Heidelberg Cement India (HEIM IN)

Transcription

1 (HEIM IN) Rating: BUY CMP: Rs159 TP: Rs200 July 31, 2018 Q1FY19 Result Update Change in Estimates Target Reco Change in Estimates Current Previous FY19E FY20E FY19E FY20E Rating BUY BUY Target Price Sales (Rs. m) 20,709 22,186 21,006 22,197 % Chng. (1.4) - EBITDA (Rs. m) 4,335 4,673 3,883 4,109 % Chng EPS (Rs.) % Chng Key Financials FY17 FY18 FY19E FY20E Sales (Rs. m) 16,876 18,607 20,709 22,186 EBITDA (Rs. m) 2,490 3,289 4,335 4,673 Margin (%) PAT (Rs. m) 759 1,294 1,993 2,345 EPS (Rs.) Gr. (%) DPS (Rs.) Yield (%) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) PE (x) P/BV (x) Key Data HEID.BO HEIM IN 52-W High / Low Rs.190 / Rs.109 Sensex / Nifty 37,494 / 11,320 Market Cap Rs.36bn/ $ 525m Shares Outstanding 227m 3M Avg. Daily Value Rs.58.47m Shareholding Pattern (%) Promoter s Foreign Domestic Institution 5.97 Public & Others Promoter Pledge (Rs bn) - Stock Performance (%) 1M 6M 12M Absolute Relative 8.3 (2.2) 5.3 Strong control on energy cost drove the beat; Remains the best play on Central region Heidelberg cement (HEIM) reported strong set of Q1FY19 earnings with highest ever EBITDA/t of Rs915 (PLe:Rs793), up 76% YoY/1.7% QoQ. Beat was largely on the back of lower than expected energy costs. We increase our FY19e/FY20e EPS estimates by 6%/8% to factor in lower costs and higher realisations. Demand outlook remains upbeat on Central region on the back of strong govt spending on low cost housing and infrastructure sector, revival of private spending in rural areas and normalization of sand availability. Our BUY rating on HEIM remains intact given the strong outlook on Central region, quality operations and attractive valuations. Reiterate BUY with TP of Rs200, EV/EBITDA of 10x FY20e. Lower than expected energy cost drove the beat: Volumes grew 15% YoY to 1.27m tonnes (t), in line with our estimates. Volume growth benefitted by higher demand from rural UP and low base due to sand shortage and demonetisation. Realisations rose 2.4% QoQ/Rs100 (+8.2% YoY/Rs322) at Rs4,237 (PLe:Rs4,239). Led by increased generation by Waste Heat Recovery (WHR) plant and procurement of power through lower cost arrangements, power cost fell by 1%/Rs14 YoY to Rs932, below our estimates of Rs1,050. Total costs fell 2% YoY to Rs3,322 beating our estimate of Rs3,446. EBITDA doubled YoY to Rs1.16bn (PLe:Rs1.0bn). PAT rose 2.2x YoY to Rs511mn (PLe:Rs467mn). Key earnings call highlights: 1) Demand in Central region to grow at ~7% in FY19e 2) 59%/26%/16% of demand coming from IHB/Infrastructure/Commercial segment 3) Pet coke prices rose 13-16% QoQ to Rs11,500-12,000/t 4) Prepaid Rs750mn debt in Q1FY19; will prepay another Rs750mn in Q2FY19 5) Net debt fell 28% QoQ to Rs3.37bn; Net debt/ebitda reduced to 0.7x from 1.29x in Q4FY18 6) Rs10/t expected reduction in freight cost due to increase in axle load of trucks from Jul 18 7) Generation from WHR increased by 17% YoY and contributed 20% of power requirement, up from 9% in Q4FY18 and FY18 8) Capacity utilisation reached to 92% up from 85% in Q4FY18 9) Premium products volume rose 40% YoY; constitutes 11% of total sales and commands a premium of Rs10/bag over its normal product 10) Started sourcing ~50% of Karnataka plant s power requirement through renewable (Solar) PPA at 30-35% cheaper than Grid prices Kamlesh Bagmar kamleshbagmar@plindia.com Amit Khimesra amitkhimesra@plindia.com July 31,

2 Q1FY19 Result Overview (Rs mn) Y/e March (Rs mn) Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 FY19E FY18 YoY gr. (%) Net Sales 5,369 4, ,254 20,709 18, Raw Material 1, ,714 3, % of Net Sales Staff Costs ,286 1, % of Net Sales Power & Fuel 1,180 1, ,304 4,599 4, % of Net Sales Freight ,096 2, % of Net Sales Other Expenses ,680 3,139 (14.6) % of Net Sales Total Expenditure 4,209 3, ,112 16,374 15, EBITDA 1, ,143 4,335 3, Margin (%) Depreciation ,034 1, Other income (14.8) (32.1) EBIT 1, ,005 3,631 2, Interest (24.1) PBT ,066 2, Extraordinary income/(expense) PBT (After EO) ,066 2, Tax , % PBT Reported PAT ,993 1, Adjusted PAT ,993 1, Source: Company, PL Operating Metrics Y/e March (Rs mn) Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 FY19E FY18 YoY gr. (%) Volume (mn te) Net Realisations (Rs/te) 4,237 3, ,137 4,200 4, EBITDA/ te (Rs/te) Source: Company, PL July 31,

3 Financials Income Statement (Rs m) Net Revenues 16,876 18,607 20,709 22,186 YoY gr. (%) Cost of Goods Sold 3,607 3,586 3,992 4,317 Gross Profit 13,270 15,021 16,717 17,869 Margin (%) Employee Cost 1,148 1,202 1,286 1,376 Other Expenses 1,289 1,354 1,446 1,519 EBITDA 2,490 3,289 4,335 4,673 YoY gr. (%) Margin (%) Depreciation and Amortization 992 1,012 1,034 1,052 Balance Sheet Abstract (Rs m) Non-Current Assets Gross Block 20,751 21,325 21,687 22,056 Tangibles 20,751 21,325 21,687 22,056 Intangibles Acc: Dep / Amortization 1,980 2,992 4,027 5,079 Tangibles 1,980 2,992 4,027 5,079 Intangibles Net fixed assets 18,771 18,332 17,661 16,977 Tangibles 18,771 18,332 17,661 16,977 Intangibles EBIT 1,499 2,277 3,301 3,621 Margin (%) Net Interest Other Income Capital Work In Progress Goodwill Non-Current Investments Net Deferred tax assets (530) (831) (1,229) (1,699) Other Non-Current Assets Profit Before Tax 1,136 2,075 3,066 3,608 Margin (%) Total Tax ,073 1,263 Effective tax rate (%) Profit after tax 762 1,330 1,993 2,345 Minority interest Share Profit from Associate Adjusted PAT 759 1,294 1,993 2,345 YoY gr. (%) Margin (%) Extra Ord. Income / (Exp) Reported PAT 762 1,330 1,993 2,345 YoY gr. (%) Margin (%) Other Comprehensive Income Total Comprehensive Income 762 1,330 1,993 2,345 Equity Shares O/s (m) EPS (Rs) Current Assets Investments Inventories 1,396 1,269 1,702 1,823 Trade receivables Cash & Bank Balance 142 1,100 1,849 3,162 Other Current Assets Total Assets 24,076 24,410 25,008 25,881 Equity Equity Share Capital 2,266 2,266 2,266 2,266 Other Equity 7,403 8,188 9,499 11,026 Total Networth 9,670 10,454 11,765 13,292 Non-Current Liabilities Long Term borrowings 7,053 5,753 4,253 2,753 Provisions Other non current liabilities Current Liabilities ST Debt / Current of LT Debt Trade payables 1,914 2,266 2,440 2,614 Other current liabilities 4,631 4,817 5,015 5,201 Total Equity & Liabilities 24,077 24,410 25,008 25,881 July 31,

4 Cash Flow (Rs m) Key Financial Metrics Year PBT 1,136 2,075 3,066 3,608 Per Share(Rs) Add. Depreciation 992 1,012 1,034 1,052 EPS Add. Interest CEPS Less Financial Other Income BVPS Add. Other (193) (125) (174) (224) FCF Op. profit before WC changes 2,815 3,708 4,492 4,832 DPS Net Changes-WC 1, (133) 134 Return Ratio(%) Direct tax (245) (444) (675) (794) RoCE Net cash from Op. activities 3,614 3,777 3,685 4,172 ROIC Capital expenditures (446) (353) (363) (369) RoE Interest / Dividend Income Balance Sheet Others Net Debt : Equity (x) Net Cash from Invt. activities (402) (228) (189) (145) Net Working Capital (Days) (8) (16) (10) (10) Issue of share cap. / premium Valuation(x) Debt changes (2,215) (1,300) (1,500) (1,500) PER Dividend paid - (546) (682) (818) P/B Interest paid (933) (745) (565) (396) P/CEPS Others EV/EBITDA Net cash from Fin. activities (3,147) (2,591) (2,747) (2,714) EV/Sales Net change in cash ,313 Dividend Yield (%) Free Cash Flow 3,140 3,424 3,322 3,804 Quarterly Financials (Rs m) Y/e Mar Q2FY18 Q3FY18 Q4FY18 Q1FY19 Net Revenue 4,200 4,839 5,254 5,369 YoY gr. (%) Raw Material Expenses 676 1, ,080 Gross Profit 3,524 3,633 4,402 4,288 Margin (%) EBITDA ,143 1,160 YoY gr. (%) 42.3 (7.7) Margin (%) Depreciation / Depletion EBIT Margin (%) Net Interest Other Income Profit before Tax Margin (%) Total Tax Effective tax rate (%) Profit after Tax Minority interest Share Profit from Associates Adjusted PAT YoY gr. (%) Margin (%) Extra Ord. Income / (Exp) Reported PAT YoY gr. (%) (987.2) Margin (%) Other Comprehensive Income Total Comprehensive Income Avg. Shares O/s (m) EPS (Rs) Key Operating Metrics Volume (mn te)-cement Cement Realisation (Rs/te) 3,772 4,000 4,200 4,285 EBITDA (Rs/ te) RM cost (Rs/ te) Power, Oil & Fuel (Rs/ te) Freight Charges (Rs/ te) July 31,

5 Price Chart Recommendation History (Rs) Aug-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 No. Date Rating TP (Rs.) Share Price (Rs.) 1 10-Aug-17 BUY Sep-17 BUY Oct-17 BUY Oct-17 BUY Nov-17 BUY Dec-17 BUY Jan-18 BUY Feb-18 BUY Feb-18 BUY Mar-18 BUY Analyst Coverage Universe Sr. No. CompanyName Rating TP (Rs) Share Price (Rs) 1 ACC BUY 1,750 1,311 2 Ambuja Cement Accumulate Coal India BUY Heidelberg Cement India BUY Hindalco Industries Accumulate Hindustan Zinc Accumulate Jindal Steel & Power BUY JK Lakshmi Cement Accumulate JSW Steel BUY NMDC Accumulate Shree Cement Hold 17,235 15, Steel Authority of India Hold Tata Steel BUY The Ramco Cements Hold Ultratech Cement Hold 4,000 3,849 PL s Recommendation Nomenclature (Absolute Performance) Buy : > 15% Accumulate : 5% to 15% Hold : +5% to -5% Reduce : -5% to -15% Sell : < -15% Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly July 31,

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