1 P a g e. Report By: Vikash Kandoi Page 1

Transcription

1 1 P a g e Report By: Vikash Kandoi vikash@dynamiclevels.com Page 1

2 Heidelberg Cement - Cement for better building Company Overview and Stock price. 3 Product Overview....4 Industry Outlook..6 Company Financial Balance Sheet Cash Flow Key Financial Ratios.10 Peer Comparison Shareholding Pattern Investment Rationale Disclaimer.. 15 Page 2

3 Company s Overview and Stock Price Heidelberg Cement offers a wide range of high quality products. Alongside classical building materials, they produce special building products for diverse applications. Their core activities include the production and distribution of cement and aggregates, the two essential raw materials for the manufacture of concrete. Their product range is substantially complemented by downstream ready-mixed concrete and asphalt activities. Furthermore, Heidelberg Cement offers services such as worldwide trading in cement and coal by sea. Heidelberg Cement deliberately focuses on vertical. Due to the heavy weight of cement and aggregates compared with their price, production is usually located in close proximity to the sales markets. The cement transportation radius by road normally does not exceed 200 km. The delivery radius for aggregates and ready-mixed concrete by road is less than 100 km. Consequently, they have local production sites in the around 60 countries in which they offer building materials. The company currently operates more than 3,000 production sites worldwide. This is a 1 year weekly chart of Heidelberg Cement showing momentum above 120 levels. EXCHANGE SYMBOL HEIDELBERG Current Price * (Rs.) Face Value (Rs.) Week High (Rs.) (23-Aug-16) 52 Week Low (Rs.) (17-Feb-16) Life Time high (Rs.) Life Time low (Rs.) (23-Aug-16) 4.35 (12-Mar-03) Average Daily Movement 5.32 Average Volume Month Return (%) 8.95 P/E Ratio (x) Book Value Market Cap (Cr) % of Promoter s pledged 0 COMPANY PROFILE OF HEIDELBERG, NSE, INDIA Date of Incorporation 13-May-1958 Date of Listing 22-Dec-1994 Management Name Designation Pradeep V Bhide Independent Director S Krishna Kumar Independent Director Jamshed Naval Cooper Managing Director P G Mankad Non Executive Chairman Albert Scheuer Non Executive Director Juan-Francisco Defalque Non Executive Director Kevin Gerard Gluskie Non Executive Director Soek Peng Sim Non Executive Director Sushil Kumar Tiwari Whole Time Director Registered Office Address 9th Floor, Infinity Tower C,DLF Cyber City, Phase-II,122002,Gurgaon,Haryana,India Website Page 3

4 Product overview Heidelberg Cement Group: The Heidelberg Cement Group is a global market leader in aggregates and a prominent player in the fields of cement, concrete and other downstream activities, ranking as one of the world s largest manufacturers of building materials. The Group employs 52,600 manpower at 2,500 locations in more than 40 countries. country. Within the company, every employee is aware that quality of its products and services hold the key to our customers' heart. Delivering customer satisfaction has become a way of life for them in HCIL. Brand Although such products usually go un-noticed many a time, these are an integral part of day to day lives be it homes, offices, factories, schools, streets, motorways, bridges, tunnels, water supply and sewage systems. Making the company proud and it also creates more responsible to continuously deliver products of highest standard that would over the coming years perform exceptionally under all weather conditions. The company s customers, employees, shareholders as well as local partners across the globe form the core of their corporate governance. Their concern for the environment with the emphasis on sustainability continues to be their driving objective. They have obligated them to build on the three pillars of ecology, economy and social responsibility. Heidelberg Cement India: Heidelberg Cement India Limited (HCIL / Company) is a subsidiary of Heidelberg Cement Group, Germany. The Company has its operations in Central India at Damoh (Madhya Pradesh), Jhansi (Uttar Pradesh) and in Southern India at Ammasandra (Karnataka). The Company increased its capacity to 5.4 million tones p.a. through brown field expansion of its facilities in Central India in The new manufacturing capacity has enabled the Company to increase its market share in Central India i.e. Madhya Pradesh and Uttar Pradesh and in markets of Bihar, Haryana and Uttarakhand. With the help of committed sales efforts supported by quality products, the Company has carved a niche for its brand "mycem" in new markets and has further improved its brand positioning in the existing ones. Focus on quality and customer satisfaction mycem mycempower mycem ConcreteMAX Being part of a global giant in the field of cement industry it is our continuous endeavor to perform on strict standards. It is the excellent quality of our products and the continuous delivery of customer satisfaction, HCIL would not have achieved the leading position in the Page 4

5 PPC PPC or Portland Pozzolana Cement is a kind of Blended Cement which is produced by grinding the Portland clinker with gypsum and pozzolanic materials in measured proportions or by blending Ordinary Portland Cement (OPC), with Pozzolanic materials in certain proportions. Pozzolana is any natural or artificial material containing silica in a reactive form. The pozzolana is in a finely divided state to allowsilica to combine with calcium hydroxide (liberated by the hydrating Portland cement) in the presence of water forming stable Calcium Silicates Hydrate that have the cementitious properties. The pozzolanic materials commonly used are Calcined clay Fly ash Silica fumes PSC has been voted as the most suitable cement for mass construction because of its low heat of hydration. Slow hydration of PSC liberates the C-S-H gel over a longer time period thus reducing the pores / porosity of concrete. The dense concrete is more suitable for structures in the coastal regions as the flow of water inside the concrete is restricted resulting in the increase durability of the structure. PSC (in required proportion) offers an improved resistance to sulphate attack from the sea water because of low water permeability, depleted quantum of Ca(OH) 2 and C 3 A content. The Indian standards for Portland Pozzolana Cement have been issued in two parts based on the type of pozzolanic materials to be used in manufacturing of Portland Pozzolana Cement as given below: PSC IS 1489 (Part 1) 1991, Portland Pozzolana Cement specification (fly ash based) IS 1489 (Part 2) 1991, Portland Pozzolana Cement specification (Calcined clay based) the quality of flyash or calcined clay to be used in manufacturing of PPC is also specified by BIS in the following standards: IS specification for flyash as pozzolana and admixture IS specification for calcined clay pozzolana. In view of the availability of good quality fly ash in abundant quantity, the use of calcined clay based pozzolana cement is progressively decreasing. PSC or Portland Slag cement is manufactured by either grinding the Portland clinker with gypsum and granulated slag or blending the ground granulated blast furnace slag (GGBS) with Ordinary Portland cement by means of mechanical blenders. Normal composition of portland cement is 30 % clinker, 5 % gypsum and 70 % blast furnace granulated slag. The quality of slag used in cement manufacturing is governed by IS 12089:1987. Page 5

6 Industry Outlook India is the second largest producer of cement in the world. No wonder, India's cement industry is a vital part of its economy, providing employment to more than a million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian cement industry has attracted huge investments, both from Indian as well as foreign investors. India has a lot of potential for development in the infrastructure and construction sector and the cement sector is expected to largely benefit from it. Some of the recent major government initiatives such as development of 98 smart cities are expected to provide a major boost to the sector. Expecting such developments in the country and aided by suitable government foreign policies, several foreign players such as Lafarge- Holcim, Heidelberg Cement, and Vicat have invested in the country in the recent past. A significant factor which aids the growth of this sector is the ready availability of the raw materials for making cement, such as limestone and coal. Market Size Cement demand in India is expected to increase due to government s push for large infrastructure projects, leading to 45 million tonnes of cement needed in the next three to four years. India's cement demand is expected to reach Million Tonnes Per Annum (MTPA) by The housing sector is the biggest demand driver of cement, accounting for about 67 per cent of the total consumption in India. The other major consumers of cement include infrastructure at 13 per cent, commercial construction at 11 per cent and industrial construction at nine per cent. To meet the rise in demand, cement companies are expected to add 56 million tonnes (MT) capacity over the next three years. The cement capacity in India may register a growth of eight per cent by next year end to 395 MT from the current level of 366 MT. It may increase further to 421 MT by the end of The country's per capita consumption stands at around 190 kg. Page 6

7 Cement production in India growing at a fast pace Cement production increased at a CAGR of 6.7 per cent to million tonnes over FY As per the 12th Five Year Plan, production is expected to reach 407 million tonnes by FY17. Availability of fly-ash (from thermal power plants) and use of advance technology has increased production of blended cement. Availability of fly-ash (from thermal power plants) and use of advance technology has increased production of blended cement. The environment-friendly blended cement is more cost-efficient to produce, as it requires lesser input of clinker and energy. Road Ahead The eastern states of India are likely to be the newer and virgin markets for cement companies and could contribute to their bottom line in future. In the next 10 years, India could become the main exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance the plants in Gujarat and Visakhapatnam, will have an added advantage for exports and will logistically be well armed to face stiff competition from cement plants in the interior of the country. A large number of foreign players are also expected to enter the cement sector, owing to the profit margins and steady demand. In future, domestic cement companies could go for global listings either through the FCCB route or the GDR route. With help from the government in terms of friendlier laws, lower taxation, and increased infrastructure spending, the sector will grow and take India s economy forward along with it. Page 7

8 Company Financials In Cr. Jun-16 Quarterly Mar-16 Quarterly Dec-15 Quarterly Sep-15 Quarterly Jun-15 Quarterly Mar-16 Net Sales/Income from operations , Other Operating Income Total Income From Operations , Increase/Decrease in Stocks Consumption of Raw Materials Power And Fuel Employees Cost Depreciation Other Expenses Total Expenditure , Operating Profit Other Income P/L Before Int., Excpt. Items & Tax Interest P/L Before Exceptional Items & Tax Exceptional Item P/L Before Tax Tax P/L After Tax from Ordinary Activities PAT Equity Share Capital Reserves EPS (Rs.) [After Extraordinary items] Company s revenue has jumped by 16.28% OoQ, however YoY revenue rose 6.94%. Company s operating profit jumped by 32.21% QoQ and % YoY. Net profit has jumped by 8.06% QoQ and huge jump of % in YoY. Operating profit margin during last quarter was 13.59%. Net profit margin during last quarter was 5.58%. Page 8

9 Balance sheet In Cr. Mar-16 Mar-15 EQUITIES AND LIABILITIES Dec-13 Dec-12 Dec-11 SHAREHOLDERS FUNDS Equity Share Capital Total Share Capital Revaluation Reserves Reserves and Surplus Total Reserves and Surplus Total Share holder s Funds NON-CURRENT LIABILITIES Long Term Borrowings , Deferred Tax Liabilities [Net] Other Long Term Liabilities Long Term Provisions Total Non-Current Liabilities , , , CURRENT LIABILITIES Short Term Borrowings Trade Payables Other Current Liabilities Short Term Provisions Total Current Liabilities Total Capital And Liabilities 2, , , , , ASSETS NON-CURRENT ASSETS Tangible Assets 1, , , Intangible Assets Capital Work-In-Progress , , Fixed Assets 1, , , , , Long Term Loans And Advances Other Non-Current Assets Total Non-Current Assets 2, , , , , CURRENT ASSETS Inventories Trade Receivables Cash And Cash Equivalents Short Term Loans And Advances Other Current Assets Total Current Assets Total Assets 2, , , , , Page 9

10 Cash Flow In Cr. Mar-16 Mar-15 Dec-13 Dec-12 Dec-11 Net Profit/Loss Before Extraordinary Items And Tax Net Cash Flow From Operating Activities Net Cash Used In Investing Activities Net Cash Used From Financing Activities Foreign Exchange Gains / Losses Adjustments on Amalgamation / Merger / Demerger / Others Net Inc/Dec In Cash And Cash Equivalents Cash And Cash Equivalents Begin of Year Cash And Cash Equivalents End Of Year Ratio Analysis 16-Mar 15-Mar 13-Dec 12-Dec Per Share Ratios Basic EPS (Rs.) Diluted EPS (Rs.) Cash EPS (Rs.) Book Value Profitability Ratios PBDIT Margin (%) PBIT Margin (%) PBT Margin (%) Net Profit Margin (%) Return on Networth / Equity (%) Return on Capital Employed (%) Return on Assets (%) Asset Turnover Ratio (%) Liquidity Ratios Current Ratio (X) Quick Ratio (X) Inventory Turnover Ratio (X) Valuation Ratios Enterprise Value (Cr.) 2, , , , Market Cap/Net Operating Revenue (X) Price/BV (X) Price/Net Operating Revenue Earnings Yield Page 10

11 Peer Comparison Peer Comparison on Market Liquidity and Volume SL INSTRUMENT Price Avg. Volume Market Cap (Rs. in Cr) 1 ACC AMBUJA CEMENTS BINANI INDUSTRIES BIRLA CORP DALMIA BHARAT HEIDELBERG* INDIA CEMENTS JK CEMENT JK LAKSHMI CEMENT KAKATIYA CEMENT KCP MANGALAM CEMENT NCL INDUSTRIES OCL VISAKA INDUSTRIES Company has good average volume and market capitalization this give liquidity to the share price of stock. Peer Comparison on Leverage Position SL INSTRUMENT Price % Pledged Debt Equity Ratio (X) Int. Coverage Ratio (X) 1 ACC AMBUJA CEMENTS BINANI INDUSTRIES BIRLA CORP DALMIA BHARAT HEIDELBERG* INDIA CEMENTS JK CEMENT JK LAKSHMI CEMENT KAKATIYA CEMENT KCP MANGALAM CEMENT NCL INDUSTRIES OCL VISAKA INDUSTRIES Heidelberg has average debt to equity ratio of 0.86 and interest coverage ratio of 2.33 shows that company can manage its debt better. Page 11

12 SL INSTRUMENT Price Peer Comparison on Profitability and FII Holding. % FII Holding P/E Ratio (X) PAT JUN' 16 PAT MAR' 16 PAT DEC' 15 PAT JUN' 15 1 ACC AMBUJA CEMENTS BINANI INDUSTRIES BIRLA CORP DALMIA BHARAT HEIDELBERG* INDIA CEMENTS JK CEMENT JK LAKSHMI CEMENT KAKATIYA CEMENT KCP MANGALAM CEMENT NCL INDUSTRIES OCL VISAKA INDUSTRIES Cement sector PE multiple is 40 and Heidelberg is trading at 49 which is quite expensive but with its varied product it can attract further investment similar to big companies like Dalmia Bharat and JK lakshmi Cement. Peer Comparison on Performance SL INSTRUMENT 1Month % 3Month % 6Month % 1Year % % Movt Post Budget 1 HEIDELBERG* OCL BINANI INDUSTRIES VISAKA INDUSTRIES MANGALAM CEMENT BIRLA CORP KCP JK CEMENT KAKATIYA CEMENT NCL INDUSTRIES JK LAKSHMI CEMENT AMBUJA CEMENTS ACC DALMIA BHARAT INDIA CEMENTS Heidelberg remains top performer post budget from 31st March 2016 and rose 110%. The share price has performed in all the time period. Page 12

13 Shareholding Pattern & Management Shareholding Pattern Jun-16 Mar-16 Dec-15 Sep-15 Jun-15 Promoter and Promoter Group (%) Indian NIL NIL NIL NIL NIL Foreign Institutions (%) FII DII Non Institutions (%) Bodies Corporate NIL NIL NIL Others Custodians NIL NIL NIL NIL NIL Total no. of shares (cr.) Institution has made huge investment Institutions Holding Institutions No. of shareholder Total no. shares held % Holding Mutual Funds/ FRANKLIN INDIA SMALLER COMPANIES FUND SUNDARAM MUTUAL FUND A/C SUNDARAM SMILE FUND Foreign Portfolio Investors CAISSE DE DEPOT ET PLACEMENT DU QUEBEC-FIRST STATE INVESTMENTS INTERNA JP MORGAN INDIAN INVESTMENT COMPANY (MAURITIUS) LIMITED FIRST STATE INVESTMENTS (HONGKONG) LIMITED A/C FIRST STATE INDIAN SUBC Financial Institutions/ Banks 18 63, Insurance Companies HDFC STANDARD LIFE INSURANCE COMPANY LIMITED LIFE INSURANCE CORPORATION OF INDIA Total As on 30th June 2016 Mutual funds holds 6.08% of total share holding. Total no of 45 Foreign Portfolio Investors are holding 8.09% with 1.83 crs shares. Insurance companies hold 3.20% stake in the company, out of which HDFC Standard Life Insurance Company Limited holds 1.36%. Page 13

14 Investment Rationale The Heidelberg Cement Group is a global market leader in aggregates and a prominent player in the fields of cement, concrete and other downstream activities, ranking as one of the world s largest manufacturers of building materials. The Group employs 52,600 manpower at 2,500 locations in more than 40 countries The Company increased its capacity to 5.4 million tones p.a. through brown field expansion of its facilities in Central India in The new manufacturing capacity has enabled the Company to increase its market share in Central India i.e. Madhya Pradesh and Uttar Pradesh and in markets of Bihar, Haryana and Uttarakand HeidelbergCement Group has been honoured as the best improver in disclosing environmental information among 350 largest listed companies in German-Austria-Switzerland region by Carbon Disclosure Project. HeidelbergCement now ranks among the top 5 companies in the sector of energy and materials. Company s revenue has jumped by 16.28% OoQ, however YoY revenue rose 6.94%. Company s operating profit jumped by 32.21% QoQ and % YoY. Net profit has jumped by 8.06% QoQ and huge jump of % in YoY. Operating profit margin during last quarter was 13.59%. Net profit margin during last quarter was 5.58%. We recommend BUY in with the target of 160. Page 14

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