12.8

12.3

49.0

FY27E

6.5

16.7

10.6

7.1

7.4

48.3

Source: MOFSL, Industry, Company

Demand CAGR is estimated at 7.5% over FY24-27

Cement Demand (mt)

11.0

5.9

334

-0.9

FY20

YoY Growth (%)

11.9

9.3

7.5

7.4

7.6

10.0

324

304

FY18

337

FY19

-3.2

FY21

356

FY22

399

FY23

436

FY24

468

FY25E

503

FY26E

541

FY27E

Source: MOFSL, Industry, Company

WHRS and other renewable energy capacity trend

WHRS

Windmill and Solar

Green energy’s share in the industry is rising

Green power share (%)

45

26

30

35

49

50

2.9 3.8 4.1

1.1 1.6

0.3 0.4 0.6

0.1 0.1 0.1 0.1 0.2

1.0 1.1 1.4 1.5 1.6

0.2

0.3

0.3 0.4 0.5 0.6 0.7 0.8

7

9

11

12

14

18

22

Source: MOFSL, Company

July 2024

5

Cement: Stronger Together!

Housing sector accounts for 67% of cement demand in FY24

Rural Housing

Urban housing

37%

30%

Infrastructure

Industrial & Commercial,

24%

9%

Trend in India’s per capita cement consumption (kg)

Per capita consumption of cement (in kg)

221 216 227

201 204 213

182 189

162 177

153

134 144

121

254 249

220

263

283

305

Cement Capacity Addition (mt)

FY25E

FY26E

FY27E

Clinker Capacity Addition (mt)

FY25E

FY26E

FY27E

16.7

7.1

10.6

5.4

West

6.7

Cetral

12.8

7.4

12.3

2.8

10.3

3.0

5.9

-

6.0

-

West

7.3

3.3

4.7

Cetral

10.7

11.7

6.5

6.8

3.2

North

East

13.2

3.7

8.9

South

15.7

3.7

South

North

8.6

East

Note: East included North-East

July 2024

6

Cement: Stronger Together!

India’s per capita cement consumption among lowest

Egypt

420 kg

USA

300 kg

China

1430 kg

Russia

420 kg

Korea

950 kg

Indonesia

200 kg

India

305 kg

Brazil

280 kg

World’s average per capita consumption 525kg

Turkey

750 kg

Vietnam

1110 kg

Profitability v/s valuation

25%

20%

DALBHARA

15%

10%

5%

JKLC

BCORP

TRCL

JKCE

SRCM

ACEM

UTCEM

ACC

4.0

8.0

12.0

EV/EBITDA (x) FY26E

16.0

20.0

July 2024

7

Consolidation intensifies

Capacity addition ebbs for regional players

A few regional players have been conservative in capacity addition over the years.

The south and west regions have the most regional players that have not expanded

their capacity since FY15, followed by the central and north regions. Despite limited

capacity additions by regional players in the south, this market remained the most

fragmented due to the largest installed cement capacity and the highest number of

cement players among regions. However, market concentration has increased over

the year, aided by M&A.

In the north region,

consolidation has increased over the years as a result of muted

capacity additions by regional players, increasing M&A activities, and balanced

capacity additions by the top five players.

Exhibit 1:

Consolidation increased in the north region

Capacity share of Top five players' of North region (%)

3.7

79

72

67

73

1.5

79

77

78

79

81

3.3

Exhibit 2:

A few players who have not added capacity

FY17

FY24

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E

Source: MOFSL, Company

Mangalam Cement*

ICEM

Source: MOFSL, Company; *expanded through debottlenecking

In the central region,

despite low capacity additions by regional players, the

capacity share of the top five players has recently dropped due to large capacity

additions by JKCE (added 6.2mtpa over FY22-24). However, it remains high at ~73%.

Exhibit 3:

Market concentration contracts but remains high

Capacity share of Top five players' of Central region (%)

78

76

74

75

74

78

Exhibit 4:

A few regional players did not expand capacity

FY17

FY24

8.1

76

4.7

5.6

8.1

5.6

2.3

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E

Source: MOFSL, Company

HEIM*

Prism

KJS Cement

JPA

Source: MOFSL, Company; *expanded through debottlenecking

In the east region,

consolidation has increased amid steady capacity expansions by

large players and M&As. All large players have their capacities in the region spread

across key markets, while

regional players’ share in

the east is low.

July 2024

8

Exhibit 5:

Consolidation increased in the east

region…

Capacity share of Top five players' of East region (%)

78

73

68

70

69

Exhibit 6:

…with

steady capacity expansion by large players

FY17

26.8

25.5

17.5 18.9

12.9

11.5

8.2

18.5

6.2

17.4

FY24

78

79

78

76

Source: MOFSL, Company

Source: MOFSL, Company;

The south region is the

most fragmented market, with the highest installed cement

capacity and the highest number of regional players. The region has a large number

of players who have not expanded capacity over the years. However, with the

recent two major M&As (UTCEM acquiring KSI and ACEM acquiring PCIL) and higher

capacity additions by the top five players, consolidation is intensifying in the region.

Exhibit 7:

In the south concentration is increasing too

Capacity share of Top five players' of South region (%)

54

43

46

43

44

45

46

47

5.9

Exhibit 8:

Major regional players did not expand capacity

FY17

13.0

5.9

6.9

4.0

6.9

9.2

8.6

4.0

FY24

Source: MOFSL, Company

In the west region,

top-five

players’ capacity share

increased due to M&As and

organic capacity expansions by large players. In the west region, a few regional

players have not expanded capacities over the years.

Exhibit 9:

Consolidation is increasing in the west region

Capacity share of Top five players' of West region (%)

78

75

76

77

74

80

78

1.1

Exhibit 10:

A few regional players did not expand capacity

2.7

FY17

FY24

2.0

1.0

77

74

Source: MOFSL, Company

Source: MOFSL, Company; *Note: Including its subsidiary

July 2024

9

M&A activity rising in the Indian cement industry

M&A activity in the Indian cement industry has increased over the last few years, as

the country's leading cement producers are looking to strengthen their positions at

the top. Jaipraksh Associates (JPA) sold its cement assets to UTCEM due to pressure

from lenders to repay debt. To reduce their debt burden and focus on other

businesses, BK Birla Group, Reliance Infra, and Emami Group sold their cement

assets to UTCEM, BCORP, and NUVOCO, respectively. Sanghi’s promoter sold a

majority stake to ACEM due to significantly higher leverage (net debt to EBITDA

surged to 7x in FY23). A few cement companies (Binani Cement, Andhra Cement,

Kalyanpur Cement, and Murli Industries) are sold under the Insolvency and

Bankruptcy Code (IBC) due to defaults in loan repayments. Earlier, Lafarge sold its

entire cement business in India to Nirma Group to comply with MMDR and CCI

rules, a prerequisite for the global merger of Holcim and Lafarge. The Holcim group

exited India by selling its entire stake in ACC and ACEM as part of its plan to become

a global leader in innovative and sustainable building solutions. Recently, two major

M&As have been announced by the top two cement players. UTCEM announced the

acquisition of KSI’s cement business and ACEM announced the acquisition of a 100%

stake in PCIL.

Exhibit 11:

Major M&A activities in the industry

Year Company/plants acquired

CY10

CY12

CY13

CY14

CY15

CY16

CY17

CY18

CY20

CY22

CY23

CY24

OCL India (45.4% stake)

Adhunik Cement

Calcom Cement (76% stake)

Heidelberg Cement (Dolvi GU)

Sree Jayajothi Cements

Gujarat units of JPA group

Jaypee Cement (Bokaro GU)

Jaypee Cement (Panipat GU)

BMM Cements

OCL India (26.6% stake)

JP group (Cement plants)

Lafarge India

Reliance Cement

Murli Industries

Century Cement

Binani Cement

Emami Cement

ACC and ACEM (Holcim’s stake)

Andhra Cement

Sanghi Industries*

Kesoram Industries^*

Penna Cement^

Acquiring company

DALBHARA

JSW Cement

My Home Industries

UTCEM

DALBHARA

SRCM

SGC

DALBHARA

UTCEM

NUVOCO

BCORP

DALBHARA

UTCEM

NUVOCO

Adani group

SGC

ACEM

UTCEM

ACEM

Capacity

(mtpa)

5.3

1.5

2.1

0.6

3.2

4.8

2.1

1.5

1.0

6.7

21.2

11.1

5.5

3.0

14.6

8.6

8.3

67.8

2.6

6.1

8.5

14.0

Region

East

West

South

West

East

North

South

East

Central/North/South

North/East

Central/West

West

East/West/Central

North

East

Pan India

South

West

South

South/West/North

Deal value

(INR b)

3.8

5.0

3.2

1.7

14.0

38.0

9.0

3.6

5.4

10.2

161.9

94.0

48.0

4.0

86.2

80.3

55.0

501.8

9.2

50.0

77.8

104.2

EV/t

(INR)

1,567

3,338

1,975

2,767

4,375

7,917

4,296

2,400

5,400

5,744

7,636

8,507

8,727

1,340

5,905

9,386

6,627

11,727

3,546

6,775

8,488

7,446

EV/t

(USD)

32

64

37

49

67

131

68

38

87

89

118

127

130

21

106

131

93

151

44

81

102

90

Source: MOFSL, Industry; Note: *EV/t is calculated by adjusting excess capacities ^the deals are pending for certain approvals

Large players consolidating their positions

Large players with steady expansions (organically as well as inorganically) have been

consolidating their positions. After a spate of acquisitions until FY20, UTCEM, the

largest cement company in India, has continued its growth journey through

brownfield and greenfield expansions across regions to maintain its leadership

July 2024

10

In the last decade,

Adani/UTCEM/DALBHARA

added 100%/58%/48% of

their capacity through

acquisitions

position.

In Dec’23, it announced

the acquisition of

KSI’s

cement business (having a

clinker/grinding capacity of 6.3mtpa/10.8mtpa). In the last decade, the company

added 104.2mtpa of capacity (including the acquisition of KSI, which is pending

certain approvals), of which 60.5mtpa (~58%) was through acquisitions. DALBHARA

is also increasing its capacity through a combination of organic and inorganic

expansions. Over FY14-24, the company added 32.8mtpa (excluding the JPA deal,

which is currently held under IBC), of which 15.6mtpa (48%) was added through

acquisitions. Adani,

on the other hand, became the country’s

second-largest cement

producer entirely by acquisitions. However, SRCM has expanded its capacity mostly

through organic routes.

Exhibit 12:

Inorganic vs. organic mix in capacity expansion by large players

Capacity addition

Company Name

UTCEM

Adani Group

DALBHARA

SRCM

In last 10 years’ (mtpa)

104.2

88.9

32.8

38.9

Inorganic

Growth (mtpa)

60.5

88.9

15.6

1.5

Organic

Growth (mtpa)

43.8

-

17.2

37.4

Inorganic

Growth

share

58%

100%

48%

4%

Source: MOFSL, Company; Note: UTCEM capacity addition is included KSI and ACEM capacity addition

is included PCIL pending for certain approvals

Aggressive guidance for capacity enhancement by large players

After the entry of

Adani Group

into the cement business and due to its aggressive

capacity expansion plans (aiming to double the capacity to 140mtpa by FY28), a few

other players have also raised their capacity targets.

UTCEM

has set an ambitious

target of increasing its cement capacity to 200mtpa by FY30-31 (currently increasing

cement capacity to 183.5mtpa by FY27 vs. 147.3mtpa through the organic route).

DALBHARA

targets to increase its grinding capacity to 75mtpa/110-130mtpa by

FY27/FY31 through organic and inorganic routes. Currently, it has a major presence

in the east and south regions of India. It intends to establish its presence in the west,

central, and north regions of India.

SRCM

remains conservative about acquiring

cement capacity. Currently, the company intends to expand their capacity to

+80mtpa mainly through the organic route. However, it is open to any such strategic

inorganic opportunity that can create value for the company.

JSW Group

also has

ambitions for becoming a serious player in the industry. It

aims to invest

INR180b in

the next five years to grow its cement capacity to 60mtpa from 21.4mtpa currently.

Notably, JSW Group was among the key

contenders to acquire Holcim’s stake

in

ACEM

(news article).

These companies intend to increase their capacity in order to

become pan-India players and expand their market share in a high-demand

environment. We believe that their strong balance sheets will help them pursue

their capacity targets.

Exhibit 13:

Cement capacity

–

long-term targets of large companies and capacity CAGR

Company Name

UTCEM

Adani Group

DALBHARA

SRCM

JSW Group

Current Capacity

(mtpa)

Target Capacity

(mtpa)

Target Year

Capacity

CAGR

Top five players’ capacity

CAGR is estimated to be

~12% over FY24-28

141

77

45

53

21

200

140

110-130

80

60

2028

2030

2028

2028-29

9.2%

16.0%

16%-19%

10.6%

22.9%

Source: MOFSL, Company

July 2024

11

Long-term capacity addition estimates

Estimate clinker/ cement

capacity CAGR of 6.3%/7.0%

over FY24-27

India’s cement industry is estimated to clock a CAGR of 6.3%/7.0% in clinker/cement

over FY24-27. We estimate a cement capacity CAGR of 9.6%/9.3%/7.4%/5.9%/4.1%

for Central/East/West/South/North. The top four players (UTCEM, Adani Group,

SRCM, and DALBHARA) are likely to grow their capacities (through organic routes)

by a CAGR of ~9% over the same period. The capacity share of the top four players is

likely to increase to ~57% by FY27E from ~50% in FY24.

Exhibit 14:

Clinker/grinding capacity additions

Region

FY22

North

East

West

Central

South

Total

3.8

3.2

5.4

1.4

1.9

15.7

FY23

5.5

7.4

-

3.7

3.5

20.1

Clinker (mtpa)

FY24

FY25E

9.6

5.9

-

5.9

2.6

24.0

3.7

8.6

-

4.7

8.9

25.8

FY26E

10.3

5.9

6.0

3.3

3.7

29.2

FY27E

2.8

3.0

-

7.3

10.7

23.8

FY22

5.3

7.1

5.0

6.1

2.8

26.2

FY23

2.9

9.4

7.7

7.6

5.8

33.4

Cement (mtpa)

FY24

FY25E

14.2

12.3

4.0

4.6

4.4

39.5

3.2

13.2

5.4

6.7

15.7

44.1

FY26E

6.8

11.7

5.4

12.8

12.3

49.0

FY27E

6.5

16.7

10.6

7.1

7.4

48.3

Source: MOFSL, Industry, Company

Top four players likely to add higher clinker capacity

According to the available data for environmental clearance (EC); we believe that

the industry players have applied/obtained environmental clearance for 118.5mtpa

of clinker capacities. The top five players account for 66% of these capacities. It is

important to note here that not all the capacities come on stream for which

environmental clearances are under process.

Exhibit 15:

EC obtained for incremental clinker capacity addition, for which order has not

yet been placed

Company Name

Clinker capacity (mtpa)

SRCM

22.4

DALBHARA

22.9

UTCEM

15.0

JSW Cement

15.9

Adani

12.4

NUVOCO

12.0

JKLC

8.7

Wonder Cement

5.5

JKCE

5.3

Sagar Cements

5.1

BCORP

3.6

Orient Cement

3.0

Deccan Cement

1.5

Shree Digvijay Cement

1.1

Total

134.4

Source: MOFSL, Industry

Top five players account

for 66% of clinker capacity

for which ECs have been

applied/obtained

July 2024

12

Clinker utilization to improve to 81% by FY27E

Over FY18-24, all-India clinker capacity posted a CAGR of 4.0% vs. a demand CAGR of

6.2%. As a result, the industry’s clinker utilization increased to ~78% in FY24 from

70% in FY18. In FY21, clinker utilization dropped due to demand disruptions amid

Covid-19. We estimate clinker utilization to improve to ~81% by FY27, aided by

strong cement demand and rising consolidation in the industry. Clinker utilization

(ex-South) is estimated to hover at 88-89% over FY25-27 (similar to FY23/24 levels).

Conversely, in South, clinker utilization is likely to rise to ~72% by FY27 vs. ~66% in

FY24 (average ~57% over FY18-23).

Exhibit 16:

Industry’s clinker capacity and utilization trends

Clinker capacity (mtpa)

69

70

75

73

69

72

76

Utilization (%)

78

81

Exhibit 17:

Industry’s cement capacity and utilization trends

Cement capacity (mtpa)

68

64

66

70

67

62

66

70

Utilization (%)

72

73

79

68

Source: MOFSL, Company

Estimate cement demand

CAGR of 7.5% to outpace

supply CAGR of 7.0% over

FY24-27

Over FY24-27, cement demand CAGR (at 7.5%) is expected to outpace supply CAGR

(of 7.0%). We believe that strong demand growth will be driven by the

government’s focus on affordable housing, infrastructure development, continuing

strong demand from real estate, and likely pick-up in industrial capex.

BJP’s 2024

manifesto also highlighted its focus on expanding the PM Awas Yojana, slum

redevelopment, promoting affordable housing, expanding road network, rail &

metro connectivity, and constructing new airports. The announcements under the

forthcoming Union Budget will be the key monitorables for cement demand

momentum.

Exhibit 18:

Demand CAGR is estimated to be 7.5% over FY23-28

Cement Demand (mt)

11.0

5.9

-0.9

-3.2

10.0

11.9

YoY Growth (%)

9.3

7.5

7.4

7.6

Source: MOFSL, Industry, Company

July 2024

13

Improved clinker utilization to boost the

industry’s pricing power

Clinker utilization improved significantly from the FY19 level (except FY21, where

clinker utilization declined due to demand disruptions amid Covid-19), leading to an

increase in cement prices at a 2.5% CAGR over FY18-24 (the cement realization for

our coverage universe also improved at a similar rate 2.7% over FY18-24). However,

FY24-exit price was lower by ~5% YoY amid demand slowdown due to the general

elections and softening fuel prices (average imported petcoke/coal prices were

down ~32-36% YoY, domestic petcoke price declined ~25% YoY, and domestic coal

price through E-auction was down ~37% YoY). Further, most of the management

teams in the last earnings concall has guided that cement prices will remain stable in

FY25. We believe improvements in clinker utilizations, intensifying consolidation in

the industry, and a recovery in cement demand post-monsoon should enhance the

industry’s pricing power.

Exhibit 19:

Cement price posted a 2.5% CAGR over FY18-24

All-India average cement price (INR per 50kg bag)

360

340

320

300

280

5,400

5,050

4,700

4,350

4,000

Exhibit 20:

Industry’s average cement realization CAGR at 2.7%

Industry average Realization (INR/t)

Source: MOFSL, Company

Source: MOFSL, Industry, Company

July 2024

14

Increasing green power share to reduce costs

The industry’s green power

share to increase to 50% by

FY27 from 35% in FY24

Cement companies have been making efforts to reduce power costs by installing

WHRS and solar and wind power plants (other renewable energy). The rising

emphasis on green energy is expected to reduce the cement industry's reliance on

the expensive thermal power and grid electricity, resulting in cost savings. Captive

thermal power and grid electricity costs stand at INR5.5-INR8.0/Kwh, whereas

WHRS power costs stand at INR1/Kwh, and solar power costs (under a power

purchase agreement) stand at INR4-4.5/Kwh. Higher green energy usage helps

reduce fossil fuel consumption and, thus, carbon emissions. Over FY15-24, the

cement industry reported a CAGR of 21%/39% (on a low base) in WHRS/other

renewable energy capacities to 1.1GW/1.6GW.

As a result, the industry’s green

power share of total power consumption increased to 35% in FY24 from 7% in FY15.

Over FY24-27, we estimate a CAGR of 11%/37% in WHRS/other renewable energy

capacity to 1.6GW/4.1GW.

Furthermore, the industry’s green energy share is

likely

to climb to 50% by FY27.

Exhibit 22:

Green energy share in the industry is rising

Green power share (%)

45

26

30

35

49 50

Exhibit 21:

WHRS and other RE capacities in industry rising

WHRS

Windmill and Solar

2.9

3.8

4.1

1.1 1.6

0.3 0.4 0.6

0.1

0.1 0.1 0.1

0.2

1.1 1.4 1.5 1.6

0.5 0.6 0.7 0.8 1.0

0.2 0.3 0.3 0.4

7

9

14

11 12

18

22

Source: MOFSL, Company

Within our coverage universe, SRCM has the highest green power share in total

power consumption at 57%, followed by JKCE at 51% and JKLC at 39%. UTCEM,

Adani Group, and SRCM are likely to add higher green power capacities (89% of

total green power capacity addition) during FY25-27. This will lead to a

significant increase in green power share for UTCEM and Adani vs. peers.

Exhibit 24:

UTCEM and Adani likely to witness a higher

increase in green power share by FY27E

Green power share in total power consumption in FY27E (%)

79

39

34

64

27

60

50

Exhibit 23:

SRCM a pioneer in green power usage in FY24

Green power share in total power consumption in FY24 (%)

56

51

24

48

44

30

16

Source: MOFSL, Company

July 2024

15

Exhibit 25:

WHRS and RE capacity addition over FY25-27E

WHRS

Solar & Wind

Exhibit 26:

Cost savings over FY25-27E through green power

WHRS

Solar & wind

1006

888

103

187

288

46

15

95

52

50

165

0

27

38

0

49

0

25

7

10

13

0

53

75

48

29

7

45

36

3

18

16

5

-

Source: MOFSL, Company

Source: MOFSL, Company; Note: Incremental cost saving spread

over next three years

Exhibit 27:

Green power (MW)/t of cement capacity (FY24)

Green power capacity (MW/t of cement capacity) in FY24

9.3

9.2

9.0

6.3

6.1

4.2

4.0

2.8

Exhibit 28:

Green power (MW)/t of cement capacity (FY27E)

Green power capacity (MW/t of cement capacity) in FY27E

11.9

10.9

10.7

9.1

7.1

7.0

6.6

4.2

Source: MOFSL, Company

July 2024

16

Valuation and View

◼

We believe that acceleration in consolidation and higher clinker utilization can

improve the industry’s pricing power in the long run. We estimate that large

players will benefit the most from the larger scale of operations, brand equity,

and cost-saving measures. This, in our view, will help these players

maintain/improve their premium valuations. We have ascribed higher-than-

historical valuation multiples and assigned premium over other companies to

UTCEM and ACEM, as we believe that these companies would benefit from

inorganic opportunities, as seen in last few deals in the sector. Higher capacity

additions will also help to improve cost structures, e.g., operating efficiencies,

reduction in lead distance, etc.

In the 1QFY25 preview, we rolled over the valuation multiples for our coverage

companies to Jun’26E

from Mar’26E. We value UTCEM and ACEM at 20x Jun'26E

EV/EBITDA. Our target multiple of 12x Jun'26E EV/EBITDA for ACC is in line with

DALBHARA and TRCL. We reiterate our

BUY rating

on UTCEM, DALBHARA, JKCE,

BCORP and JKLC and maintain our

Neutral rating

on TRCL and SRCM. We

upgrade

ACEM to BUY

from Neutral given its value-accretive acquisitions in last

one year, which will help ACEM balance its market presence and ambitious

organic expansion plans. We value ACEM at 20.0x Jun’26E EV/EBITDA to arrive

at our TP of INR800. We also upgrade

ACC to BUY

from Neutral given its

attractive valuation and expected improvement in profitability, driven by cost-

saving initiatives, strong brand positioning, and structural changes in the

operations (higher volume under MSA and leveraging group synergies). We

value ACC at 12.0x Jun’26E EV/EBITDA to arrive at our TP of INR3,300.

P/E (x)

FY26E

33.3

32.2

44.5

19.6

27.7

29.7

28.0

18.4

18.9

51.2

FY27E

27.5

27.4

39.8

16.9

21.5

23.2

24.0

14.6

16.4

27.5

EV/EBITDA (x)

FY25E

22.4

21.2

18.7

11.3

11.8

16.3

12.7

9.3

10.0

34.7

FY26E

17.8

17.9

17.2

9.8

10.0

13.3

11.3

7.7

8.6

17.8

FY27E

14.7

15.7

7.9

8.4

11.4

10.2

6.7

7.8

13.1

EV/t (USD)

FY25E

265

230

219

136

96

204

126

97

79

104

FY26E

231

189

190

124

94

177

119

86

72

102

FY27E

209

177

168

109

90

159

120

80

67

99

ROE (%)

FY25E

12.7

7.3

10.6

13.6

5.9

15.5

6.7

7.5

14.5

(1.0)

FY26E

13.8

7.7

9.8

13.2

7.2

17.4

8.6

9.1

14.4

3.4

FY27E

14.3

8.5

10.1

13.5

8.7

19.1

9.3

10.5

14.6

6.1

Net debt/

EBITDA (x)

FY25E FY26E FY27E

(0.1) (0.3) (0.6)

(3.6) (1.8) (1.9)

(1.1) (0.8) (0.5)

(1.8) (2.0) (2.3)

0.4 0.2 (0.3)

2.0 1.7 1.1

3.0 2.7 2.5

1.7 1.2 0.9

1.4 1.6 1.7

6.7 3.2 2.0

Exhibit 29:

Valuation summary

M-cap CMP

(USD b) (INR)

UTCEM

ACEM

SRCM

ACC

DALBHARA

JKCE

TRCL

BCORP

JKLC

ICEM

44.7

18.1

13.4

6.7

4.7

4.5

2.5

1.7

1.4

1.3

Rating

FY25E

11,555 Buy 41.4

679

Buy

40.5

27,790 Neutral 44.4

2,664

Buy

21.5

1,866

Buy

35.3

4,342

Buy

37.8

797 Neutral 38.4

1,605

Buy

24.0

888

Buy

21.2

305

Sell

Loss

Source: MOFSL, Company; Note: ACEM estimates and valuation on a consolidated basis

Exhibit 30:

Profitability v/s valuation (based on EV/EBITDA)

25%

20%

15%

10%

5%

4.0

8.0

12.0

16.0

EV/EBITDA (x) FY26E

20.0

JKLC

BCORP

TRCL

ACC

JKCE

SRCM

Exhibit 31:

Profitability v/s valuation (based on EV/t)

1,400

SRCM

ACEM

DALBHARA

UTCEM

ACEM

UTCEM

1,200

1,000

800

600

40

DALBHARA

TRCL

ACC

JKCE

BCORP

80

120

160

EV/Ton (USD) FY26E

200

240

Source: MOFSL, Company

July 2024

17

Companies

Page no.

1. Ultratech Cement:

Well positioned to capture the growing cement demand

19

24

2. Ambuja Cement:

Growing capacity; focusing on profitability improvement

3. ACC:

Improving profitability; valuations attractive

29

4. Shree Cement:

Expensive valuation limits upside

34

5. Dalmia Bharat:

Growth slowdown factored in; cost benefits to drive earnings

39

44

6. JK Cement:

Improving market reach; regional mix improves too

7. The Ramco Cement:

Capacity constraint and higher leverage restrict upside

49

54

2

8. Birla Corporation:

Operating performance improves

6

9. JK Lakshmi Cement:

Profitability improves; focusing on capacity expansion

59

July 2024

Update

| Sector: Cement

Ultratech Cement

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR11,555

TP: INR13,300 (+15%)

Buy

Well positioned to capture the growing cement demand

Timely capacity addition and utilization ramp-up leading to market share gains

UTCEM’s domestic grey cement capacity/volume CAGR

of 10%/11% over FY14-24

exceeded that of the industry (at 5% each). As a result, its market share surged to

~26% in FY24 from ~16% in FY14. UTCEM is expanding the domestic grey cement

capacity (under Phases II & III) to reach 183.5mtpa organically by end-FY27 vs.

149.5mtpa currently. It has enough organic opportunities to reach its capacity

target of 200mtpa in the medium term. Apart from that, UTCEM explores

inorganic growth opportunities, and in Dec’23, it announced

the acquisition of

the cement business of Kesoram Industries (KSI). KSI has a cement grinding

capacity of 10.75mtpa (including a surplus grinding capacity of 2.25mtpa). The

transaction is likely to be completed in 2HFY25E.

Cost savings to help improve profitability

The company is targeting cost savings of INR200-300/t over the next three years.

It has given a detailed cost saving guidance of

–

i) INR80/t through an increase in

the green power share; ii) INR30/t by higher alternative fuel share; iii) INR60/t by

a reduction in clinker factor and higher blended cement share, iv) INR75/t by

savings in logistics costs through utilizing larger scale of operation and logistic

optimization; and v) INR40/t from other operational efficiency, including positive

operating leverage with higher volume. UTCEM aims to increase its WHRS/other

RE capacity to 465MW/1.5GW by FY27E vs. 278MW/612MW currently. After the

completion of these projects, green energy will fulfill +60% of total power

requirements (25% from WHRS and 35% from other RE) with increased capacity. It

has a long-term target (by FY30E) of increasing its share of green power to ~85%.

Strong balance sheet and low-cost expansion improve return ratios

UTCEM’s consolidated

net debt increased to INR217b after a slew of acquisitions

in FY19-20. However, with successful integrations and a rapid scale-up in capacity

utilization in acquired assets, UTCEM not only reduced its net debt (INR27.8b as

of

Mar’24)

but also expanded its domestic grey cement capacity to 140.8mtpa

from 109mtpa in FY19 to maintain its leadership position in the industry.

Further, we believe the low-cost expansion (all Phase - I, II and III expansions

entail a capex of ~USD70/t) and faster execution will improve return ratios.

Lower capex is partially due to a higher proportion of brownfield expansion and a

larger proportion of equipment orders to a single supplier. We estimate its RoE

to improve to 14% by FY26/FY27 from 12% in FY24.

Valuation and view

–

top of the pack; reiterate BUY

We estimate an 18%/21% CAGR in consolidated EBITDA/adjusted PAT over FY24-

27 (including KSI in our estimates from FY26). UTCEM’s

improved earnings/RoE

and leadership position warrant higher multiples for the stock, which currently

trades at 18x

Mar’26E

EV/EBITDA. We value the stock at 20x

Jun’26E

EV/EBITDA

to arrive at our TP of INR13,300.

We reiterate our BUY rating.

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

UTCEM IN

289

3335.9 / 39.9

12078 / 7941

1/4/14

3502

40.0

Financials Snapshot (INR b)

Y/E March

FY25E FY26E FY27E

Sales

751 899 1,011

EBITDA

145 181 214

Adj. PAT

81 102 124

EBITDA Margin (%)

19

20

21

Adj. EPS (INR)

280 347 420

EPS Gr. (%)

14

24

21

BV/Sh. (INR)

2,321 2,765 3,184

Ratios

Net D:E

(0.0) (0.1) (0.1)

RoE (%)

12.7 13.8 14.3

RoCE (%)

12.0 13.0 13.6

Payout (%)

16.1 15.8

6.7

Valuations

P/E (x)

41.3 33.3 27.5

P/BV (x)

5.0

4.2

3.6

EV/EBITDA(x)

22.5 18.2 15.1

EV/ton (USD)

241 214 193

Div. Yield (%)

0.4

0.5

0.6

FCF Yield (%)

1.3

2.1

2.7

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

60.0

DII

14.3

13.8

17.1

FII

18.4

18.9

15.4

Others

7.3

7.5

FII Includes depository receipts

Stock Performance (1-year)

July 2024

19

STORY IN CHARTS

Exhibit 32:

Estimate clinker utilization to remain high…

Clinker capacity (mt)

79

83

88

76

75

79

Capacity Utilization (%) (RHS)

86

81

87

86

76

Exhibit 33:

…and

cement capacity utilization too

Cement capacity (mt)

76

69

Capacity Utilization (%) (RHS)

84

73

84

86

77

71

82

71

48

62

74

81

89

94 106 116 130

65

67

85 109 111 111 115 127 141 157 180 194

Source: MOFSL, Company

Exhibit 34:

UTCEM’s region-wise

capacity (mtpa) and

capacity share currently

Region

North

Central

East

West

South

All India

Cement

Capacity

currently

Regional

mix (%)

Industry

capacity

Capacity

share in the

industry (%)

Exhibit 35:

UTCEM’s FY24 market share at 26%

FY24

26.2%

UTCEM

Adani

SRCM

DALBHARA

TRCL

13.5%

BCORP

JKCE

Others

Source: Company, MOFSL

33.3

28.4

30.3

32.2

23.2

147.4

23

19

21

22

16

~128

~86

~144

~83

~194

~634

26

33

21

39

12

23

33.1%

3.9%

4.1%

4.3%

6.7% 8.2%

Source: Company, MOFSL

Exhibit 36:

Estimate an EBITDA CAGR of 18% over FY24-27

EBITDA (INR b)

21

22

18

EBITDA margin (%) (RHS)

Exhibit 37:

Estimate EBITDA/t to rise

EBITDA/t (INR)

26

19

20

22

17

18

19

20

21

Source: MOFSL, Company

July 2024

20

Exhibit 38:

Increasing green

power portfolio…

WHRS

Solar and windmill

1500

1250

945

612

4

59

32

59

345

Exhibit 39:

…to drive higher green power share

Green power share (%)

60

45

50

62

85

99

400 425 465

118 125 167 210 278

148 269

7

8

7

10

13

18

25

26

Source: MOFSL, Company

Exhibit 40:

Estimate UTCEM to be net cash by FY26

Net debt (INR b)

141

0.6

35

222 170

(2)

67

39

27 28

1

(33)

(104)

(0.1)

0.3

Net Debt: Equity (RHS)

0.9

Exhibit 41:

Return ratios to improve over FY25-26E

RoCE (%)

12.1 11.7

9.7

8.3

9.4 9.7

8.4

9.5

7.1

10.3

13.2

11.5

12.0

12.7

9.7

11.5 12.0

9.0

RoE (%)

12.3 12.7

13.8 14.3

13.0 13.6

(0.4)

Source: Company, MOFSL

Exhibit 42:

1-year forward EV/EBITDA

EV/EBITDA(x)

Max(x)

Min(x)

Avg(x)

Exhibit 43:

1-year forward EV/ton

EV/ton (USD)

280

Max

Min

245

235

193

Avg

25

20

15

10

5

8.6

16.0

22.1

21.1

230

180

130

80

115

Source: Company, MOFSL

July 2024

21

Financials and valuations

Consolidated - Income Statement

Y/E March

Total Income from Operations

Change (%)

Raw Materials

Employees Cost

Other Expenses

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Total Tax

Tax Rate (%)

Minority Interest

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

FY20

4,24,299

2.0

65,181

25,199

2,40,141

3,30,520

77.9

93,779

22.1

27,227

66,552

19,917

6,511

53,146

19,788

72,934

15,413

21.1

-32

57,553

41,946

69.0

9.9

FY21

4,47,258

5.4

70,858

23,530

2,37,191

3,31,579

74.1

1,15,679

25.9

27,002

88,677

14,857

7,342

81,162

-2,607

78,555

25,387

32.3

-34

53,202

54,967

31.0

12.3

FY22

5,25,988

17.6

79,650

25,347

3,05,848

4,10,845

78.1

1,15,144

21.9

27,148

87,996

9,447

5,078

83,627

0

83,627

11,901

14.2

-118

71,844

56,665

3.1

10.8

FY23

6,32,400

20.2

97,150

27,390

4,01,662

5,26,201

83.2

1,06,199

16.8

28,880

77,319

8,227

5,031

74,122

0

74,122

23,429

31.6

54

50,640

-10.6

8.0

FY24

7,09,081

12.1

1,19,029

30,376

4,29,991

5,79,396

81.7

1,29,686

18.3

31,453

98,233

9,680

6,170

94,722

-720

94,002

24,183

25.7

-231

70,050

70,572

39.4

10.0

FY25E

7,51,311

6.0

1,29,839

31,520

4,44,633

6,05,992

80.7

1,45,319

19.3

34,444

1,10,875

9,561

6,719

1,08,033

0

1,08,033

27,315

25.3

0

80,718

14.4

10.7

FY26E

8,99,162

19.7

1,52,052

36,375

5,29,300

7,17,727

79.8

1,81,435

20.2

42,988

1,38,447

9,228

7,592

1,36,811

0

1,36,811

34,508

25.2

0

1,02,303

26.7

11.4

(INR M)

FY27E

10,10,883

12.4

1,71,326

38,251

5,87,583

7,97,159

78.9

2,13,723

21.1

48,259

1,65,465

8,633

8,566

1,65,398

0

1,65,398

41,667

25.2

0

1,23,730

20.9

12.2

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Total Loans

Deferred Tax Liabilities

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Goodwill on Consolidation

Capital WIP

Current Investment

Non-Current Investment

Curr. Assets, Loans & Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Deferred Tax assets

Net Assets held for sale

Appl. of Funds

FY20

2,886

3,88,269

3,91,155

75

2,28,979

49,120

6,69,329

6,02,798

95,399

5,07,400

62,525

9,095

42,437

16,850

1,44,307

41,483

22,383

5,392

75,049

1,19,152

35,014

76,240

7,898

25,155

60

5,808

6,69,329

FY21

2,887

4,38,860

4,41,747

57

2,04,878

60,407

7,07,089

6,14,319

1,22,401

4,91,918

62,199

16,867

1,08,939

12,842

1,59,034

40,180

25,717

20,076

73,061

1,52,307

46,993

96,441

8,873

6,727

72

7,526

7,07,089

FY22

2,887

5,01,466

5,04,353

-31

1,02,028

60,332

6,66,683

6,41,922

1,49,549

4,92,374

62,502

47,847

49,633

13,725

1,71,938

55,956

30,716

3,592

81,674

1,71,595

58,628

1,04,309

8,658

343

164

95

6,66,683

FY23

2,887

5,40,359

5,43,245

556

99,008

62,601

7,05,411

7,10,926

1,78,428

5,32,497

63,293

40,404

58,366

14,604

2,04,460

66,118

38,670

11,496

88,175

2,08,459

72,093

1,28,080

8,286

-3,999

66

180

7,05,411

FY24

2,887

5,99,388

6,02,275

559

1,02,984

64,478

7,70,296

7,75,203

2,09,881

5,65,321

63,455

68,112

54,848

27,642

2,28,444

83,297

42,782

7,832

94,533

2,37,724

84,783

1,43,660

9,281

-9,280

49

149

7,70,296

FY25E

2,887

6,67,115

6,70,001

559

92,984

75,082

8,38,626

8,70,929

2,44,325

6,26,604

63,455

68,466

54,848

27,642

2,47,275

82,811

45,120

24,668

94,676

2,49,863

89,833

1,50,744

9,286

-2,587

50

149

8,38,627

FY26E

2,947

8,11,699

8,14,646

559

96,594

88,461

10,00,261

10,38,828

2,87,313

7,51,515

63,455

68,466

54,848

27,642

3,09,294

99,061

53,335

62,080

94,819

2,75,158

1,07,511

1,58,356

9,292

34,136

50

149

10,00,261

(INR M)

FY27E

2,947

9,16,276

9,19,223

559

81,594

1,04,607

11,05,984

11,19,581

3,35,571

7,84,010

63,455

80,466

54,848

27,642

3,84,209

1,11,353

59,746

1,18,148

94,961

2,88,846

1,20,869

1,58,680

9,297

95,363

51

149

11,05,984

July 2024

22

Financials and valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/Ton (Cap-USD)

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

FY20

145.3

239.7

1,355.2

11.5

9.1

79.5

48.2

8.5

7.8

359

37.2

0.1

249.4

11.5

9.5

8.5

36

19

30

1.2

3.3

0.5

FY21

190.4

284.0

1,530.4

37.0

19.4

60.7

40.7

7.6

7.4

347

29.2

0.3

369.4

13.2

10.3

10.2

33

21

38

1.0

6.0

0.2

FY22

196.3

290.3

1,747.2

38.0

19.4

58.9

39.8

6.6

6.3

332

28.9

0.3

127.4

12.0

12.7

13.4

39

21

41

1.0

9.3

0.1

FY23

175.4

275.4

1,881.8

38.0

21.7

65.9

42.0

6.1

5.3

301

31.2

0.3

102.6

9.7

9.0

9.1

38

22

42

1.0

9.4

0.1

FY24

244.5

353.4

2,086.2

70.0

28.6

47.3

32.7

5.5

4.6

269

25.3

0.6

69.7

12.3

11.5

11.8

43

22

44

1.0

10.1

0.1

FY25E

279.6

398.9

2,320.8

45.0

16.1

41.3

29.0

5.0

4.4

241

22.5

0.4

147.8

12.7

12.0

12.5

40

22

44

1.0

11.6

0.0

FY26E

347.2

493.1

2,764.7

55.0

15.8

33.3

23.4

4.2

3.7

214

18.2

0.5

238.4

13.8

13.0

13.8

40

22

44

1.1

15.0

0.0

FY27E

419.9

583.7

3,184.1

65.0

6.7

27.5

19.8

3.6

3.2

193

15.1

0.6

306.4

14.3

13.6

14.8

40

22

44

1.3

19.2

-0.1

Consolidated - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY20

52,423

27,022

19,917

-8,914

4,503

94,949

-5,929

89,020

-17,037

71,983

-26,266

1,210

-42,094

27

-26,663

-19,445

-3,800

-31

-49,911

-2,985

8,377

5,392

FY21

78,576

27,002

14,857

-12,910

23,264

1,30,789

-5,785

1,25,004

-18,389

1,06,615

-70,949

774

-88,565

70

-25,149

-14,805

-3,748

68

-43,565

-7,125

27,201

20,076

FY22

83,627

27,148

9,447

-15,549

-4,730

99,943

-7,110

92,832

-56,062

36,771

76,888

1,744

22,570

44

-1,12,232

-2,227

-10,650

87

-1,24,979

-9,577

13,169

3,592

FY23

74,122

28,880

8,227

-11,243

-3,370

96,617

-5,932

90,685

-61,056

29,629

-13,642

2,827

-71,871

47

-3,632

-1,894

-10,913

81

-16,310

2,504

8,992

11,496

FY24

94,002

31,453

9,680

-16,505

-4,811

1,13,819

-4,844

1,08,975

-88,841

20,135

-653

1,612

-87,881

19

-6,240

-2,252

-10,944

161

-19,257

1,838

11,496

13,334

FY25E

1,08,033

34,444

9,561

-16,712

10,143

1,45,469

-6,719

1,38,750

-96,081

42,669

0

6,719

-89,362

0

-10,000

-9,561

-12,991

0

-32,552

16,836

13,334

30,169

FY26E

1,36,811

42,988

9,228

-21,129

689

1,68,587

-7,592

1,60,995

-90,740

70,255

0

-69,566

-1,60,306

60

3,610

-9,228

-16,207

58,488

36,724

37,412

30,169

67,582

(INR M)

FY27E

1,65,398

48,259

8,633

-25,522

-5,159

1,91,608

-8,566

1,83,042

-92,753

90,288

0

8,566

-84,187

0

-15,000

-8,633

-19,153

0

-42,786

56,068

67,582

1,23,650

July 2024

23

July 2024

Update

| Sector: Cement

Ambuja Cement

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR679

TP: INR800 (+18%)

Upgrade to Buy

Growing capacity; focusing on profitability improvement

Reiterates its consol. capacity target of 140mtpa by FY28

ACEM is expanding its capacities through organic as well as inorganic routes. After

the acquisition of Sanghi Industries (SNGI), it announced the

acquisition

of Penna

Stock Info

Cement (PCIL), with a capacity of 14mtpa (including 4mtpa under construction).

Bloomberg

ACEM IN

Equity Shares (m)

2198

However, it initiated expansion of projects organically at different locations, with

M.Cap.(INRb)/(USDb)

1672.8 / 20

an aggregate grinding capacity of 20mtpa to be completed over FY25-26E. Post-

52-Week Range (INR)

707 / 404

completion of these acquisition and organic expansions, the

company’s

clinker/

1, 6, 12 Rel. Per (%)

2/14/37

cement capacity is likely to increase to 72.3mtpa/109.8mtpa by end-FY26 from

12M Avg Val (INR M)

2108

Free float (%)

29.7

54.0mtpa/77.4mtpa as of end-FY24. Apart from these expansions, the Board

approved a 2.25mtpa clinker unit in Mundra, Gujarat (a calcium hydroxide

Financials Snapshot (Consol.) (INR b)

Y/E March

FY25E FY26E FY27E

process), and 17 grinding units (2.4mtpa each) at different locations across the

Sales

360.8 442.1 494.1

country. The land acquisition process and statutory approvals are in progress.

EBITDA

Adj. PAT

EBITDA Margin (%)

Adj. EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

Ratios

Net D:E

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA(x)

EV/ton (USD)

Div. Yield (%)

FCF Yield (%)

76.4

35.2

21.2

14.3

-8.1

226

-0.5

7.3

8.5

14.0

40.5

2.6

21.2

230

0.3

0.5

95.9 114.4

44.2 52.0

21.7 23.2

18.0 21.1

25.6 17.7

241 259

-0.3

7.7

9.3

16.7

32.2

2.4

17.9

189

0.4

1.3

-0.3

8.5

10.3

18.9

27.4

2.2

14.7

177

0.6

3.8

Targeting profitability improvement through operational efficiencies

The company continues to focus on improving cost efficiencies and targets further

cost reduction of INR530/t by FY28. Key cost reduction drivers would be: 1) long-

term tie-ups for sourcing critical raw materials; 2) increasing renewable energy and

AFR share, and 3) optimization of logistic costs. It targets to increase the WHRS/Solar

& Wind capacity to 376MW/1GW by FY28 and renewable power share to 60%. It is

committed to investing INR100b in green power projects. ACEM is also focusing on

increasing the AFR to reduce costs and carbon footprints. It installed the AFR pre-

processing and feeding systems and implemented a gas bypass system to improve

the utilization of AFR. It achieved a TSR of 7.76% and targets to increase it to 23.0%

by FY30. The company is optimizing logistics costs by increasing the share of direct

dispatches and sea transportation within the group.

Strong balance sheet to support growth and strategic initiative plans

ACEM has a strong balance sheet with a consolidated cash balance of INR243.4b as

of Apr’23

(including INR83.4b

received against warrants converted into equity

shares, issued to the promoter entity). Management has guided an aggregate

capex of INR75b in FY25 (for capacity expansions through organic routes and cost-

efficiency plans, such as installation of WHRS, solar, and wind plants, buying

railway wagons, opening of coal mines, etc.) funded through internal accruals. The

fundraise of INR200b will primarily be used for strategic initiatives.

Upgrade to BUY on ambitious growth plans

We incorporate

ACEM’s consolidated earnings and estimates in this note.

We

estimate the company’s

consol. revenue/EBITDA CAGR at 14%/21% over FY24-27

(have included PCIL in estimates from FY26). Further, we estimate a consolidated

volume CAGR of ~14% and EBITDA/t of INR1,190/INR1,220/ INR1,310 over

FY25/FY26/FY27.

We upgrade ACEM to Buy from Neutral

given its value-accretive

acquisitions in last one year, which will help ACEM balance its market presence and

ambitious organic expansion plans.

We value ACEM at 20.0x

Jun’26E EV/EBITDA

to

arrive at our TP of INR800.

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

66.7

63.2

DII

14.5

15.8

14.7

FII

11.2

12.0

11.3

Others

7.7

9.1

10.9

FII Includes depository receipts

Stock Performance (1-year)

July 2024

24

STORY IN CHARTS

Exhibit 44:

ACEM’s consolidated grinding capacity growth…

Cement capacity (mtpa)

109.8

85.2

115.2

Exhibit 45:

…and

consolidated regional capacity mix

FY26E

South

20%

North

24%

77.4

62.7

65.9

67.5

West

21%

East

25%

Source: Company, MOFSL

Central

10%

Source: Company, MOFSL

Exhibit 46:

Cement capacity and utilization trends

Cement capacity (mtpa)

83

84

75

83

81

Capacity Utilisation (%)

82

Exhibit 47:

ACEM is estimated to report ~14% volume CAGR

Sales Volume

11.5

16.2

7.0

0.6

0.2

8.2

8.6

YoY growth (%)

19.4

14.1

78

79

78

-11.2

Source: MOFSL, Company

Source: MOFSL, Company; Note higher volume growth on account of

acquisition of PCIL and higher organic growth

Exhibit 48:

Estimate EBITDA CAGR of ~21% over FY24-27

EBITDA (INR b)

20.4

21.4

16.3 15.4 17.1

13.2

EBITDA Margin (%)

19.3

23.2

21.2 22.3

Exhibit 49:

EBITDA/t is estimated to rise

EBITDA/ton (INR)

Source: MOFSL, Company

July 2024

25

Exhibit 50:

Increasing renewable power capacity…

WHRS

Solar and Wind

1,091.0

641.0

80.6

14.0

85.0

53.3

85.0

1,091.0

Exhibit 51:

…to

drive higher green power share

Green power share (%)

50.0

40.0

31.0

16.0

4.0

7.0

225.0

122.2

173.3

182.5

Source: Company, MOFSL; Note: Consolidated

Source: Company, MOFSL; Consolidated

Exhibit 52:

CFO and FCF to improve over FY25-27

CFO (INR b)

FCF (INR b)

88

22

103

63

9

Exhibit 53:

Aggressive expansion plans to lead to high capex

Capex (INR b)

64.1 66.0

40.7 39.6

16.1 17.3

40.0

36

49

25 19

8

33

50

54

56

32

7

17

73

33

23.0

10.8 10.9

(33)

Source: MOFSL, Company; Note: CFO is considered post-tax

Source: MOFSL, Company

Exhibit 54:

One-year forward EV/EBITDA chart

EV/EBITDA(x)

24

18

12

6

5.4

0

12.2

Peak(x)

Avg(x)

Min(x)

23.2

Exhibit 55:

One-year forward EV/t chart

EV/ton (USD)

250

180

110

40

70

131

Max

Avg

237

Min

222

20.6

-30

Source: Company, MOFSL

July 2024

26

Financials and valuations - Consolidated

Income Statement

Y/E December/March

Net Sales

Change (%)

Total Expenditure

As a percentage of Sales

EBITDA

Change (%)

Margin (%)

Depreciation

EBIT

Interest

Other Income

–

Rec.

PBT before EO Exp.

EO Exp./(Inc.)

PBT after EO Exp.

Tax expense

Tax Rate (%)

Add: Share of profit from associate

Less: Minority Interest

Reported PAT

PAT Adj. for EO Items

Change (%)

Margin (%)

CY19

2,71,036

4.1

2,24,774

82.9

46,261

15.3

17.1

11,525

34,736

1,699

5,533

38,570

-275

38,845

10,922

28.1

200

6,882

21,241

20,966

47.6

7.7

CY20

2,45,162

-9.5

1,95,106

79.6

50,056

8.2

20.4

11,618

38,438

1,402

4,438

41,474

1,702

39,772

8,848

22.2

144

7,414

23,654

25,357

20.9

10.3

CY21

2,89,655

18.1

2,27,551

78.6

62,104

24.1

21.4

11,525

50,579

1,457

3,524

52,647

1,205

51,442

14,534

28.3

202

9,307

27,804

28,707

13.2

9.9

FY23*

3,89,370

7.5

3,38,147

86.8

51,224

-34.0

13.2

16,447

34,777

1,949

7,377

40,205

3,190

37,015

7,051

19.0

280

4,410

25,834

28,227

-21.3

7.2

FY24

3,31,596

6.5

2,67,601

80.7

63,995

56.2

19.3

16,234

47,761

2,764

11,664

56,662

-2,116

58,777

11,626

19.8

229

11,612

35,768

34,181

51.4

10.3

FY25E

3,60,758

8.8

2,84,383

78.8

76,375

19.3

21.2

20,783

55,592

5,333

13,453

63,712

0

63,712

16,451

25.8

229

12,289

35,201

3.0

9.8

FY26E

4,42,122

22.6

3,46,255

78.3

95,867

25.5

21.7

24,371

71,496

6,144

13,382

78,734

0

78,734

19,489

24.8

229

15,253

44,221

25.6

10.0

(INR m)

FY27E

4,94,100

11.8

3,79,677

76.8

1,14,423

19.4

23.2

30,285

84,139

4,400

13,670

93,409

0

93,409

22,795

24.4

229

18,794

52,049

17.7

10.5

Balance Sheet

(INR m)

Y/E December

CY19

CY20

CY21

FY23*

FY24

FY25E

FY26E

FY27E

Equity Share Capital

3,971

4,395

4,926

Money received against issue of warrants

50,000

27,797

Total Reserves

2,36,809 2,23,605 2,49,566 2,63,010 3,82,359 5,52,018 5,89,790 6,32,927

Net Worth

2,40,780 2,27,576 2,53,537 3,16,982 4,14,551 5,56,944 5,94,717 6,37,853

Minority Interest

57,368

63,409

71,450

70,584

93,908 1,04,883 1,18,821 1,36,206

Def. Liabilities

9,367

6,260

7,562

7,004

15,122

Total Loans

353

436

435

477

368

435

Capital Employed

3,07,868 2,97,681 3,32,985 3,95,046 5,23,948 6,77,384 7,29,094 7,89,616

Gross Block

1,74,809 1,85,238 2,13,828 2,43,254 3,44,361 4,07,896 5,80,166 6,31,216

Less: Accum. Depn.

46,610

59,140

69,989

86,436 1,02,669 1,22,199 1,45,317 1,74,339

Net Fixed Assets

1,28,199 1,26,099 1,43,839 1,56,818 2,41,692 2,85,697 4,34,849 4,56,877

Capital WIP

15,544

24,219

21,964

25,259

26,585

27,116

25,091

14,066

Capital Advances

4,422

6,050

4,234

4,810

14,123

Goodwill

78,815

78,761

78,697

82,193

Investments in subsidiaries

1,459

1,546

1,705

1,861

623

Investments

–

Trade

26,579

7,026

8,861

276

7,863

Curr. Assets

1,46,805 1,53,507 1,92,773 2,49,495 2,79,531 3,95,648 3,09,328 3,63,649

Inventory

20,965

16,486

27,380

32,728

36,086

38,814

45,145

48,965

Debtors

10,686

5,611

6,458

11,544

12,131

13,331

16,184

18,167

Cash and Bank Bal.

67,003

82,457 1,08,358 1,15,610 1,52,625 2,64,064 1,67,810 2,15,578

Others

48,152

48,953

50,577

89,613

78,689

79,439

80,189

80,939

Curr. Liability and Prov.

93,956

99,526 1,19,088 1,22,168 1,28,660 1,35,878 1,44,975 1,49,777

Creditors

89,969

96,601 1,16,026 1,19,373 1,25,671 1,32,889 1,41,986 1,46,787

Provisions

3,987

2,926

3,062

2,795

2,989

Net Current Assets

52,850

53,980

73,685 1,27,327 1,50,870 2,59,770 1,64,353 2,13,872

Appl. of Funds

3,07,868 2,97,681 3,32,985 3,95,046 5,23,948 6,77,384 7,29,094 7,89,616

Source: Company, MOFSL; * Note: 15-month period due to change in accounting year from December to March

July 2024

27

Financials and valuations - Consolidated

Ratios

Y/E December/March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E ratio

Cash P/E ratio

P/BV ratio

EV/Sales ratio

EV/EBITDA ratio

EV/t (Cap) - USD

Dividend Yield (%)

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Asset Turnover (x)

Debtor (Days)

Inventory (Days)

Work Cap (Days)

Leverage Ratio (x)

Current Ratio

Debt/Equity ratio

CY19

10.6

16.4

121.3

1.5

14.0

54.8

35.4

4.8

5.5

32.1

287

0.2

9.1

10.8

11.0

0.9

14.4

28

71.2

1.6

0.0

CY20

12.8

18.6

114.6

18.5

155.3

45.3

31.1

5.0

6.0

29.6

285

2.7

10.9

12.8

14.5

0.8

8.4

25

80.4

1.5

0.0

CY21

14.5

20.3

127.7

6.3

45.0

40.0

28.6

4.5

5.0

23.5

267

0.9

12.0

15.2

18.6

0.9

8.1

35

92.9

1.6

0.0

FY23*

14.2

22.5

159.6

2.5

19.2

40.7

25.7

3.6

3.7

28.4

260

0.4

10.0

9.9

12.4

1.0

10.8

31

119.4

2.0

0.0

FY24

15.6

22.9

188.6

2.0

12.3

37.2

25.2

3.1

4.7

24.3

243

0.3

9.4

10.5

12.8

0.6

13.4

40

166.1

2.2

0.0

FY25E

14.3

22.7

226.1

2.0

14.0

40.5

25.5

2.6

4.5

21.2

230

0.3

7.3

8.5

11.3

0.5

13.5

39

262.8

2.9

0.0

FY26E

18.0

27.8

241.4

3.0

16.7

32.2

20.8

2.4

3.9

17.9

189

0.4

7.7

9.3

11.7

0.6

13.4

37

135.7

2.1

0.0

FY27E

21.1

33.4

259.0

4.0

18.9

27.4

17.3

2.2

3.4

14.7

177

0.6

8.5

10.3

11.6

0.6

13.4

36

158.0

2.4

0.0

Cash Flow Statement

(INR m)

Y/E December

CY19

CY20

CY21

FY23*

FY24

FY25E

FY26E

FY27E

OP/(Loss) before Tax

38,753

39,916

51,645

37,295

59,006

63,941

78,963

93,638

Depreciation

11,525

11,618

11,525

16,447

16,234

19,530

23,118

29,022

Interest and Finance Charges

1,705

1,699

1,402

1,905

2,764

5,333

6,144

Direct Taxes Paid

-5,299

-11,702

-6,476

-7,385

-9,156

-16,451

-19,489

-22,795

(Inc.)/Dec. in WC

2,407

8,492

-3,602

-40,913

-12,390

2,540

-837

-1,751

CF from Operations

49,092

50,022

54,494

7,349

56,458

72,323

87,088

1,04,258

Others

0

CF from Operations incl. EO

49,092

50,022

54,494

7,349

56,458

72,323

87,088

1,04,258

(Inc.)/Dec. in FA

-16,070

-17,253

-22,963

-40,659

-39,611

-64,066

-66,025

-40,025

Free Cash Flow

33,022

32,769

31,530

-33,310

16,847

8,257

21,063

64,233

(Pur.)/Sale of Investments

4,142

4,080

2,893

2,668

-2,944

0

Others

-8,658

19,865

-1,963

8,585

-33,776

0 -1,04,220

0

CF from Investments

-20,587

6,692

-22,034

-29,407

-76,331

-64,066 -1,70,245

-40,025

Issue of Shares

0

424

531

0

Inc./(Dec.) in Debt

0

-1,155

-1,533

67

0

Interest Paid

-1,705

-1,699

-1,402

-1,581

-2,341

-2,764

-5,333

-6,144

Dividend Paid

-5,174

-37,959

-3,334

-12,514

-4,964

-4,926

-7,389

-9,853

Others

-1,120

-1,603

-1,823

44,560

65,302

1,10,274

-374

-468

CF from Fin. Activity

-7,999

-41,261

-6,560

29,310

56,888

1,03,182

-13,097

-16,465

Inc./Dec. in Cash

20,507

15,453

25,901

7,253

37,015

1,11,439

-96,254

47,768

Opening Balance

46,497

67,003

82,457

1,08,358

1,15,610

1,52,625

2,64,064

1,67,810

Closing Balance

67,003

82,457

1,08,357

1,15,610

1,52,625

2,64,064

1,67,810

2,15,578

Source: Company, MOFSL; *

Note: 15-month period due to change in accounting year from December to March

July 2024

28

July 2024

Update

| Sector: Cement

ACC

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR2,664

TP: INR3,300 (+24%)

Upgrade to Buy

Improving profitability; valuations attractive

Capacity expansion offers growth opportunities

ACC commissioned its greenfield integrated cement plant at Ametha (UP), with a

clinker/cement capacity of 3.3mtpa/1.0mtpa in FY24. Further, it acquired the

remaining 55% stake in Asian Concretes & Cements (ACCPL), which had a grinding

capacity of 2.8mtpa in FY24. The company also announced a grinding capacity

expansion of 4mtpa over FY25-26 (1.6mtpa brownfield expansion at Sindri,

Jharkhand by 4QFY25 and 2.4mtpa greenfield expansion at Salai Banwa, UP by

1QFY26). Post-completion

of these expansions, ACC’s grinding capacity will

increase to 46.9mtpa from 39.9mtpa currently. Capacity expansions and higher

volumes under MSA, with ACEM and SNGI, offer higher growth opportunities.

Taking initiatives for sustainable cost reduction and efficiency improvement

ACC’s opex/t dipped in FY24 due to:-

a) rationalization of raw material cost by

maximizing wet fly ash, further reduction in clinker factor to 55.6% in FY24 (56.8%

in FY23), and rise in blended cement share to ~93% in FY24 (vs. ~92% in FY23); b)

increased green power share to ~13% (from ~6% in FY23) by installing WHRS; c)

freight cost optimization by reducing lead distance and increasing volumes under

MSA with ACEM (sold 6.6mt volume to ACEM in FY24). ACC prioritizes cost

optimization through

–

1) setting up the WHRS capacity to improve green power

share, 2) higher usage of captive and alternative fuel to rationalize fuel costs, 3)

and reducing the average primary road lead by 50km with network optimization

and lead distance reduction. We believe these initiatives help the company narrow

its cost curve vs. peers on a sustainable basis.

Leverage its strong brand position to gain market share

ACC has a strong presence in the retail segment and it is positioned as an ‘A

Category’ brand across regions. ACEM (Holding Company) acquired a majority stake

in Gujarat-based Sanghi Industries (SNGI) and recently announced the acquisition of

South-based Penna Cement (PCIL). Given the strong brand equity of ACC and its wide

range of product portfolio (Gold range and Silver range) acceptable across categories

of home builders, the group leverages the ACC brand in both markets (Gujarat and

South) to gain market share and boost its volume growth.

Valuation attractive; upgrade to BUY

ACC currently trades at 10x

Mar’26E

EV/EBITDA and USD112 EV/ton. Despite the

strong brand equity, pan-India presence, and a strong balance sheet, the stock

traded at a lower valuation multiple due to slow capacity addition (capacity CAGR

at ~2% over CY18-CY22) and higher opex/t vs. its peers. ACC is a net cash positive

company with a net cash balance of INR45.2b as of Mar’24. We believe the

company’s profitability should improve, driven

by cost-saving initiatives and the

structural changes in its operations (higher volumes under MSA and leveraging

group synergies).

We value ACC at 12.0x Jun’26E EV/EBITDA to arrive at our TP of

INR3,300. We upgrade our rating on the stock to BUY from Neutral.

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

ACC IN

188

500.3 / 6

2844 / 1763

-1/2/24

1297

43.3

FY27E

252.2

48.2

29.6

19.1

157.3

15.9

1,234

-0.5

13.5

13.9

9.5

16.9

2.2

7.9

98

0.6

6.0

Financials Snapshot (INR b)

Y/E March

FY25E FY26E

Sales

213.1 231.5

EBITDA

37.4 41.5

Adj. PAT

23.3 25.5

EBITDA Margin (%) 17.5 17.9

Adj. EPS (INR)

123.8 135.7

EPS Gr. (%)

24.6

9.6

BV/Sh. (INR)

969 1,090

Ratios

Net D:E

-0.4 -0.4

RoE (%)

13.6 13.2

RoCE (%)

13.9 13.6

Payout (%)

11.3 10.3

Valuations

P/E (x)

21.4 19.5

P/BV (x)

2.7

2.4

EV/EBITDA(x)

11.2

9.8

EV/ton (USD)

123 112

Div. Yield (%)

0.5

FCF Yield (%)

4.6

3.9

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

56.7

DII

24.8

24.3

19.7

FII

6.2

10.1

Others

12.3

12.8

13.6

FII Includes depository receipts

Stock Performance (1-year)

July 2024

29

STORY IN CHARTS

Exhibit 56:

ACC’s capacity utilization to improve

Cement Capacity (mtpa)

92

74

80

85

83

78

Capacity utilisation (%)

84

86

-3

14

8

2

-12

Exhibit 57:

Estimate ACC’s volume CAGR of ~8%

over FY24-27

Sales volumes (mt)

15

5

Volume growth (%)

19

7

8

71

77

80

Source: Company, MOFSL; Note: FY23 was a 15M period

Source: Company, MOFSL; Note: FY23 was a 15M period hence

growth number is annualized

Exhibit 58:

Estimate an EBITDA CAGR of ~16% over FY24-27

EBITDA (INR b)

18.0 18.6

15.3

8.6

Margin(%)

19.1

17.5 17.9

Exhibit 59:

EBITDA/t to improve led by cost-saving measures

EBITDA (INR/t)

15.4

13.4 14.4 13.8

Source: MOFSL, Company; Note: FY23 was a 15M period

Exhibit 60:

The highest blended cement share among the

top five cement players

Clinker factor (%)

88.0

Exhibit 61:

Targets to increase the thermal substitution rate

(TSR) to 28% by FY28 from 9.2% currently

Thermal substitution (%)

28.0

Blended cement (%)

90.0

91.2

92.4

93.0

89.0

83.5

66.0

84.7

63.0

61.7

61.2

59.8

58.4

56.8

55.6

3.2

4.0

4.5

5.5

6.9

7.3

9.2

Source: MOFSL, Company

July 2024

30

Exhibit 62:

ACC is adding 39.5MW WHRS capacity in FY25E

Plants

Gagal

Kymore

Jamul

Ametha

Current capacity

Wadi

Chanda

Planned capacity

Total capacity

Karnataka

Maharashtra

State

Himachal Pradesh

Madhya Pradesh

Chhattisgarh

Madhya Pradesh

MW

7.5

12.4

10.0

16.1

46.3

21.5

18.0

39.5

85.8

Source: MOFSL, Company

FY25

Timeline

Exhibit 63:

Green power share more than doubled in FY24

Green power share (%)

13.1

4.0

4.3

5.8

6.2

6.9

6.5

6.3

Source: MOFSL, Company,

Exhibit 64:

ACC to generate healthy OCF and FCF…

CFO (INR b)

2218 22

15

28

17

FCF (INR b)

38 35

30

23 19

16

Exhibit 65:

…leading to an increase in net cash

Net Cash (INR b)

Net Debt: Equity (RHS)

45

30

-0.2

-0.3 -0.3

-0.4

74

59

19

26

30

46

-0.5

32

45

67

83

-0.2

-0.3

-0.4

-0.5

110

14 9 1610 11

6

-12

-32

Source: MOFSL, Company; Note: CFO is considered post-tax

Source: MOFSL, Company

Exhibit 66:

One-year forward EV/EBITDA chart

EV/EBITDA(x)

24

18

12

6

0

5.6

12.4

10.8

Peak(x)

Avg(x)

19.3

Min(x)

Exhibit 67:

One-year forward EV/t chart

EV/ton (USD)

180

147

135

90

109

125

Max

Avg

Min

45

0

44

Source: Company, MOFSL

July 2024

31

Financials and valuations

Standalone Income Statement

Y/E December

Net Sales

Change (%)

EBITDA

Change (%)

Margin (%)

Depreciation

Int. and Fin. Charges

Other Income - Rec.

PBT Before EO Item

EO Income/(Expense)

PBT After EO Item

Tax

Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

Standalone Balance Sheet

Y/E December

Share Capital

Fully Diluted Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Capital Employed

Gross Block

Less: Accum. Depn.

Net Fixed Assets

Capital WIP

Investments-Trade

Investments in subsidiaries

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Others

Curr. Liab. and Prov.

Account Payables

Other Liabilities

Provisions

Net Current Assets

Application of Funds

CY19

1,56,567

5.8

24,095

17.8

15.4

6,030

862

3,112

20,315

-

20,315

6,726

33.1

13,589

35.1

8.7

CY20

1,37,845

(12.0)

24,811

3.0

18.0

6,353

570

2,040

19,927

(3,049)

16,878

2,728

16.2

14,149

14,746

8.5

10.7

CY21

1,61,514

17.2

30,004

20.9

18.6

5,973

546

2,048

25,533

(929)

24,604

6,401

26.0

18,203

18,899

28.2

11.7

FY23*

2,22,100

37.5

19,190

(36.0)

8.6

8,351

772

3,372

13,439

(1,618)

11,821

3,122

26.4

8,699

9,896

(47.6)

4.5

FY24

1,99,522

(10.2)

30,576

59.3

15.3

8,763

1,538

4,915

25,191

-

25,191

3,948

15.7

21,242

18,670

88.7

9.4

FY25E

2,13,085

6.8

37,370

22.2

17.5

9,202

1,643

4,500

31,025

-

31,025

7,756

25.0

23,268

24.6

10.9

FY26E

2,31,542

8.7

41,502

11.1

17.9

9,794

1,790

4,100

34,018

-

34,018

8,504

25.0

25,513

9.6

11.0

(INR m)

FY27E

2,52,179

8.9

48,224

16.2

19.1

10,966

1,949

4,125

39,434

-

39,434

9,858

25.0

29,575

15.9

11.7

CY19

1,880

1,13,333

1,15,213

0

6,422

1,21,635

93,972

24,059

69,914

4,353

37

2,265

94,252

11,410

6,284

45,672

30,887

49,186

14,710

28,478

5,998

45,067

1,21,635

(INR m)

CY20

CY21

FY23*

FY24

FY25E

FY26E

FY27E

1,880

1,24,735

1,40,404

1,38,550

1,58,340

1,80,198

2,03,080

2,30,023

1,26,614

1,42,284

1,40,430

1,60,220

1,82,078

2,04,960

2,31,903

0

3,762

3,827

4,331

4,543

1,30,376

1,46,112

1,44,761

1,64,762

1,86,621

2,09,502

2,36,446

98,093

1,04,708

1,20,694

1,46,866

1,59,866

1,77,866

1,93,866

31,507

37,480

45,831

54,593

63,795

73,590

84,556

66,586

67,228

74,863

92,273

96,071

1,04,277

1,09,311

5,453

12,121

16,831

9,720

11,720

9,720

8,720

37

7,624

2,169

1,890

6,117

1,07,014

1,27,914

1,10,464

1,13,263

1,43,144

1,66,459

1,94,475

9,005

12,733

16,235

18,429

19,687

21,444

21,744

4,515

4,624

8,747

8,412

8,987

9,789

10,192

59,219

74,345

32,062

37,536

58,955

75,699

1,02,850

34,275

36,212

53,420

48,886

55,514

59,527

59,689

50,883

63,078

59,324

64,235

78,055

84,695

89,801

14,163

18,992

14,922

19,142

22,075

25,315

25,498

30,189

33,868

35,632

30,802

32,342

33,959

35,657

6,531

10,219

8,770

14,291

23,638

25,420

28,646

56,131

64,835

51,141

49,028

65,089

81,764

1,04,674

1,30,376

1,46,112

1,44,761

1,64,762

1,86,621

2,09,502

2,36,446

Source: Company, MOFSL; *Note: FY23 is 15-month period due to change in accounting year

July 2024

32

Financials and valuations

Standalone Ratios

Y/E December

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

EV/Sales

EV/EBITDA

P/BV

Dividend Yield

EV/ton (USD-Cap)

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Debtor (Days)

Asset Turnover (x)

Leverage Ratio

Debt/Equity (x)

Standalone Cash Flow Statement

Y/E December

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

CY19

72.3

104.4

613

14.0

19.3

36.7

25.4

2.9

18.6

4.3

0.5

164

12.3

12.1

16.2

15

0.8

0.0

CY20

78.4

112.2

674

14.0

18.6

33.8

23.6

3.1

17.5

3.9

0.5

159

12.2

13.6

22.6

12

0.9

0.0

CY21

100.5

132.3

757

58.0

59.9

26.4

20.0

2.6

13.7

3.5

2.2

145

14.1

14.0

28.4

10

0.9

0.0

FY23*

52.6

97.1

747

9.3

20.0

50.4

27.3

2.0

23.4

3.6

0.3

151

7.0

7.2

10.3

14

0.7

0.0

FY24

99.3

145.9

852

7.5

6.6

26.7

18.2

2.2

14.5

3.1

0.3

135

12.4

14.6

17.9

15

0.8

0.0

FY25E

123.8

172.7

969

14.0

11.3

21.4

15.4

2.0

11.2

2.7

0.5

123

13.6

13.9

19.4

15

0.9

0.0

FY26E

135.7

187.8

1,090

14.0

10.3

19.5

14.1

1.8

9.8

2.4

0.5

112

13.2

13.6

21.2

15

0.9

0.0

(INR m)

FY27E

157.3

215.7

1,234

15.0

9.5

16.9

12.3

1.5

7.9

2.2

0.6

98

13.5

13.9

23.9

15

0.9

0.0

(INR m)

CY19

CY20

CY21

FY23*

FY24

FY25E

FY26E

FY27E

20,315

16,878

24,604

11,821

25,191

31,025

34,018

39,434

6,030

6,353

5,973

8,351

8,763

9,202

9,794

10,966

0

570

0

-1,835

-3,554

0

(4,462)

(7,064)

(2,849)

(4,027)

(1,748)

(7,756)

(8,504)

(9,858)

601

5,419

588

(26,697)

1,153

5,359

68

4,241

22,484

22,156

28,316

-12,388

29,804

37,829

35,376

44,782

-

22,484

22,156

28,316

-12,388

29,804

37,829

35,376

44,782

(4,935)

(7,252)

(11,509)

(19,788)

(13,560)

(15,000)

(16,000)

(15,000)

17,549

14,904

16,808

-32,175

16,244

22,829

19,376

29,782

1,651

1,886

1,619

(26,632)

1,861

-

(3,283)

(5,366)

(9,890)

(46,420)

(11,699)

(15,000)

(16,000)

(15,000)

0

(572)

(399)

(316)

(596)

(1,424)

0

(2,629)

(10,892)

(1,753)

(1,410)

(2,632)

(540)

(246)

(360)

(889)

(1,245)

-

(3,742)

(3,274)

(3,305)

(12,377)

(4,423)

(1,410)

(2,632)

15,459

13,516

15,121

-71,185

13,682

21,419

16,744

27,151

29,959

45,477

58,908

74,029

32,062

37,536

58,955

75,699

45,418

58,993

74,029

32,062

37,536

58,955

75,699

1,02,850

Source: Company, MOFSL; *Note: FY23 is 15-month period due to change in accounting year

July 2024

33

July 2024

Update

| Sector: Cement

Shree Cement

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR27,790

TP: INR30,300 (+9%)

Neutral

Expensive valuation limits upside

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

SRCM IN

36

1002.7 / 12

30738 / 23023

-2/-9/-9

935

Financials Snapshot (INR b)

Y/E March

FY25E FY26E

Sales

209.2 231.6

EBITDA

49.3 54.2

Adj. PAT

22.6 22.5

EBITDA Margin (%) 23.6 23.4

Adj. EPS (INR)

626 624

EPS Gr. (%)

-8.4 -0.3

BV/Sh. (INR)

6,156 6,630

Ratios

Net D:E

-0.3 -0.2

RoE (%)

10.6

9.8

RoCE (%)

10.6

9.7

Payout (%)

19.2 24.0

Valuations

P/E (x)

44.5 44.7

P/BV (x)

4.5

4.2

EV/EBITDA(x)

18.8 17.2

EV/ton (USD)

199 173

Div. Yield (%)

0.4

0.5

FCF Yield (%)

-0.5 -0.6

Capacity expansion broadly in existing markets

SRCM has been consistent in capacity expansion (mostly through organic routes),

with a ~12% CAGR over FY14-24. The company plans to raise its grinding capacity

organically at a similar CAGR over FY24-27E to reach 65mtpa/75mtpa by FY26E/

FY27E. However, most of these expansions will focus on the company’s existing

markets (North, East, and part of South), while a large part of Central India and

West will remain untapped until FY27E. We expect SRCM’s

capacity/volume CAGR

at ~12%/10% over FY24-27E vs. ~7%/10% over FY21-24.

Low-cost producer; also focusing on improving its brand equity currently

SRCM is one of the lowest-cost cement producers in the industry, backed by: 1) a

higher share of green power (WHRS, solar power), which fulfills 57% of its power

requirements, 2) high dependence on split-grinding units, 3) high alternative raw

material consumption (at ~28% of total raw material consumption); and 4) lower

specific power consumption (68Kwh/t of cement). It is now focusing on improving

its brand equity by enhancing the consumer pull for its products in the market, and

increasing its premium product share. SRCM has revamped its brand strategy and

launched ‘Bangur’ as the

master brand

for all its product categories across

markets. This was implemented with the help of a new brand identity through a

new logo and modern packing designs. A new multi-media advertising campaign

has been launched across television, outdoor, print, digital, and retail touchpoints.

It streamlined its premium product offerings with one premium product

– ‘Bangur

Magna’ across markets.

Higher capex results in lower FCF generation and yields

SRCM plans to scale up its capacity at a CAGR of ~12% over FY24-27E and expects

to reach ~75mtpa of cement capacity by FY27 (vs. 56.4mtpa currently). We expect

SRCM to generate a cumulative OCF of INR121b over FY25-27, with an estimated

capex of INR140b. The company is estimated to post an FCF outflow until FY27 due

to its accelerated growth plans, leading to a negative FCF yield. Its net cash is

estimated to decline to INR30b from INR65.5b as of Mar’24. We estimate its RoCE

to decline to ~10% over FY25-27 from the historical average of ~12-14% over FY18-

24 (except FY23, when return ratios were exceptionally low due to weak

profitability amid significantly higher fuel prices).

Valuation and view: Valuations expensive; reiterate Neutral

We estimate SRCM’s EBITDA to report ~11%

CAGR over FY24-27, led by ~10%

volume growth and ~2% improvement in EBITDA/t.

SRCM’s net cash is estimated

at INR30b vs. INR65.5b in FY24, given the high capex for its expansion plans. The

stock trades at 17x

Mar’26E

EV/EBITDA, limiting any material upside potential.

We

reiterate our Neutral rating

and value SRCM at 18x

Jun’26E

EV/EBITDA to arrive at

our TP of INR30,300.

FY27E

256.6

60.2

25.2

23.5

698

11.9

7,149

-0.1

10.1

25.8

39.9

3.9

15.7

153

0.6

-0.8

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

62.6

DII

12.3

12.6

11.7

FII

12.5

12.3

12.8

Others

12.6

12.9

FII Includes depository receipts

Stock Performance (1-year)

July 2024

34

STORY IN CHARTS

Exhibit 68:

SRCM’s capacity expansion plans

Location

Kodla

Bangalore

Pali

Etah

Howrah

Total

State

Karnataka

Rajasthan

Western UP

West Bengal

Clinker (mtpa)

3.7

-

3.7

-

8.9

Cement (mtpa)

3.0

6.0

3.0

2.5

17.5

Region

South

North

East

Mode of expansion

Brownfield

Greenfield

Brownfield

Greenfield

Source: MOFSL, Company;

Exhibit 69:

Current regional cement capacity mix

Maharashtra

5%

South

11%

North

53%

Exhibit 70:

Regional grinding capacity mix in FY27E

Maharashtra

4%

South

16%

North

53%

East

27%

East

31%

Source: MOSL, Company; Note: North is including Western UP

Source: MOSL, Company, Note: North is including Western UP

Exhibit 71:

SRCM’s clinker capacity utilization…

Clinker capacity (mt)

88

84

78

65

67

Capacity utilizations (%)

Exhibit 72:

…and grinding capacity utilization

trends

Cement Capacity (mt)

74

72

66

Capacity utilizations (%)

72

69

73

72

70

71

67

70

71

67

64

Source: MOFSL, Company

Source: MOFSL, Company;

Exhibit 73:

EBITDA CAGR is estimated at ~11% over FY24-27

EBITDA (INR b)

30.8 31.4

25.5

28.0

25.0

23.7

25.5

17.5

22.3 23.6 23.4 23.5

EBITDA margin (%) (RHS)

Exhibit 74:

Estimate EBITDA/t largely stable over FY25-27E

EBITDA/ton (INR)

Source: MOFSL, Company

July 2024

35

Exhibit 75:

Capex should be high, given the

growth plan…

Capex (INR b)

Exhibit 76:

…resulting in

an FCF outflow and negative yield

CFO (INR b)

FCF (INR b)

31

27

8

38

2

(6)

41

(1)

27

33

5

FCF Yield (RHS) (%)

3.7

45.0 45.0

25.3

18.9

7.3

12.8

12.9 10.0

27.6 28.1

19.5

50.0

25

22

9

19

21

40

39

42

2.4

1.1

-0.2

(5)

(6)

(8)

-1.5

Source: MOFSL, Company

Exhibit 77:

SRCM’s net cash is estimated to decline due to its

aggressive expansion plan

Net Cash (INR b)

64

67

63

Net Debt: Equity

66

56

45

24

31

24

-0.3

(2)

30

0.0

-0.1

-0.3 -0.2

-0.3

-0.4 -0.4 -0.3 -0.3

33

Exhibit 78:

Return ratios are likely to remain low compared

to historical average

ROE (%)

18.9 18.4

16.7

13.9

16.5

17.4

14.0

11.7

11.6

14.9

12.6

16.3

ROCE (%)

14.0

6.6

12.8

10.6 9.8 10.1

-0.4 -0.4

13.9

12.6

7.8

10.6 9.7 10.1

Source: MOFSL, Company

Exhibit 79:

One-year forward EV/EBITDA

EV/EBITDA(x)

32

Peak(x)

Avg(x)

29.5

Min(x)

Exhibit 80:

One-year forward EV/t

EV/ton (US$)

Max

Avg

Min

320

260

215

290

26

20

14

8

13.4

19.5

17.2

200

189

140

80

155

Source: MOFSL, Company

July 2024

36

Financials and valuations - Standalone

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

–

Rec.

PBT before EO Expense

EO Expense/(Income)

PBT after EO Expense

Tax

Deferred Tax

Tax Rate (%)

Reported PAT

Tax adjustment prior period

Adj. PAT for EO items

Change (%)

Margin (%)

Balance Sheet

Y/E March

Equity Share Capital

Other Reserves

Total Reserves

Net Worth

Deferred Liabilities

Secured Loan

Unsecured Loan

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Financial investments

Strategic Investment

Curr. Assets

Inventory

Account Receivables

Cash and Bank Balance

Others

Curr. Liability and Prov.

Account Payables

Provisions

Net Current Assets

Appl. of Funds

FY20

1,19,301

1.4

36,745

30.8

16,994

19,751

2,865

2,716

19,602

0

19,602

5,248

-1,348

19.9

15,702

0

15,702

46.0

13.2

FY21

1,26,037

5.6

39,547

31.4

11,399

28,148

2,471

4,580

30,257

0

30,257

7,536

-398

23.6

23,119

-103

23,017

46.6

18.3

FY22

1,43,297

13.7

36,478

25.5

10,365

26,114

2,178

5,373

29,309

0

29,309

4,382

1,161

18.9

23,766

-1,045

22,721

-1.3

15.9

FY23

1,68,375

17.5

29,423

17.5

15,462

13,961

2,689

4,315

15,586

0

15,586

937

1,368

14.8

13,281

-1,543

11,739

-48.3

7.0

FY24

1,95,855

16.3

43,635

22.3

16,147

27,489

2,643

5,611

30,456

0

30,456

5,098

674

19.0

24,684

0

24,684

110.3

12.6

FY25E

2,09,242

6.8

49,302

23.6

22,121

27,181

2,253

5,408

30,335

0

30,335

7,736

0

25.5

22,600

0

22,600

-8.4

10.8

FY26E

2,31,633

10.7

54,188

23.4

25,797

28,390

2,243

4,087

30,235

0

30,235

7,710

0

25.5

22,525

0

22,525

-0.3

9.7

(INR m)

FY27E

2,56,583

10.8

60,215

23.5

27,884

32,331

2,124

3,616

33,824

0

33,824

8,625

0

25.5

25,199

0

25,199

11.9

9.8

FY20

361

1,29,003

1,29,364

-7438

31,042

400

31,442

1,53,368

1,03,634

60,445

43,189

12,576

63,575

25,579

41,022

14,279

8,285

1,082

17,378

32,574

32,470

104

8,449

1,53,368

FY21

361

1,52,140

1,52,501

-7855

21,332

0

21,332

1,65,978

1,13,644

71,729

41,916

12,836

83,712

26,794

37,275

14,772

4,859

2,098

15,547

36,555

36,430

125

721

1,65,978

FY22

361

1,72,348

1,72,709

-6695

20,142

0

20,142

1,86,155

1,35,229

82,014

53,215

9,729

86,014

29,445

49,056

21,614

5,957

1,183

20,303

41,304

41,160

144

7,752

1,86,155

FY23

361

1,82,524

1,82,525

1,82,885

-6686

25,392

0

25,392

2,01,592

1,50,803

97,476

53,327

23,203

87,060

29,445

58,467

24,226

9,061

1,193

23,987

49,911

49,756

155

8,556

2,01,592

FY24

361

2,03,484

2,03,486

2,03,847

-5992

14,737

0

14,737

2,12,591

1,84,610

1,13,623

70,987

18,328

77,307

29,445

72,131

31,462

9,298

2,971

28,400

55,610

55,454

156

16,522

2,12,591

FY25E

361

2,21,754

2,21,756

2,22,117

-5992

19,508

0

19,508

2,35,634

2,24,610

1,35,744

88,866

23,328

67,307

29,445

81,327

28,663

11,465

8,538

32,660

54,642

54,486

156

26,685

2,35,634

(INR m)

FY26E

FY27E

361

2,38,867

2,57,572

2,38,869

2,57,574

2,39,230

2,57,934

-5992

17,161

16,016

0

17,161

16,016

2,50,399

2,67,959

2,64,610

3,14,610

1,61,541

1,89,425

1,03,069

1,25,185

28,328

57,307

42,307

29,445

86,396

96,554

31,731

35,148

12,692

14,059

4,414

4,154

37,559

43,193

54,148

53,863

53,992

53,707

156

32,248

42,691

2,50,399

2,67,959

Source: Company, MOFSL

July 2024

37

Financials and valuations - Standalone

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

EV/t (USD-Cap)

Dividend Yield (%)

Return Ratios (%)

RoIC

RoE

RoCE

Working Capital Ratios

Inventory (Days)

Debtor (Days)

Creditor (Days)

Working Capital Turnover (Days)

Leverage Ratio (x)

Current Ratio

Net Debt/Equity ratio

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest and Finance Charges

Direct Taxes Paid

(Inc.)/Dec. in WC

CF from Operations

Others

CF from Operations incl. EO

(Inc.)/Dec. in FA

Free Cash Flow

(Pur.)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc./(Dec.) in Debt

Interest Paid

Dividend Paid

CF from Fin. Activity

Inc./Dec. in Cash

Opening Balance

Closing Balance

FY20

435

471

3,585

110.0

25.3

64.1

59.2

7.8

8.1

26.1

287

0.4

25.8

13.9

12.6

44

25

99

26

1.3

-0.3

FY21

638

316

4,227

60.0

9.4

43.7

88.3

6.6

7.4

23.5

259

0.2

39.2

16.3

14.9

43

14

106

2

1.0

-0.4

FY22

630

287

4,787

90.0

13.7

44.3

97.1

5.8

6.5

25.5

242

0.3

33.4

14.0

13.9

55

15

105

20

1.2

-0.4

FY23

325

429

5,069

100.0

27.2

85.7

65.1

5.5

31.3

240

0.4

15.6

6.6

7.8

53

20

108

19

1.2

-0.3

FY24

684

448

5,650

105.0

15.3

40.8

62.3

4.9

4.7

21.1

209

0.4

26.9

12.8

12.6

59

17

103

31

1.3

-0.3

FY25E

626

613

6,156

120.0

19.2

44.5

45.5

4.5

4.4

18.8

199

0.4

21.7

10.6

50

20

95

47

1.5

-0.3

FY26E

624

715

6,630

150.0

24.0

44.7

39.0

4.2

4.0

17.2

173

0.5

19.1

9.8

9.7

50

20

85

51

1.6

-0.2

FY27E

698

773

7,149

180.0

25.8

39.9

36.1

3.9

3.7

15.7

153

0.6

18.3

10.1

50

20

76

61

1.8

-0.1

(INR m)

FY27E

33,824

27,884

0

-8,625

-10,704

42,378

0

42,378

-50,000

-7,622

15,000

0

-35,000

0

-1,145

0

-6,494

-7,639

-261

4,414

4,154

FY20

19,602

16,994

1,132

-4,859

5,591

38,460

-947

37,513

-12,941

24,572

-42,478

0

-55,419

23,833

1,175

-2,868

-6,231

15,910

-1,997

3,078

1,081

FY21

30,257

11,399

220

-7,439

8,762

43,200

-2,264

40,936

-9,984

30,953

-17,791

0

-27,774

0

-9,610

-2,514

-22

-12,146

1,016

1,081

2,097

FY22

29,309

10,365

-849

-1,959

-7,321

29,546

-2,317

27,229

-19,483

7,746

-77

0

-19,559

0

-2,707

-2,088

-3,789

-8,584

-915

2,097

1,183

FY23

15,586

15,462

-165

-3,287

967

28,563

-1,520

27,043

-27,619

-576

3,737

0

-23,882

0

2,669

-2,574

-3,245

-3,151

11

1,182

1,193

FY24

30,456

16,147

139

-4,400

-6,238

36,104

-3,068

33,036

-28,057

4,979

14,555

0

-13,503

0

-11,961

-2,186

-3,790

-17,937

1,597

1,374

2,971

FY25E

30,335

22,121

0

-7,736

-4,596

40,125

0

40,125

-45,000

-4,875

10,000

0

-35,000

0

4,772

0

-4,330

442

5,567

2,971

8,538

FY26E

30,235

25,797

0

-7,710

-9,687

38,635

0

38,635

-45,000

-6,365

10,000

0

-35,000

0

-2,348

0

-5,412

-7,760

-4,124

8,538

4,414

July 2024

38

July 2024

Update

| Sector: Cement

Dalmia Bharat

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR1,866

TP: INR2,300 (+23%)

Buy

Growth slowdown factored in; cost benefits to drive earnings

JPA acquisition at risk…

DALBHARA proposed to acquire the cement assets of JPA located in central India.

The company is acquiring clinker/cement/CPP capacities of 6.7mtpa/9.4mtpa/

280MW at an enterprise value of INR58.4b (USD75/t). For these, the company

entered into different agreements, including tolling arrangements for a few of

JPA’s plants. The transaction has been delayed due to the pending approvals from

different lenders. Recently, at the

request of one of the lenders, the Hon’ble NCLT

has admitted JPA under IBC, and appointed an interim resolution professional

(IRP). Earlier, DALBHARA expected the deal to be closed by 2QFY25. However, with

the recent developments, we estimate the acquisition is at risk and IRP may invite

fresh bids to sell these assets.

…while, awaiting clarity on the next-leg

of organic expansion

In Jul’21, the company laid down a detailed and comprehensive capital allocation

plan along with a capacity target of 110-130mtpa by 2031. In Phase-I, it targeted to

increase the grinding capacity through the organic route to 48.5mtpa. Now, its

grinding capacity has increased to 46.6mtpa, and further expansion of 2.9mtpa is

under progress. The total capacity would reach 49.5mtpa by FY26-end. However,

management is yet to announce any new organic expansion plan (which would

take 12-24 months to become operational).

Given the uncertainty over JPA’s

cement asset acquisition and lack of clarity on further expansion plans, we

anticipate the company’s growth to slow down vs. peers.

Cost benefits would continue to drive profitability

DALBHARA is among the least cost producers in the industry supported by a higher

share of blended cement at 87% (the largest producer of slag-based cement),

green power at 27%, alternative fuel (TSR stood at ~17%), and higher C:C ratio at

1.7x. Further, it has significantly lowered the lead distance to 285Km. It is installing

a chlorine bypass duct to remove chlorine from the system, which improves clinker

quality and reduces fossil fuel consumption. DALBHARA aims to achieve 50% TSR in

the coming years. It also secured two coal blocks, namely, Brinda Sesai (East) and

Mandala North (Central), which will provide fuel security and cost optimization for

kilns. The company is also investing in renewable energy (by entering into power

purchase agreements and share purchase agreements) to improve its green power

share and lower overall costs.

Valuation and view: Leverage at a comfortable level; reiterate BUY

The company’s leverage remains low, thanks to strong volume CAGR (~17% over

FY15-24), improvement in profitability (EBITDA CAGR of 18%), and divestment of

non-core assets. Its net debt (net of investments in IEX) stood at INR3.7b and net

debt-to-EBITDA

ratio was 0.14x as of Mar’24. We estimate a

15% EBITDA CAGR

over FY24-27 fueled by 8% volume CAGR and 7% improvement in EBITDA/t backed

by cost efficiency. We believe the lack of clarity over capacity expansion would be

a near-term overhang on the stock. The stock trades at 10x

Mar’26E

EV/EBITDA.

We value DALBHARA at 12x Jun’24E EV/EBITDA

to arrive at our TP of INR2,300,

with an upside of 23%.

Reiterate BUY.

July 2024

39

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

DALBHARA IN

188

349.9 / 4.2

2431 / 1651

-6/-31/-35

846

44.2

Financials Snapshot (INR b)

Y/E March

FY25E FY26E

Sales

156.9 173.0

EBITDA

28.7 34.8

Adj. PAT

9.9 12.6

EBITDA Margin (%) 18.3 20.1

Adj. EPS (INR)

52.7 67.3

EPS Gr. (%)

28.2 27.7

BV/Sh. (INR)

914 964

Ratios

Net D:E

0.1

0.0

RoE (%)

5.9

7.2

RoCE (%)

6.1

7.0

Payout (%)

24.7 26.7

Valuations

P/E (x)

35.4 27.7

P/BV (x)

2.0

1.9

EV/EBITDA(x)

11.8 10.0

EV/ton (USD)

87

85

Div. Yield (%)

0.7

1.0

FCF Yield (%)

-1.4

2.9

FY27E

186.9

39.7

16.3

21.2

86.7

28.8

1,030

-0.1

8.7

8.2

23.1

21.5

1.8

8.4

81

1.1

5.9

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

55.8

55.9

DII

12.8

11.2

8.7

FII

11.3

12.9

12.8

Others

20.0

22.6

FII Includes depository receipts

Stock Performance (1-year)

STORY IN CHARTS

Exhibit 81:

Capacity CAGR at ~4% over FY24-27E vs. ~13%

CAGR over FY21-24

Grinding Capacity (mtpa)

North-east

16%

West

6%

Exhibit 82:

DALBHARA’s grinding capacity regional break-up

by FY26-27E

East

44%

South

34%

Source: MOFSL, Company; capacity is excluding pending acquisition

of JPA cement asset

Source: MOFSL, Company

Exhibit 83:

Cement utilization should improve

Cement Capacity (mtpa)

72

68

73

72

67

69

Utilization (%)

74

71

Exhibit 84:

Estimate volume CAGR of ~8% over FY24-27

Sales volume

15.8

10.8 10.1

7.3

3.3

7.2

12.1

9.5

8.5

7.0

YoY Chg (%)

25.0 26.5 26.5 30.8 36.0 38.6 44.6 47.1 49.5 49.5

Source: MOFSL, Company; E: MOFSL estimates

Source: MOFSL, Company; E: MOFSL estimates,

Exhibit 85:

Increasing green power portfolio

WHRS (MW)

Solar and Wind (MW)

Exhibit 86:

Higher PSC and PCC help reduce the clinker factor

OPC

13%

278

PSC

14%

PCC

54%

72

PPC

19%

9

8

9

8

10

22

32

31

100

66

113

72

Source: MOFSL, Company

July 2024

40

Exhibit 87:

Estimate EBITDA CAGR of 15% over FY24-27

EBITDA (INR b)

27

24

20

22

21

17

18

20

21

Exhibit 88:

EBITDA/t growth to be aided by cost efficiencies

EBITDA/t (INR)

EBITDA margin (%)

Source: MOFSL, Company; E: MOFSL estimates

Source: MOFSL, Company; E: MOFSL estimates,

Exhibit 89:

OCF and FCF should improve

CFO (INR b)

36

21

12

8

23

10

2

-4

-1

-5

26

19

23

26

25

28

21

10

36

Exhibit 90:

Net debt-to-EBITDA remains less than 1.0x

Net Debt/ (net cash) (INR b)

1.7

1.6

1.4

0.1

35.0 30.9 28.5

1.7

-0.6

(14.4)

(10.2)

0.2

5.2

0.1

3.7

0.4

11.7

0.2

5.9

-0.3

Net Debt/EBITDA (x)

16

Source: MOFSL, Company; E: MOFSL estimates

Source: MOFSL, Company; E: MOFSL estimates;

Exhibit 91:

One-year forward EV/EBITDA

EV/EBITDA(x)

18.0

14.0

11.1

10.0

6.0

2.0

10.0

3.2

Max(x)

Avg(x)

Min(x)

16.5

Exhibit 92:

One-year forward EV/t

EV/ton (USD)

Max (USD)

220

170

120

70

20

188

92

40

85

Source: MOFSL, Company

July 2024

41

Financials and valuations - Consolidated

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income - Rec.

PBT bef. EO Exp.

EO Expense/(Income)

PBT after EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Reported PAT

Minority and Associates

PAT Adj. for EO items

Change (%)

Margin (%)

Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Deferred capital investment subsidy

Deferred Liabilities

Minority Interest

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Current Investment

Non-current Investment

Curr. Assets, Loans and Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability and Prov.

Account Payables

Provisions

Net Current Assets

Appl. of Funds

E: MOFSL estimates

FY20

96,740

2.0

21,060

21.8

15,280

5,780

4,380

2,170

3,570

0

3,570

1,140

50

27.5

2,380

-140

2,240

-27.3

2.3

FY21

1,01,100

4.5

27,620

27.3

12,500

15,120

2,950

1,810

13,980

-3,330

17,310

2,120

3,330

40.4

11,860

-130

8,400

275.0

8.3

FY22

1,12,860

11.6

24,260

21.5

12,350

11,910

2,020

1,600

11,490

20

11,470

250

2,900

26.5

8,320

-240

8,203

-2.3

7.3

FY23

1,35,400

20.0

23,160

17.1

13,050

10,110

2,340

1,380

9,150

-3,850

13,000

320

2,100

29.6

10,580

-190

6,850

-16.5

5.1

FY24

1,46,910

8.5

26,390

18.0

14,980

11,410

3,860

3,150

10,700

0

10,700

2,160

1,310

25.4

7,230

-270

7,710

12.6

5.2

FY25E

1,56,924

6.8

28,717

18.3

13,876

14,841

4,140

2,955

13,656

0

13,656

3,471

0

25.4

10,184

-300

9,884

28.2

6.3

FY26E

1,73,000

10.2

34,834

20.1

16,249

18,585

4,426

3,104

17,263

0

17,263

4,388

0

25.4

12,875

-250

12,625

27.7

7.3

(INR m)

FY27E

1,86,941

8.1

39,700

21.2

16,515

23,185

4,230

3,178

22,133

0

22,133

5,626

0

25.4

16,506

-250

16,256

28.8

8.7

(INR m)

FY27E

375

1,92,794

1,93,169

1,560

17,580

1,900

50,300

2,64,509

3,13,700

1,23,081

1,90,619

7,000

38,720

5,910

77,075

17,926

10,243

21,738

27,169

54,815

50,425

4,390

22,261

2,64,509

FY20

390

1,05,650

1,06,040

1,400

12,770

250

59,500

1,79,960

1,66,440

40,890

1,25,550

17,400

26,980

1,610

37,670

9,740

6,640

4,030

17,260

29,250

27,210

2,040

8,420

1,79,960

FY21

374

1,27,726

1,28,100

1,240

16,590

340

37,080

1,83,350

1,86,160

49,910

1,36,250

10,060

32,930

7,410

32,210

7,600

5,110

2,470

17,030

35,510

32,820

2,690

-3,300

1,83,350

FY22

375

1,60,235

1,60,610

1,250

15,640

720

31,190

2,09,410

2,00,360

59,020

1,41,340

10,450

43,990

13,060

37,840

9,460

6,730

1,600

20,050

37,270

34,600

2,670

570

2,09,410

FY23

375

1,55,905

1,56,280

1,660

16,100

1,160

37,420

2,12,620

2,16,590

68,760

1,47,830

18,710

29,350

5,900

53,400

13,160

7,000

2,850

30,390

42,570

39,370

3,200

10,830

2,12,620

FY24

375

1,63,590

1,63,965

1,560

17,580

1,100

46,300

2,30,505

2,39,020

81,710

1,57,310

23,950

38,720

5,910

51,225

12,180

8,360

3,920

26,765

46,610

43,160

3,450

4,615

2,30,505

FY25E

375

1,71,037

1,71,412

1,560

17,580

1,400

52,300

2,44,252

2,68,940

93,556

1,75,384

22,000

38,720

5,910

50,867

13,758

8,599

1,840

26,670

48,628

44,943

3,685

2,238

2,44,252

FY26E

375

1,80,288

1,80,663

1,560

17,580

1,650

55,800

2,57,253

2,98,910

1,07,776

1,91,134

8,000

38,720

5,910

64,215

16,589

9,479

11,174

26,973

50,727

46,664

4,063

13,488

2,57,253

July 2024

42

Financials and valuations - Consolidated

Ratios

Y/E March

Basic (INR)*

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)*

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

EV/t (USD)

Dividend Yield (%)

Return Ratios (%)

RoIC

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Leverage Ratio (x)

Current Ratio

Debt/Equity ratio

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest and Finance Charges

Direct Taxes Paid

(Inc.)/Dec. in WC

CF from Operations

Others

CF from Operations incl. EO

(Inc.)/Dec. in FA

Free Cash Flow

(Pur.)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc./(Dec.) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc./Dec. in Cash

Opening Balance

Closing Balance

FY20

11.5

89.8

543.8

2.0

17.2

162.5

20.8

3.4

3.7

17.1

165

0.1

3.0

2.1

3.5

0.5

37

25

1.3

0.6

FY21

44.9

111.7

684.6

1.3

3.0

41.6

16.7

2.7

3.4

12.4

134

0.1

6.7

7.2

6.1

0.6

27

18

0.9

0.3

FY22

43.8

109.7

857.2

9.0

20.6

42.6

17.0

2.2

2.9

13.4

109

0.5

6.0

5.7

5.6

0.5

31

22

1.0

0.2

FY23

36.5

106.1

833.6

9.0

24.6

51.1

17.6

2.2

2.5

14.5

105

0.5

4.5

4.3

4.2

0.6

35

19

1.3

0.2

FY24

41.1

121.0

874.6

9.0

21.9

45.4

15.4

2.1

2.2

12.5

89

0.5

5.2

4.8

5.4

0.6

30

21

1.1

0.3

FY25E

52.7

126.7

914.3

13.0

24.7

35.4

14.7

2.0

2.2

11.8

87

0.7

6.4

5.9

6.1

0.6

32

20

1.0

0.3

FY26E

67.3

154.0

963.6

18.0

26.7

27.7

12.1

1.9

2.0

10.0

85

1.0

7.3

7.2

7.0

0.7

35

20

1.3

0.3

FY27E

86.7

174.8

1,030.3

20.0

23.1

21.5

10.7

1.8

8.4

81

1.1

8.7

8.2

0.7

35

20

1.4

0.3

(INR m)

FY27E

22,133

16,515

4,100

-5,626

1,668

38,789

-3,178

35,611

-15,000

20,611

-9

3,178

-11,831

0

-5,368

-4,100

-3,750

0

-13,217

10,563

11,174

21,737

FY20

3,570

15,280

3,640

-660

2,740

24,570

-1,190

23,380

-13,450

9,930

-4,970

300

-18,120

0

120

-4,680

-930

-430

-5,920

-660

4,690

4,030

FY21

13,640

12,500

3,190

440

7,810

37,580

-1,540

36,040

-10,270

25,770

6,050

370

-3,850

-4,000

-25,340

-3,960

0

-450

-33,750

-1,560

4,030

2,470

FY22

11,620

12,360

1,930

240

-5,150

21,000

-1,680

19,320

-17,560

1,760

6,380

410

-10,770

50

-5,800

-2,320

-1,000

-350

-9,420

-870

2,470

1,600

FY23

13,210

13,050

2,310

-140

-770

27,660

-5,140

22,520

-27,010

-4,490

2,980

1,080

-22,950

0

6,670

-2,970

-1,690

-330

1,680

1,250

1,600

2,850

FY24

10,690

14,980

3,860

-540

460

29,450

-3,100

26,350

-27,230

-880

-1,610

1,340

-27,500

0

8,890

-4,390

-1,690

-590

2,220

1,070

2,850

3,920

FY25E

13,656

13,876

3,870

-3,471

208

28,139

-2,955

25,184

-30,000

-4,816

-6

2,955

-27,051

0

6,095

-3,870

-2,437

0

-212

-2,080

3,920

1,840

FY26E

17,263

16,249

4,296

-4,388

-2,058

31,362

-3,104

28,258

-18,000

10,258

-10

3,104

-14,906

0

3,652

-4,296

-3,375

0

-4,018

9,334

1,840

11,174

July 2024

43

July 2024

Update

| Sector: Cement

JK Cement

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR4,342

TP: INR5,150 (+19%)

Buy

Improving market reach; regional mix improves too

Strong execution capabilities driving growth

JKCE has surprised through its exceptional project executions and marketing

strategies. The company’s

central India expansion achieved 83% utilization in

the first full year of operation, driving higher-than-industry growth (its grey

cement volume increased ~19% YoY in FY24 vs. ~10% for the industry). This was

supported by the company’s effective marketing strategies. JKCE expanded its

dealership network, and through robust marketing campaigns, it tapped into

newer markets in the central region.

Further expansion to deepen market reach

The company has recently commissioned a greenfield grinding unit at Prayagraj,

UP, with a capacity of 2mtpa. With this, JKCE’s grey cement capacity rose to

24.34mtpa. It announced a capacity expansion in the Central region and Bihar.

JKCE plans to set up clinker capacity (line II) of 10,000tpd (3.3mtpa) in Penna, along

with grinding units of 6mtpa spread across UP, MP, and Bihar. JKCE also completed

the acquisition of Tosahli Cement. It expects production of this plant to start from

3QFY25, after some modernization and upgradation work. Meanwhile, the

company is working on mining lease acquisitions and long-term arrangements for

limestone, after which it will announce the next phase of expansion at this plant.

Apart from that, it has limestone reserves in Jaisalmer, Rajasthan, which will be

part of its long-term expansion plan. The company also has expansion

opportunities in the South. We believe that JKCE has the potential to reach

50mtpa+ capacity in the long run, as it follows a disciplined expansion approach.

Improvement in profitability led by better regional mix and cost efficiency

With recent capacity expansions in Central India, the company’s

regional mix

improved, with 80%+ grey cement capacity located in the North, Central, and

Gujarat (high-growth markets) regions. Further, in Central India, the share of split-

location grinding units stood at ~80%, which we believe would drive higher net

plant realization. The company’s green energy share stood at 51% and it plans to

increase this to ~75% by FY30. It is using alternative fuels (AFR) in its kilns, and its

TSR was 14.6% (with a target to increase it to 30% by FY30).

Outlook positive; reiterate BUY

We estimate JKCE’s consol. revenue/EBITDA CAGR at 11%/15%

over FY24-27,

driven by 11% CAGR in sales volume and improvement in EBITDA/t. We

estimate its EBITDA/t at INR1,090/ INR1,150/INR1,210 in FY25/FY26/FY27 vs.

INR1,080 in FY24 (average INR1,035 over FY19-23). It trades at 13x

Mar’26E

EV/EBITDA and an EV/t of USD145. Considering JKCE’s well-planned growth

strategy, higher volume growth, improving regional mix, and improved

profitability, we value the stock

at 15x Jun’26E EV/EBITDA

to arrive at our TP of

INR5,150.

Reiterate BUY.

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

JKCE IN

77

335.5 / 4

4594 / 2996

-1/-5/4

576

Financials &Valuations (INR b)

Y/E MARCH

FY25E FY26E

Sales

125.1 140.6

EBITDA

22.6

26.9

Adj. PAT

8.9

11.3

EBITDA Margin (%)

18.1

19.1

Adj. EPS (INR)

115.0 146.3

EPS Gr. (%)

11.9

27.2

BV/Sh. (INR)

785

901

Ratios

Net D:E

0.7

0.6

RoE (%)

15.5

17.4

RoCE (%)

10.9

12.1

Payout (%)

21.7

20.5

Valuations

P/E (x)

37.8

29.7

P/BV (x)

5.5

4.8

EV/EBITDA(x)

16.3

13.3

EV/ton (USD)

166

145

Div. Yield (%)

0.6

0.7

FCF Yield (%)

0.9

2.3

Shareholding pattern (%)

As On

Jun-24 Mar-24

Promoter

45.7

DII

22.1

23.4

FII

17.7

15.9

Others

14.5

15.0

FII Includes depository receipts

Stock Performance (1-year)

FY27E

157.0

31.5

14.4

20.1

186.8

27.7

1,058

0.4

19.1

13.8

16.1

23.3

4.1

11.4

132

0.7

5.3

Jun-23

45.8

23.2

15.5

July 2024

44

STORY IN CHARTS

Exhibit 93:

Central India’s

expansion enhances regional mix

North

-

40

-

29

-

21

11

-

5

20

10

Central

-

5

20

10

South

-

3

17

29

-

3

16

34

West

-

3

14

39

East

3

13

10

2

12

41

Adani

Group

11%

Exhibit 94:

Capacity share of leading players in Central India

FY26E

Others

25%

UTCEM

33%

46

60

71

68

65

51

47

43

39

35

JPA

8%

BCORP

10%

JKCE

13%

Sources: MOFSL, Company

Sources: MOFSL, Company;

Exhibit 95:

Grey cement capacity and utilization trends

Grey Cement Capacity

79

66

65

82

60

70

83

Capacity Utilization (%)

80

79

80

82

Exhibit 96:

Grey cement volume CAGR of ~11% over FY24-27E

Grey Cement volume (mt)

Growth (YoY) (%)

21.9

21.0

17.7

17.0

18.9

13.0 12.0

10.0

4.3

8.4

6.9 6.8 8.2

(1.1)

8.6

10.3 12.1 14.2 16.9 18.6 21.0 23.5

9.3

(1.5)

Sources: MOFSL, Company,

Sources: MOFSL, Company

Exhibit 97:

Est. ~15% consol. EBITDA CAGR over FY24-27

EBITDA (INR b)

23.3

18.6

13.5

Margin (%)

Exhibit 98:

Estimate consol. EBITDA/t to rise during FY26-27

EBITDA/t (INR)

18.1

13.5

20.9

16.2 15.9

20.7

18.4 18.8

19.7

5.1 7.3 7.9 8.3 12.1 15.4 14.8 13.1 20.6 22.6 26.9 31.5

Sources: Company, MOFSL, Note: Consolidated EBITDA

Sources: Company, MOFSL, Note: Consolidated EBITDA/t

July 2024

45

Exhibit 99:

OCF to improve; will support expansion plans

OCF

14

16

7

Exhibit 100:

Net debt is estimated to peak out in FY26

Net debt (INR b)

Net debt to EBITDA (x)

5.3

3.5

2.6

1.7 1.8

1.6

2.5 2.0 2.0

1.7

Capex

14

20

FCF

20

23

26

6

8

9

7

1.0

1.1

(4)

(4) (1) (6)

(12)

(8)

(15) (16) (12) (17) (15)

(8)

27

25

20

14

22

15

24

33

42

45

34

Sources: MOFSL, Company

Exhibit 101:

PAT margin to expand

PAT (INR b)

Margin (%)

Exhibit 102:

Estimate return ratios to improve

ROE

ROCE

21.6

10.6

8.3

8.6

4.4

16.4

6.9 7.1

8.0

9.2

11.5

3.6

7.7

5.0

10.7

11.6

11.4

8.5

12.9

17.2

17.0

9.5

15.9

15.5

17.4

19.1

4.6

1.5

0.6

6.1

5.0

11.2

7.0

12.1

10.8 10.9

13.8

1.9 3.0 2.7 4.9 7.3 6.9 4.3 8.0 8.9 11.3 14.4

Sources: MOFSL, Company

Exhibit 103:

One-year forward EV/EBITDA (x) trend

EV/EBITDA(x)

24.0

18.0

11.8

12.0

6.0

0.0

5.6

Peak(x)

Avg(x)

21.6

Min(x)

Exhibit 104:

One-year forward EV/t (USD) trend

EV/ton (US$)

255

195

198

111

160

Max

Avg

Min

14.4

135

75

15

52

Sources: MOFSL, Company

July 2024

46

Financials and valuations - Consolidated

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

–

Rec.

PBT bef. EO Exp.

EO Expense/(Income)

PBT after EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Reported PAT

PAT adj. for EO items

Change (%)

Margin (%)

Less: Minority Interest

Net Profit

Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Deferred Liabilities

Minority Interest

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Total Investments

Curr. Assets, Loans, and Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability and Prov.

Account Payables

Provisions

Net Current Assets

Appl. of Funds

Source: Company, MOFSL estimates

FY20

58,016

10.3

12,134

20.9

2,880

9,255

2,764

853

7,344

0

7,344

1,593

917

34.2

4,834

83.4

8.3

-90.0

4,924

FY21

66,061

13.9

15,387

23.3

3,062

12,325

2,528

1,130

10,927

0

10,927

3,296

600

35.7

7,031

45.5

10.6

-66.2

7,317

FY22

79,908

21.0

14,824

18.6

3,425

11,399

2,697

1,429

10,131

0

10,131

2,429

908

32.9

6,794

6,871

-2.3

8.6

-77.0

6,871

FY23

97,202

21.6

13,143

13.5

4,582

8,561

3,122

874

6,313

0

6,313

1,424

698

33.6

4,191

4,263

-38.0

4.4

-72.5

4,263

FY24

1,15,560

18.9

20,598

17.8

5,726

14,872

4,531

1,451

11,791

55

11,736

1,487

2,350

32.7

7,899

7,936

86.2

6.9

-24.1

8,013

FY25E

1,25,094

8.3

22,636

18.1

6,172

16,463

4,683

1,600

13,380

0

13,380

4,498

0

33.6

8,882

11.9

7.1

0.0

8,882

FY26E

1,40,627

12.4

26,858

19.1

6,729

20,129

4,794

1,690

17,025

0

17,025

5,723

0

33.6

11,302

27.2

8.0

0.0

11,302

(INR m)

FY27E

1,57,012

11.7

31,540

20.1

7,182

24,359

4,462

1,843

21,740

0

21,740

7,308

0

33.6

14,432

27.7

9.2

0.0

14,432

(INR m)

FY27E

773

80,947

81,719

10,756

-455

45,885

1,37,906

1,64,108

56,569

1,07,539

10,000

3,683

51,571

14,573

7,372

10,155

19,472

34,888

33,133

1,755

16,683

1,37,906

FY20

773

29,504

30,277

4,173

-203

32,840

67,086

75,780

20,235

55,545

5,295

458

24,122

6,904

2,677

9,649

4,892

18,334

16,725

1,609

5,788

67,086

FY21

773

36,595

37,367

5,930

-257

34,017

77,057

82,126

22,752

59,374

5,093

1,422

32,831

7,566

3,615

16,416

5,233

21,663

20,276

1,388

11,167

77,057

FY22

773

42,476

43,249

7,383

-343

38,549

88,838

91,614

26,177

65,437

10,321

2,157

36,115

12,087

4,268

10,793

8,967

25,192

23,803

1,389

10,923

88,838

FY23

773

46,095

46,868

8,094

-444

49,951

1,04,469

1,12,857

30,759

82,097

5,920

923

41,552

9,821

4,801

15,874

11,056

26,024

24,512

1,511

15,528

1,04,469

FY24

773

52,899

53,671

10,756

-455

52,385

1,16,358

1,29,469

36,486

92,983

4,639

3,683

46,716

11,816

5,663

8,665

20,572

31,663

29,955

1,709

15,053

1,16,358

FY25E

773

59,849

60,622

10,756

-455

53,385

1,24,308

1,39,108

42,658

96,450

12,000

3,683

44,315

12,091

6,032

5,920

20,272

32,139

30,415

1,724

12,176

1,24,308

FY26E

773

68,833

69,606

10,756

-455

54,885

1,34,792

1,44,108

49,387

94,721

22,000

3,683

47,713

13,133

6,696

8,012

19,872

33,325

31,586

1,739

14,388

1,34,792

July 2024

47

Financials and valuations - Consolidated

Ratios

Y/E March

Basic (INR)*

Consol. EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)*

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

EV/t (USD)

Dividend Yield (%)

Return Ratios (%)

RoIC

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Working Capital Turnover (Days)

Leverage Ratio (x)

Current Ratio

Debt/Equity ratio

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest and Finance Charges

Direct Taxes Paid

(Inc.)/Dec. in WC

CF from Operations

Others

CF from Operations incl. EO

(Inc.)/Dec. in FA

Free Cash Flow

(Pur.)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc./(Dec.) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc./Dec. in Cash

Opening Balance

Closing Balance

FY20

62.6

99.8

391.8

17.5

33.7

70.2

44.0

11.2

6.2

29.4

270

0.4

13.0

17.2

11.4

0.9

43.4

17

105

-24

1.3

1.1

FY21

91.0

130.6

483.6

15.0

16.5

48.3

33.6

9.1

5.3

22.8

249

0.3

15.0

21.6

12.9

0.9

41.8

20

112

-29

1.5

0.9

FY22

88.9

133.2

559.7

15.0

17.1

49.4

33.0

7.8

4.4

23.9

247

0.3

12.8

17.0

11.2

0.9

55.2

19

109

1

1.4

0.9

FY23

55.2

114.5

606.6

15.0

27.7

79.6

38.4

7.2

3.8

27.9

190

0.3

7.7

9.5

7.0

0.9

36.9

18

92

-1

1.6

1.1

FY24

102.7

176.8

694.6

20.0

19.6

42.8

24.8

6.3

3.3

18.2

182

0.5

11.1

15.9

10.8

1.0

37.3

18

95

20

1.5

1.0

FY25E

115.0

194.8

784.5

25.0

21.7

38.2

22.5

5.6

3.0

16.4

167

0.6

10.8

15.5

10.9

1.0

35.3

18

89

18

1.4

0.9

FY26E

146.3

233.3

900.8

30.0

20.5

30.0

18.8

4.9

2.6

13.4

146

0.7

13.1

17.4

12.1

1.0

34.1

17

82

17

1.4

0.8

FY27E

186.8

279.7

1,057.6

30.0

16.1

23.5

15.7

4.2

2.3

11.5

133

0.7

15.0

19.1

13.8

1.1

33.9

17

77

15

1.5

0.6

(INR m)

FY27E

21,740

7,182

4,462

-7,308

-153

25,923

-

25,923

-8,000

17,923

0

-8,000

0

-9,000

-4,462

-2,318

0

-15,780

2,143

8,012

10,155

FY20

7,344

2,880

1,975

-1,530

2,819

13,488

179

13,668

-12,428

1,240

-2,622

6,998

-8,052

0

3,133

-2,507

-1,630

-77

-1,081

4,534

5,116

9,650

FY21

10,927

3,062

1,666

-1,959

1,715

15,411

490

15,901

-7,678

8,223

-11,747

11,665

-7,760

0

1,120

-2,427

0

-68

-1,375

6,767

9,650

16,416

FY22

10,131

3,425

2,697

-2,429

-5,379

8,445

(967)

7,478

-14,716

-7,238

-734

2,232

-13,218

0

4,532

-2,697

-1,159

-559

117

-5,623

16,416

10,793

FY23

6,276

4,619

3,019

-1,622

2,276

14,568

(797)

13,771

-16,115

-2,344

-2,021

-2,012

-20,148

0

11,560

-2,841

-1,159

-147

7,413

1,036

14,838

15,874

FY24

11,736

5,726

4,435

-1,542

-6,732

13,624

5,967

19,591

-11,726

7,865

-5,634

1,002

-16,358

0

1,431

-4,324

-1,158

-106

-4,157

-924

9,590

8,665

FY25E

13,380

6,172

4,683

-4,498

131

19,869

-

19,869

-17,000

2,869

0

-17,000

0

1,000

-4,683

-1,932

1

-5,614

-2,745

8,665

5,920

FY26E

17,025

6,729

4,794

-5,723

-121

22,704

-

22,704

-15,000

7,704

0

-15,000

0

1,500

-4,794

-2,318

0

-5,612

2,092

5,920

8,012

July 2024

48

July 2024

Update

| Sector: Cement

The Ramco Cements

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR797

TP: INR890 (+12%)

Neutral

Capacity constraint and higher leverage restrict upside

Volume CAGR to moderate to ~8% over FY24-27E

TRCL reported an industry leading volume growth of ~23% over FY21-24, driven by

capacity expansion, market share gains, and healthy demand growth in its key

markets.

In FY24, the company’s clinker utilization stood at ~94%. It is expanding

clinker capacity by adding 3mtpa at its Kurnool, Andhra Pradesh plant (brownfield

expansion). However, its clinker capacity is likely to be commissioned by FY26-

end, and we anticipate the company to have limited volume growth opportunities

(through optimizing blending ratio) until then. We further

estimate the company’s

volume growth to moderate to ~8% over FY24-27E due to: 1) the high base

impact; 2) the clinker capacity constraints in the medium term; and 3) capacity

expansion by peers in the South, primarily in Tamil Nadu and Andhra Pradesh.

Profitability hit by price corrections and higher costs

The southern region witnessed significant pricing pressure in 4QFY24 and FY24.

Cement price declined ~9% QoQ in 4Q (vs. an all-India average price decline of

~7% QoQ) and ~4% YoY in FY24 (vs. flat all-India average price YoY). The company

has a higher presence in the southern region, which led to lower profitability.

TRCL is one of the low-cost producers in the industry, supported by higher usage

of captive power plants (self-sufficient for its power requirement), lower heat

consumption (at less than 700Kcal/kg of clinker), strategic location of plants

(average lead distance is less than 300km), and infrastructure created at plants to

scale up operations and drive operating efficiencies. However, in the past two

years, the company’s blended cement share has declined to ~70-68%

vs. ~75% in

FY21-22. This has resulted in a decline in C:C ratio to 1.25x from 1.34x. Lower C:C

ratio is resulting in higher clinker costs.

High leverage and low RoE; stock is fairly valued; reiterate Neutral

TRCL’s net debt increased

steeply over the past few years due to higher capex and

lower profitability. Its cumulative capex over FY20-FY24 stood at ~INR93b, while

its cumulative OCF was ~INR73b during the same period. The company’s net debt

increased to INR47b from INR29b in FY20; the net debt-to-EBITDA stood at 3.0x

vs. 2.6x in FY20. We estimate the company’s cumulative OCF to be INR51b

over

FY25-27 with a cumulative capex of INR44b

over the same period. The company’s

net debt is estimated to increase to INR56b by FY27. We estimate TRCL’s

return

ratios to be lower due to weak profitability and higher capex. The company’s RoE

and RoCE are estimated at ~9% and 8% in FY27E vs. its historical average (over

FY16-22) of ~14% and 11%, respectively. The stock is currently trading at 11x

Mar’26E

EV/EBITDA and EV/t of USD108. We value the stock at 12x

Jun’26E

EV/EBITDA to arrive at our TP of INR890.

Reiterate Neutral.

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

TRCL IN

236

188.3 / 2.3

1058 / 700

-12/-32/-40

624

Financials Snapshot (INR b)

Y/E MARCH

FY25E FY26E FY27E

Sales

100.9 109.6 118.4

EBITDA

17.7 20.6 22.8

Adj. PAT

4.9

6.7

7.9

EBITDA Margin (%) 17.6 18.8 19.2

Adj. EPS (INR)

20.7 28.4 33.3

EPS Gr. (%)

24.1 37.1 17.0

BV/Sh. (INR)

320

345

374

Ratios

Net D:E

0.7

0.6

RoE (%)

6.7

8.6

9.3

RoCE (%)

6.5

7.4

7.9

Payout (%)

16.9 12.3

0.0

Valuations

P/E (x)

38.6 28.2 24.1

P/BV (x)

2.5

2.3

2.1

EV/EBITDA(x)

12.8 11.3 10.3

EV/ton (USD)

114

108

109

Div. Yield (%)

0.4

0.0

FCF Yield (%)

-0.3

1.5

2.4

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

42.3

42.1

42.3

DII

35.6

36.3

35.9

FII

7.4

7.9

7.6

Others

14.7

13.6

14.3

FII Includes depository receipts

Stock performance (one-year)

July 2024

49

STORY IN CHARTS

Exhibit 105:

TRCL’s long-term

(FY09-24) capacity CAGR at

~6%

Cement Capacity (mtpa)

Exhibit 106:

Grinding capacity break-up (regional)

FY24E

East

17%

South

83%

Source: MOFSL, Company

Source: MOFSL, Company;

Exhibit 107:

Clinker capacity and utilization trends

Clinker capacity (mtpa)

85

71

58

60

90

80

Capacity utilization (%)

94 96 93 92

88

Exhibit 108:

Grinding capacity and utilization trends

Cement Capacity (mtpa)

Capacity utilization (%)

73

82

85

86

88

75

67

44

51

56

64

52

57

Source: MOFSL, Company;

Exhibit 109:

Estimate volume CAGR of ~8% over FY24-27

Sales volume (mt)

34.8

16.0

-6.1

7.2 8.3 9.3 11.1 11.2

19.5

11.5

0.7

-10.9

10.0

11.1 15.0 18.4 20.1 21.5 23.0

11.7

22.5

9.0 7.0 7.0

Growth (%)

Exhibit 110:

Estimate EBITDA CAGR of ~15% over FY24-27

EBITDA (INR b)

EBITDA margin (%)

30

24

20

21

29

21

15

17

18

19

10.5 11.7 10.7 10.1 11.1 15.5 12.8 11.8 15.5 17.7 20.6 22.8

Source: MOFSL, Company

July 2024

50

Exhibit 111:

EBITDA/t trend

EBITDA/t (INR)

Exhibit 112:

Higher capex led to FCF outflow over FY19-24

OCF

18

11

8

Capex

15

18

FCF

19

12

21

7

(3) (3) (5)

(12)

(19) (17) (19) (19) (19)

(12)

(16) (16)

Source: MOFSL, Company

Exhibit 113:

Net debt surged over the years

Net debt (INR b)

2.9

1.9

Net debt to EBITDA (x)

3.6

2.6

1.9

1.1 0.9

1.5

3.0 3.0

Exhibit 114:

Return ratios to remain low historically

18.1 18.9

ROE

14.5

2.5

12.6

14.0

11.7

14.4

9.7

ROCE

2.7

12.0 12.8

6.7

10.6 5.2 5.7

9.7 9.4 9.8

7.4 7.9

6.0 6.5

4.8

8.6

9.3

Source: MOFSL, Company;

Exhibit 115:

One-year forward EV/EBITDA

EV/EBITDA(x)

24.0

18.0

12.0

6.0

0.0

14.3

8.1

11.6

Peak(x)

Avg(x)

21.6

Min(x)

Exhibit 116:

One-year forward EV/t

EV/ton (US$)

200

150

100

50

0

72

128

110

Max

Avg

182

Min

Source: MOFSL, Company

July 2024

51

Financials and valuations

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income - Rec.

PBT bef. EO Exp.

EO Expense/(Income)

PBT after EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Reported PAT

PAT Adj for EO items

Change (%)

Margin (%)

FY20

53,435

4.3

11,117

20.8

3,153

7,964

714

622

7,872

0

7,872

1,393

469

23.6

6,011

18.1

11.2

FY21

52,684

-1.4

15,480

29.4

3,553

11,927

876

346

11,397

0

11,397

2,440

1,346

33.2

7,611

26.6

14.4

FY22

59,800

13.5

12,838

21.5

4,008

8,830

1,124

306

8,012

0

8,012

1,768

-2,682

-11.4

8,927

5,899

-22.5

9.9

FY23

81,353

36.0

11,820

14.5

5,044

6,775

2,405

367

4,737

0

4,737

257

1,045

27.5

3,435

-41.8

4.2

FY24

93,498

14.9

15,525

16.6

6,359

9,167

4,155

423

5,435

0

5,435

409

1,076

27.3

3,950

15.0

4.2

FY25E

1,00,910

7.9

17,732

17.6

6,989

10,742

4,413

430

6,760

0

6,760

1,859

0

27.5

4,901

24.1

4.9

FY26E

1,09,584

8.6

20,575

18.8

7,311

13,264

4,473

476

9,267

0

9,267

2,548

0

27.5

6,718

37.1

6.1

(INR m)

FY27E

1,18,403

8.0

22,765

19.2

7,785

14,980

4,653

520

10,846

0

10,846

2,983

0

27.5

7,863

17.0

6.6

(INR m)

FY27E

236

88,206

88,443

10,304

59,168

1,57,915

2,18,397

76,216

1,42,181

12,000

4,397

36,339

14,598

9,732

2,278

9,732

37,002

35,683

1,319

-663

1,57,914

Balance Sheet

Y/E March

FY20

Equity Share Capital

236

Total Reserves

48,950

Net Worth

49,186

Deferred Liabilities

9,172

Total Loans

30,241

Capital Employed

88,599

Gross Block

93,901

Less: Accum. Deprn.

35,757

Net Fixed Assets

58,144

Capital WIP

18,143

Total Investments

4,275

Curr. Assets, Loans&Adv.

19,908

Inventory

6,453

Account Receivables

5,269

Cash and Bank Balance

914

Loans and Advances

7,273

Curr. Liability & Prov.

11,871

Account Payables

11,341

Provisions

531

Net Current Assets

8,037

Appl. of Funds

88,599

Source: Company, MOFSL Estimates

FY21

236

56,032

56,268

10,877

31,017

98,162

1,06,223

38,720

67,503

23,255

4,369

18,331

5,979

3,752

1,419

7,181

15,296

14,655

641

3,035

98,162

FY22

236

65,012

65,249

8,240

39,300

1,12,789

1,18,037

42,728

75,309

30,340

4,220

20,687

8,333

3,498

1,760

7,095

17,767

16,985

782

2,920

1,12,789

FY23

236

67,699

67,935

9,285

44,874

1,22,095

1,47,329

47,772

99,557

19,873

4,209

21,530

8,823

4,650

1,686

6,371

23,074

22,141

933

-1,545

1,22,095

FY24

236

71,205

71,441

10,304

49,168

1,30,914

1,72,397

54,131

1,18,266

13,784

4,397

25,235

9,823

8,522

1,352

5,539

30,770

29,635

1,135

-5,535

1,30,914

FY25E

236

75,279

75,515

10,304

54,668

1,40,487

1,82,397

61,120

1,21,277

16,000

4,397

30,047

12,441

8,294

1,018

8,294

31,233

30,411

822

-1,187

1,40,488

FY26E

236

81,170

81,406

10,304

57,168

1,48,879

2,02,397

68,432

1,33,966

12,000

4,397

32,668

13,510

9,007

1,144

9,007

34,152

33,025

1,127

-1,484

1,48,878

July 2024

52

Financials and valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

EV/Ton (USD)

Dividend Yield (%)

Return Ratios (%)

RoIC

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Debt/Equity

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance

Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY20

25.5

38.9

208.8

2.5

11.8

31.4

20.6

3.8

3.7

18.0

129

0.3

10.0

12.8

9.4

0.6

44.1

36.0

77.5

1.7

0.6

FY21

32.3

47.3

238.5

3.0

9.3

24.8

16.9

3.4

3.7

12.6

122

0.4

11.9

14.4

9.8

0.5

41.4

26.0

101.5

1.2

0.6

FY22

25.0

41.9

276.1

3.0

7.9

32.1

19.1

2.9

3.3

15.3

122

0.4

13.5

9.7

10.6

0.5

50.9

21.3

103.7

1.2

0.6

FY23

14.5

35.9

287.5

2.0

13.8

55.1

22.3

2.8

2.6

18.0

117

0.2

5.7

5.2

4.8

0.7

39.6

20.9

99.3

0.9

0.7

FY24

16.7

43.6

302.3

2.5

15.0

48.0

18.4

2.7

2.4

14.3

117

0.3

6.4

5.7

6.0

0.7

38.3

33.3

115.7

0.8

0.7

FY25E

20.7

50.3

319.6

3.5

16.9

38.6

15.9

2.5

2.2

12.8

114

0.4

6.8

6.7

6.5

0.7

45.0

30.0

110.0

1.0

0.7

FY26E

28.4

59.4

344.5

3.5

12.3

28.2

13.5

2.3

2.1

11.3

108

0.4

7.7

8.6

7.4

0.7

45.0

30.0

110.0

1.0

0.7

FY27E

33.3

66.2

374.3

0.0

24.1

12.1

2.1

2.0

10.3

109

0.0

8.0

9.3

7.9

0.7

45.0

30.0

110.0

1.0

0.7

(INR m)

FY27E

10,846

7,785

4,653

-2,983

313

20,614

0

20,614

-16,000

4,614

0

-16,000

0

2,000

-4,653

-827

0

-3,481

1,134

1,144

2,278

FY20

7,872

3,153

714

-1,861

-2,590

7,287

100

7,387

-18,791

-11,404

19

-1,257

-20,029

0

14,054

-714

-711

0

12,630

-13

927

915

FY21

11,397

3,553

876

-3,786

5,507

17,547

143

17,690

-17,434

256

-94

1,150

-16,378

0

776

-876

-708

0

-808

504

915

1,419

FY22

8,012

4,008

1,124

915

457

14,516

30

14,546

-18,900

-4,354

150

-1,904

-20,654

0

8,282

-1,124

-709

0

6,450

342

1,419

1,761

FY23

4,737

5,044

2,405

-1,302

4,390

15,275

-166

15,109

-18,826

-3,717

11

935

-17,880

0

5,575

-2,405

-473

0

2,697

-74

1,761

1,686

FY24

5,435

6,359

4,155

-1,485

3,656

18,120

-88

18,032

-18,979

-948

-189

1,254

-17,914

0

4,294

-4,155

-591

0

-452

-334

1,686

1,352

FY25E

6,760

6,989

4,413

-1,859

-4,682

11,621

0

11,621

-12,216

-594

0

-12,216

0

5,500

-4,413

-827

0

260

-334

1,352

1,018

FY26E

9,267

7,311

4,473

-2,548

424

18,927

0

18,927

-16,000

2,927

0

-16,000

0

2,500

-4,473

-827

0

-2,801

126

1,018

1,144

July 2024

53

July 2024

Update | Sector: Cement

Birla Corporation

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR1,605

TP: INR1,970 (+23%)

Buy

Operating performance improves

Mukutban’s utilization ramp-up to drive growth

BCORP is seeing a steady progress in its Mukutban plant operations, with the

capacity utilization of the plant reaching ~77% in Mar’24. Its restructured ramp-

up strategy: 1) leveraging its well-known premium brand, Perfect Plus; 2) selling

in the markets outside Maharashtra to expand its reach; and 3) increasing direct

sales from the plant have achieved better results. BCORP expects FY25

utilization to be +70%, which will help drive its volume growth. Further, it

expects state incentives for the Mukutban plant to accrue from the beginning of

FY25. The total incentive accrual is estimated at INR1.1b in FY25.

Targets to increase the cement capacity to 25mtpa by FY27

BCORP plans to raise grinding capacity to 25mtpa by FY26-27 from its existing

capacity of 20mtpa. It has announced a greenfield grinding capacity expansion

of 1.4mtpa in Prayagraj, Uttar Pradesh, at an estimated capex of INR4b, which is

estimated to be commissioned by 1QFY26. Further, it announced a brownfield

expansion of 1.4mtpa at Kundanganj, Uttar Pradesh with an investment of

INR4.25b. The project is likely to be completed by FY26-end. Post-completion of

both these expansions,

the company’s

grinding capacity will increase to

22.8mtpa. Earlier, it acquired mining rights of Katni, MP (near to its Maihar, MP

plant). We believe, in the next phase of expansion, the company will announce

addition of clinker line

–

II at Maihar, MP plant and the associated grinding

capacity would reach its target of 25mtpa by FY27.

Profitability improvement

–

a mix of improved realization and cost efficiency

The company has implemented various cost-reduction

initiatives under “Project

Shikhar” for improving

its manufacturing operations (such as power and fuel, fly

ash, and limestone costs). On the other hand,

“Project Unnati” has been launched

with an intent to enhance the

“Go-to-Market” strategy, with a focus on sales,

logistics, and marketing domains. BCORP aims to expand its market footprint and

increase the intensity of coverage in core areas by improving reach and

penetration. The company achieved a combined savings of INR90/t+ in FY24.

Both these projects remain in a work-in-progress mode, and will lead to further

improvement in efficiency and savings. BCORP is further scaling up its production

from captive coal mine, thus, reducing dependence on imported coal.

Valuations attractive; reiterate BUY

We estimate BCORP’s consol. EBITDA/PAT CAGR at 12%/27% over FY24-27. We

estimate the company’s EBITDA/t to improve

to INR855/INR910/INR970 in

FY25/FY26/FY27 vs. INR815 in FY24. The stock currently trades at 7.4x

Mar’26E

EV/EBITDA, at an attractive valuation compared to its similar-sized peers. We

value the stock at 9x Jun’24 EV/EBITDA to arrive at our TP of INR1,970

(EV/t of

USD90).

Reiterate BUY.

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

BCORP IN

77

123.6 / 1.5

1802 / 1061

2/-1/7

232

Financial Snapshot (INR b)

Y/E MARCH

FY25E FY26E FY27E

Sales

100.4 107.5 116.4

EBITDA

15.7

17.8

20.2

Adj. PAT

5.1

6.7

8.4

EBITDA Margin (%)

15.7

16.5

17.4

Adj. EPS (INR)

66.8

87.2 109.3

EPS Gr. (%)

23.7

30.5

25.4

BV/Sh. (INR)

921

997 1,094

Ratios

Net D:E

0.4

0.3

0.2

RoE (%)

7.5

9.1

10.5

RoCE (%)

6.5

7.5

8.6

Payout (%)

18

14

11

Valuations

P/E (x)

24.0

18.4

14.7

P/BV (x)

1.7

1.6

1.5

EV/EBITDA(x)

8.8

7.4

6.4

EV/ton (USD)

84

74

69

Div. Yield (%)

0.7

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

62.9

DII

15.6

16.2

16.4

FII

6.8

6.4

5.7

Others

14.7

14.5

15.0

FII Includes depository receipts

Stock performance (one-year)

July 2024

54

STORY IN CHARTS

Exhibit 117:

Clinker utilization is at optimum levels

Clinker Capacity (mtpa)

84

90

89

92

85

92

Capacity Utilization (%)

95

93

90

89

81

Exhibit 118:

Cement utilization should also improve

Cement capacity (mtpa)

90

92

86

91

89

Capacity Utilization (%)

88

92

94

10

12

13

16

15

16

20

21

23

Source: MOFSL, Company,

Source: MOFSL, Company

Exhibit 119:

Estimate 12% EBITDA CAGR over FY24-27

EBITDA (INR b)

19

14

20

15

9

15

16

17

Margin (%)

Exhibit 120:

Estimate EBITDA/t to improve over FY25-27

EBITDA/t

8

9

13

14

11

8

14

16

18

20

651

695

979 1,023 781

491

815

855

910

970

Source: MOFSL, Company

Exhibit 121:

BCORP’s premium cement share rises…

Trade mix (%)

Premium cement share (%)

Exhibit 122:

…driving

better-than-industry realization

Realization (INR/t)

6.0

YoY (%)

5,242

4,853

0.6

4,961

2.2

(0.0)

5.7

5,239

81

40

80

79

77

51

50

37

72 54

4,826

4,554

0.3

Source: MOFSL, Company, *Premium cement as a % of trade sales

Source: MOFSL, Company

July 2024

55

Exhibit 123:

Net debt is estimated to peak out in FY24

Net debt (INR b)

4.0

4.8

3.5

2.5

3.1

2.1

1.7

1.2

Net debt to EBITDA (x)

Exhibit 124:

EBITDA conversion ratio at above 90%

CFO (INR b)

112

100

CFO/EBITDA (%)

113

104

97

94

100

98

96

95

0.9

32.6 33.1 33.5 34.1 34.7 36.7 30.3 27.1 21.9 17.9

8.0

10.6 13.4 13.3 10.4

8.1

16.2 15.4 17.1 19.2

Source: MOFSL, Company

Exhibit 125:

Profit margin to expand…

PAT (INR b)

7.3

3.9

8.0

5.6

4.3

2.9

2

6.2

5.1

Margin (%)

7.2

Exhibit 126:

…will drive material increase in return ratio

ROCE (%)

10.9 10.6

4.4

5.8

7.3

6.6

7.5

ROE (%)

10.5

9.1

0.6

3

5

4

0.4

0

4

5

7

8

6.3

6.1

8.2

7.9

5.5

3.1

6.0

6.5

7.5

8.6

Source: MOFSL, Company

Exhibit 127:

One-year forward EV/EBITDA trend

EV/EBITDA(x)

20.0

15.0

10.0

5.0

0.0

3.3

8.3

8.7

Peak(x)

Avg(x)

16.2

Min(x)

Exhibit 128:

One-year forward EV/t trend

EV/ton (US$)

160

120

80

40

0

69

19

124

83

Max

Avg

Min

Source: Company, MOFSL

July 2024

56

Financials and valuations

Consolidated Income Statement

Y/E March

Net Sales

Change (%)

Total Expenditure

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income - Rec.

PBT after EO

Change (%)

Tax

Tax Rate (%)

Reported PAT

Extra-Ordinary Expenses

PAT Adjusted for EO Items

Change (%)

Margin (%)

Balance Sheet

Y/E March

Equity Share Capital

Reserves

Net Worth

Loans

Deferred Liabilities

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Account Receivables

Cash and Bank Balance

Others

Curr. Liability and Prov.

Account Payables

Provisions

Net Current Assets

Appl. of Funds

FY20

69,157

5.6

55,797

13,360

19.3

3,519

9,841

3,877

851

6,815

114.7

1,763

25.9

5,052

0

5,052

97.6

7.3

FY21

67,855

-1.9

54,163

13,691

20.2

3,708

9,984

2,963

673

8,375

22.9

2,074

24.8

6,301

-681

5,460

8.1

8.0

FY22

74,612

10.0

63,512

11,100

14.9

3,969

7,131

2,427

988

5,421

-35.3

1,435

26.5

3,986

271

4,200

-23.1

5.6

FY23

86,823

16.4

79,103

7,720

8.9

5,099

2,621

3,387

1,131

431

-92.0

26

6.1

405

-67

361

-91.4

0.4

FY24

96,627

11.3

82,251

14,376

14.9

5,783

8,593

3,717

856

5,799

1,245.2

1,594

27.5

4,206

-68

4,158

1,052.2

4.3

FY25E

1,00,357

3.9

84,649

15,708

15.7

6,187

9,521

3,390

963

7,094

22.3

1,950

27.5

5,145

0

5,145

23.7

5.1

FY26E

1,07,500

7.1

89,719

17,781

16.5

6,603

11,178

2,948

1,026

9,256

30.5

2,544

27.5

6,712

0

6,712

30.5

6.2

(INR m)

FY27E

1,16,447

8.3

96,204

20,243

17.4

6,941

13,301

2,785

1,093

11,610

25.4

3,190

27.5

8,419

0

8,419

25.4

7.2

FY20

770

47,291

48,061

42,820

8,568

99,449

87,430

14,158

73,273

16,020

8,363

24,098

7,876

2,504

2,558

11,160

22,306

21,637

669

1,793

99,449

FY21

770

54,090

54,860

40,464

8,668

1,03,992

91,087

17,852

73,235

21,048

7,526

27,147

8,101

2,795

1,773

14,479

24,964

24,230

734

2,184

1,03,992

FY22

770

59,718

60,488

42,080

9,722

1,12,291

97,586

21,821

75,765

25,511

10,093

27,147

8,200

3,028

1,380

14,539

26,225

25,453

772

922

1,12,291

FY23

770

59,038

59,808

43,497

9,712

1,13,017

1,25,338

26,920

98,418

3,576

8,683

30,042

10,616

3,233

2,183

14,010

27,703

26,797

906

2,340

1,13,017

FY24

770

65,968

66,738

37,697

11,042

1,15,477

1,30,596

32,703

97,893

4,805

12,881

28,783

9,646

4,149

1,592

13,396

28,884

27,924

960

-102

1,15,477

(INR m)

FY25E

FY26E

FY27E

770

70,188

75,976

83,472

70,958

76,747

84,242

35,197

31,697

28,197

11,042

1,17,198 1,19,486

1,23,481

1,38,401 1,43,901

1,57,901

38,890

45,493

52,435

99,511

98,408 1,05,466

5,000

7,500

5,000

12,881

31,339

34,409

36,574

11,039

11,825

12,809

4,014

4,300

4,658

2,220

3,936

4,472

14,065

14,347

14,636

31,533

33,711

36,440

30,609

32,787

35,516

924

-194

697

134

1,17,198 1,19,486

1,23,481

Source: Company, MOFSL Estimates

July 2024

57

Financials and valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

EV/t - Cap (USD)

Dividend Yield (%)

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Inventory (Days)

Debtor (Days)

Working Capital Turnover (Days)

Leverage Ratio

Current ratio

Debt/Equity (x)

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest and Finance Charges

Direct Taxes Paid

(Inc.)/Dec. in WC

CF from Operations

Others

CF from Operating incl. EO

(Inc.)/Dec. in FA

Free Cash Flow

(Pur.)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc./(Dec.) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc./Dec. in Cash

Opening Balance

Closing Balance

FY20

65.6

111.3

624.1

7.5

13.3

24.5

14.4

2.6

2.0

10.4

110

0.5

10.9

8.2

10.0

42

13

0.7

1.1

0.9

FY21

70.9

119.0

712.4

10.0

12.2

22.6

13.5

2.3

2.0

9.8

105

0.6

10.6

7.9

10.3

44

15

0.7

1.1

0.7

FY22

54.5

106.1

785.5

10.0

19.3

29.4

15.1

2.0

1.7

11.6

97

0.6

7.3

5.5

7.0

40

15

0.7

1.0

0.7

FY23

4.7

70.9

776.6

2.5

47.5

342.5

22.6

2.1

1.8

19.8

92

0.2

0.6

3.1

2.8

45

14

0.8

1.1

0.7

FY24

54.0

129.1

866.6

10.0

18.3

29.7

12.4

1.9

1.5

9.9

86

0.6

6.6

6.0

6.4

36

16

0.8

1.0

0.6

FY25E

66.8

147.1

921.4

12.0

18.0

24.0

10.9

1.7

1.4

8.8

84

0.7

7.5

6.5

7.1

40

15

0.9

1.0

0.5

FY26E

87.2

172.9

996.6

12.0

13.8

18.4

9.3

1.6

1.2

7.4

74

0.7

9.1

7.5

8.4

40

15

0.9

1.0

0.4

FY27E

109.3

199.5

1,093.9

12.0

11.0

14.7

8.0

1.5

1.1

6.4

69

0.7

10.5

8.6

9.8

40

15

0.9

1.0

0.3

FY20

6,815

3,519

3,877

-418

207

14,000

-588

13,412

-9,860

3,552

-446

74

-10,232

0

1,860

-3,872

0

-2,012

1,169

1,390

2,559

FY21

7,126

3,708

2,963

-843

-201

12,752

532

13,284

-8,028

5,256

2,438

-1,699

-7,289

0

-2,252

-3,493

-1,036

0

-6,781

-786

2,559

1,772

FY22

5,378

3,969

2,427

-610

-2

11,162

-770

10,392

-7,762

2,629

-1,269

950

-8,082

0

1,246

-3,179

-770

0

-2,703

-393

1,772

1,380

FY23

431

5,099

3,387

-508

280

8,689

-634

8,055

-6,263

1,791

1,595

601

-4,068

0

980

-3,393

-770

0

-3,183

803

1,380

2,183

FY24

5,799

5,783

3,717

-751

2,021

16,570

-376

16,195

-5,255

10,939

-1,053

-786

-7,094

0

-5,998

-3,501

-193

0

-9,691

-591

2,183

1,592

(INR m)

FY25E

FY26E

FY27E

7,094

9,256

11,610

6,187

6,603

6,941

3,390

2,948

2,785

-1,950

-2,544

-3,190

721

825

1,099

15,442

17,088

19,244

0

15,442

17,088

19,244

-8,000

-11,500

7,442

9,088

7,744

0

-8,000

-11,500

0

-2,500

-3,500

-3,390

-2,948

-2,785

-924

0

-6,814

-7,372

-7,209

628

1,716

535

1,592

2,220

3,936

2,220

3,936

4,472

Source: Company, MOFSL estimates

July 2024

58

July 2024

Update | Sector: Cement

JK Lakshmi Cement

BSE SENSEX

79,897

S&P CNX

24,316

CMP: INR888

TP: INR1,100 (+24%)

BUY

Profitability improves; focusing on capacity expansion

Capacity expansion drives growth and relevance

JKLC announced a fresh capacity expansion plan of 3.3mtpa clinker and

6.1mtpa grinding capacity in the next 2-3 years. The company announced an

expansion of 4.6mtpa, which includes

–

1) brownfield clinker/cement

expansion of 2.3mtpa/ 1.2mtpa at Durg, Chhattisgarh; and 2) greenfield split-

location grinding units at Prayagraj, Uttar Pradesh (1.2mtpa), Madhubani,

Bihar (1.2mtpa) and Patratu, Jharkhand (1mtpa). The estimated cost of the

project stands at INR25b, with completion expected in phases by FY26-27. It is

doubling Surat Grinding unit capacity to 2.7mtpa and project is likely to be

completed in 3QFY25. JKCE is also foraying into north-east markets by setting

up 1mtpa/1.5mtpa clinker/grinding capacity (Phase-1) in Assam. Currently, it is

in the process of land acquisition and getting external approvals such as

environment clearance, etc. After this process, it will take two years to set up

the cement plant. The company targets capacity (consol.) expansion to

~24mtpa/30mtpa by FY27E/FY30E vs. 16.4mtpa existing.

Cost-saving initiatives and better realization contribute to profitability

The company continues to focus on: 1) geo-mix optimization, 2) increasing

share of trade sales and premium products, 3) better brand visibility, 4)

sustainable growth; and 5) digitization and automation to increase yield value

per tonne. These initiatives helped it achieve an EBITDA/t (consol.) of INR1,026

in 2HFY24. It is setting up a Railway siding at its Durg, Chhattisgarh plant.

Phase-I

is expected to be commissioned by Sep’24 and Phase-II

is estimated to

be completed

by Mar’26. The railway siding will help

the company to become

more competitive in Odisha. Further, this will help to expand

JKLC’s

market in

the eastern part of MP, Bihar, and Jharkhand. Apart from that, the company

invested in green power (its green power share stood at ~36%) and AFR

projects to optimize power and fuel costs.

Profitability improvement and growth plans drive re-rating; reiterate BUY

Over FY24-27, we estimate a 17% EBITDA CAGR (consolidated), driven by 11%

volume growth and improvement in EBITDA/t. We estimate an EBITDA/t

(consol.) of INR910/INR970/INR1,020 in FY25/FY26/FY27 vs. INR878 in FY24.

We estimate a cumulative OCF (consolidated) of INR40b and capex

(consolidated) of INR45b during FY25-27.

JKLC’s

consolidated net debt is

estimated to increase to INR28b by FY27 from INR14b in FY24 due to its

aggressive expansion plans. However, we expect its leverage (Net debt-to-

EBITDA) to be at a comfortable level of less than 2.0x. We believe timely

capacity addition by JKLC will help it maintain its capacity/ market share. The

stock is currently trading at 8.5x

Mar’26E

EV/EBITDA and EV/T of USD72/t.

JKLC’s robust expansion plans, improvement in profitability, and

higher return

ratios (RoE/RoCE of 15%/12%) warrant a re-rating of the stock. We value JKLC

at 10x Jun’26 EV/EBITDA

to arrive at our TP of INR1,100.

Reiterate BUY.

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

JKLC IN

118

104.4 / 1.2

1000 / 607

5/-11/5

256

53.7

Consol. Financials Snapshot (INR b)

Y/E MARCH

FY25E FY26E FY27E

Sales

71.4 81.6 94.6

EBITDA

11.9 14.2 17.0

Adj. PAT

4.9 5.5 6.4

EBITDA Margin (%) 16.6 17.4 18.0

Adj. EPS (INR)

41.9 47.0 54.2

EPS Gr. (%)

5.8 12.2 15.3

BV/Sh. (INR)

307 348 396

Ratios

Net D:E

0.5 0.6 0.6

RoE (%)

14.5 14.4 14.6

RoCE (%)

11.7 11.9 12.0

Payout (%)

14.7 13.4 11.8

Valuations

P/E (x)

21.2 18.9 16.4

P/BV (x)

2.9 2.5 2.2

EV/EBITDA(x)

9.9 8.5 7.8

EV/ton (USD)

79

72

67

Div. Yield (%)

0.7 0.7 0.7

FCF Yield (%)

-0.0 -3.2 -1.8

Shareholding pattern (%)

As On

Mar-24 Dec-23 Mar-23

Promoter

46.3

DII

25.8

27.6

28.0

FII

11.3

10.8

11.7

Others

16.5

15.3

14.1

FII Includes depository receipts

Stock’s performance (one-year)

JK Lakshmi Cem.

Nifty - Rebased

1,100

950

800

650

500

July 2024

59

STORY IN CHARTS

Exhibit 129:

Expansion plans of JKLC and UCWL (subsidiary)

JKLC (standalone)

UCWL (Subsidiary)

Nagaur - 3mtpa

Kutch - 3mtpa

Debottelnecking

at UCWL (North)

UCWL line II (north),

Surat GU (West) and

some optimization

East 4.6mtpa and

Northeast 1.5mtpa

UCWL line III

(3mtpa)

1.6

11.7

2.2

11.7

2.2

11.7

2.2

11.8

4.7

13.3

4.7

15.7

4.7

7.7

19.4

22.4

25.4

Sources: MOFSL, company reports; Note Grinding capacity expansion

Exhibit 130:

JKLC’s regional capacity mix in FY24-end

West

14%

East

21%

North

65%

Exhibit 131:

JKLC’s regional capacity mix by FY27E

Central

West 5%

15%

North

45%

East

35%

Sources: MOFSL, company reports

Sources: MOFSL, company reports, East including Northeast

Exhibit 132:

Grinding capacity and utilization trends

Grinding capacity (mtpa)

85

73

75

78

82

85

80

76

75

Capacity utilization (%)

Exhibit 133:

Estimate volume CAGR of ~11% over FY24-27

Sales volume

Growth YoY (%)

5

4

5

20

14

8

-10

9

12

14

Sources: Company reports, MOFSL; Note: estimate new capacities

will have low utilization in initial

Sources: Company reports, MOFSL,

July 2024

60

Exhibit 134:

Estimate EBITDA CAGR of ~19% over FY24-27

EBITDA (INR b)

18

12

11

20

EBITDA Margin (%)

Exhibit 135:

EBITDA/t to also increase (consolidated)

EBITDA/t (INR)

18

13

15

17

18

Sources: Company reports, MOFSL

Exhibit 136:

Robust expansion plans; FCF remains low…

OCF

6.5

7.6

5.5

-2.1

5.4

-1.0

10.3

-1.7

8.7

6.8

3.1

-3.7

-12.8

-7.3 -10.1

-1.0 -1.1

0.0

-3.4

-14.8 -18.1

-1.8

6.3

9.0

Capex

FCF

12.7

16.2

11.4

Exhibit 137:

…this

will lead to a rise in consolidated debt

Net debt

3.9

1.9

0.9

17

15

8

0.7

6

1.2

Net debt to EBITDA (x) (RHS)

1.3

1.4

1.6

1.7

10

14

17

23

28

Sources: MOFSL, Company reports; Note: OCF, Capex and FCF on

consolidated

Sources: MOFSL, Company reports

Exhibit 138:

One-year forward EV/EBITDA (x) trend

EV/EBITDA(x)

24.0

19.4

18.0

12.0

6.0

0.0

2.4

Peak(x)

Avg(x)

Min(x)

Exhibit 139:

One-year forward EV/t (USD) trend

EV/ton (US$)

120

90

59

81

102

Max

Avg

Min

9.9

9.3

60

30

0

19

Sources: MOFSL, company reports

July 2024

61

Financials and valuations - Consolidated

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

–

Rec.

PBT bef. EO Exp.

EO Expense/(Income)

PBT after EO Exp.

Total Tax

Tax Rate (%)

Reported PAT

Less: Minority Interest

PAT Adj. for EO items and MI

Change (%)

Margin (%)

Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Deferred Liabilities

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Total Investments

Goodwill

Curr. Assets, Loans, and Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability and Prov.

Account Payables

Other Liabilities

Provisions

Net Current Assets

Appl. of Funds

Source: Company, MOFSL estimates

FY20

43,641

1.1

7,981

18.3

2,198

5,782

2,250

460

3,993

302

3,690

1,161

31.4

2,530

49

2,686

464.9

6.2

FY21

47,274

8.3

9,386

19.9

2,253

7,133

1,920

726

5,939

379

5,561

1,349

24.3

4,211

157

4,311

60.5

9.1

FY22

54,199

14.6

9,507

17.5

2,235

7,272

1,422

683

6,534

270

6,264

1,488

23.7

4,776

140

4,073

-5.5

7.5

FY23

64,515

19.0

8,387

13.0

2,283

6,104

1,334

575

5,345

0

5,345

1,654

30.9

3,691

105

3,586

-12.0

5.6

FY24

67,885

5.2

10,522

15.5

2,460

8,062

1,504

681

7,239

-89

7,328

2,446

33.4

4,882

163

4,658

29.9

6.9

FY25E

71,448

5.2

11,861

16.6

2,883

8,978

1,997

758

7,739

0

7,739

2,523

32.6

5,217

289

4,928

5.8

6.9

FY26E

81,599

14.2

14,180

17.4

3,452

10,728

2,325

828

9,231

0

9,231

2,971

32.2

6,260

730

5,530

12.2

6.8

(INR m)

FY27E

94,602

15.9

16,997

18.0

4,302

12,695

2,642

903

10,955

0

10,955

3,505

32.0

7,450

1,075

6,375

15.3

6.7

(INR m)

FY27E

589

45,992

46,581

3,797

2,651

36,206

89,235

1,11,828

29,434

82,394

5,892

5,222

725

20,477

11,129

556

4,313

4,479

25,475

11,005

14,261

209

(4,998)

89,235

FY20

589

16,281

16,869

(29)

(390)

19,871

36,322

44,722

9,598

35,124

1,662

4,583

723

9,146

4,806

959

328

3,054

14,917

5,102

9,610

205

(5,770)

36,322

FY21

589

20,357

20,946

128

68

16,531

37,672

44,138

11,748

32,390

2,738

5,922

723

11,090

3,662

545

3,719

3,164

15,190

4,368

10,609

212

(4,100)

37,672

FY22

589

24,463

25,052

267

531

18,565

44,415

47,469

13,992

33,477

2,425

7,677

723

14,959

5,810

352

5,729

3,068

14,847

3,660

10,894

293

112

44,415

FY23

589

27,450

28,039

370

1,327

18,463

48,199

49,667

16,275

33,392

8,902

6,421

723

15,971

8,416

654

3,390

3,511

17,210

5,860

11,098

252

(1,239)

48,199

FY24

589

31,278

31,867

1,704

2,651

20,249

56,470

68,338

18,734

49,604

3,832

5,222

725

17,118

9,912

443

2,673

4,090

20,030

5,560

14,261

209

(2,913)

56,470

FY25E

589

35,500

36,088

1,992

2,651

24,306

65,037

75,328

21,638

53,690

9,592

5,222

725

16,444

7,709

486

4,010

4,240

20,635

6,165

14,261

209

(4,191)

65,037

FY26E

589

40,323

40,912

2,723

2,651

30,506

76,791

87,078

25,111

61,967

12,592

5,222

725

18,352

9,704

485

3,805

4,359

22,067

7,596

14,261

209

(3,715)

76,791

July 2024

62

Financials and valuations - Consolidated

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

EV/t (USD)

Dividend Yield (%)

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Coverage Ratio

Debt/Equity ratio

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest and Finance Charges

Direct Taxes Paid

(Inc.)/Dec. in WC

CF from Operations

Others

CF from Operations incl. EO

(Inc.)/Dec. in FA

Free Cash Flow

(Pur.)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc./(Dec.) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc./Dec. in Cash

Opening Balance

Closing Balance

FY20

22.6

38.6

145.5

3.1

19.6

39.3

23.0

6.1

2.6

15.8

110

0.4

16.4

11.7

12.1

1.3

37

8

120

0.6

2.9

0.9

FY21

32.7

49.2

176.6

3.8

12.1

27.1

18.0

5.0

2.3

12.6

103

0.4

20.3

15.4

16.7

1.3

26

4

114

0.7

4.2

0.5

FY22

32.5

48.7

208.4

5.0

13.8

27.2

18.2

4.3

1.9

12.2

101

0.6

16.9

15.6

18.1

1.4

36

2

94

0.8

6.3

0.4

FY23

28.1

44.5

231.4

3.8

13.3

31.5

19.9

3.8

1.6

13.8

100

0.4

12.8

11.3

12.8

1.6

42

4

90

1.0

5.6

0.3

FY24

36.1

52.6

261.8

6.5

18.0

24.6

16.8

3.4

1.5

11.1

99

0.7

14.6

13.2

17.0

1.6

44

2

106

0.7

7.7

0.2

FY25E

40.9

58.5

296.7

6.0

14.7

21.6

15.1

3.0

1.5

9.9

87

0.7

14.7

12.9

18.0

1.3

35

2

105

0.7

7

0.3

FY26E

44.8

67.1

335.6

6.0

13.4

19.8

13.2

2.6

1.4

8.9

77

0.7

14.2

11.7

15.0

1.2

40

2

100

0.8

6

0.5

FY27E

51.0

80.4

380.6

6.0

11.8

17.4

11.0

2.3

1.4

8.4

71

0.7

14.2

11.1

13.4

1.1

40

2

100

0.7

5

0.6

(INR m)

FY27E

10,955

4,323

2,642

(3,505)

1,792

16,207

-

16,207

(18,050)

(1,843)

-

(18,050)

-

5,700

(2,642)

(706)

-

2,351

508

3,805

4,313

FY20

3,993

2,198

2,250

(761)

(483)

7,196

(701)

6,495

(1,047)

5,449

(951)

-

(1,997)

-

(1,552)

(2,489)

(455)

-

(4,496)

2

29

30

FY21

5,939

2,253

1,920

(871)

2,060

11,301

(983)

10,318

(1,661)

8,658

(2,678)

-

(4,339)

-

(3,392)

(2,130)

(5)

-

(5,526)

453

30

484

FY22

6,534

2,235

1,422

(888)

(1,526)

7,776

(976)

6,800

(3,661)

3,138

(3,264)

274

(6,651)

-

2,042

(1,401)

(443)

(90)

108

257

484

740

FY23

5,345

2,283

1,334

(909)

(1,135)

6,918

(576)

6,342

(7,320)

(978)

4,070

255

(2,995)

-

(431)

(1,505)

(587)

(136)

(2,658)

689

2,701

3,390

FY24

7,325

2,460

1,504

(1,126)

(430)

9,733

(741)

8,992

(10,060)

(1,069)

818

442

(8,800)

931

1,601

(2,033)

(674)

(181)

(356)

(164)

2,837

2,673

FY25E

7,739

2,904

1,997

(2,523)

2,616

12,733

-

12,733

(12,750)

(17)

-

(12,750)

-

4,057

(1,997)

(706)

-

1,354

1,337

2,673

4,010

FY26E

9,231

3,473

2,325

(2,971)

(682)

11,377

-

11,377

(14,750)

(3,373)

-

(14,750)

-

6,200

(2,325)

(706)

-

3,168

(205)

4,010

3,805

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

July 2024

63

REPORT GALLERY

RECENT STRATEGY/THEMATIC REPORTS

May 2024

Gautam Duggad – Research Analyst

(Gautam.Duggad@MotilalOswal.com)

Research Analyst: Deven Mistry

(Deven@MotilalOswal.com)

/

Aanshul Agarawal

(Aanshul.Agarawal@Motilaloswal.com)

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Investors are advised to refer through important disclosures made at the last page of the Research Report.

RECENT INITIATING COVERAGE REPORTS

Meet Jain - Research Analyst

(Meet.jain@MotilalOswal.com)

Sumant/Omkar

13 August 2020

Investors are

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

1

advised to refer through important disclosures made at the last page of the Research Report.

NOTES

July 2024

66

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

< - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following 30 days take

appropriate measures to make the recommendation consistent with the investment rating legend.

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Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in

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Details of

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service

transactions.

Details

of

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Enquiry

Proceedings

of

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Services

Limited

are

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on

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A graph of daily closing prices of securities is available at

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Research Analyst views on Subject Company may vary based on Fundamental research and Technical

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are segregated from MOFSL research activity and therefore it can

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Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their

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The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,

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9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

********************************************************************************************************************************

The associates of MOFSL may have:

financial interest in the subject company

actual/beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report or date of the public appearance.

received compensation/other benefits from the subject company in the past 12 months

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific

recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent

conflict of interest in some of the stocks mentioned in the research report.

acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as

an advisor or lender/borrower to such company(ies)

July 2024

67

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Analyst Certification

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