Cement Sector 6 June 2018

Transcription

1 Result Review Cement Sector 6 June 218 Realisation Gain Offsets Cost Escalation, But Sustainability Is Key We have reviewed the March 218 quarterly earnings performance of 12 cement companies under our coverage universe and made an attempt to measure the key trends. We have been positively surprised (with our estimates beaten) by realisation gains, by north based companies. Realisation gain on an average was ~7.5% (of the 12 companies under our coverage) driven by higher exposure to the western region (Gujarat) like Sanghi Industries (SNGI) and JK Lakshmi Cement (JKLC). This was followed by strong price gains in Central India as indicated by the performance of HeidelbergCement (HEIM) with a gain of ~1% YoY. These gains were partly because of change in the accounting policy and partly due to a weak base in (demonetisation impact). However, this helped the companies to maintain their EBITDA margin at ~17% (flat YoY). Operating costs grew ~7.5% YoY for the companies under our coverage. For FY18, realisation gain was ~8% compared to a decline of 2% in FY17. However, companies based in the southern region were impacted as inflated operating costs could not be offset by realisation gains (over-crowded markets). EBITDA margin (average) of these companies (The Ramco Cements, Dalmia Bharat Enterprises, The India Cements and Sagar Cements) declined 2bps YoY. Operating costs of companies under our coverage rose (~7.5% YoY), largely driven by logistic costs (following higher lead distances and fuel expenses) that increased 7.6%. This was followed by energy costs that rose 5% because of the rise in pet-coke prices (hovering at an average of Rs7,5/Rs8,/tn). However, companies took efforts to control raw material costs and restrict the other expenditure from rising (a decline of 4% YoY). Overall volume gain stood at ~ 15%, although this was on a weak base, and further we will await sustainability of the double-digit jump to negate the impact of the busy cement season. Companies based in the northern region touched capacity utilisation of ~85%-9% in and were benefitted by scalability. We can extend the overall trend to the sector based on the performance of our coverage companies, given the exhaustive coverage of the companies (covering all regions and size). For, Dalmia Bharat Enterprises (DBEL) reported highest EBITDA at Rs1,137/tn followed by The Ramco Cements (TRCL) at Rs958/tn, while in case of Shree Cement (SRCM) & UltraTech Cement (UTCEM) it continued to hover ~Rs95/tn. Superior realisation gain helped HEIM to top EBITDA/tn of above Rs9. India Cements (ICEM) EBITDA/tn however declined sharply by ~24% to Rs51/t. We maintain our negative view on the sector due to sustained demand-supply mismatch, unabated input cost inflation and higher valuation. Volume gain heartening, although sustainability is key: Volume gain in was 15% for our cement universe driven largely by companies based in the southern region like TRCL and Sagar Cements (SGC) who gained more than 2%. However, the volume of companies having a presence in the western region (Gujarat) like Sanghi Industries (SNGI) and JK Lakshmi Cement (JKLC) surprisingly declined, despite a weak base (SNGI partially because of shutdown). In case of companies based in the northern region, volume grew in single digit. This indicates that sustainability will be key as realisation gain is higher in regions with relatively weak volume gain and regions with strong volume gain pushing realisation down, implying weak pricing power of cement companies. Realisation gain is lowest in the southern region: Average realisation for the quarter was Rs4,315/mt, up 7.5% YoY but only 1.6% up QoQ. This came as a surprise as overall volume growth also looked strong. However, an indepth analysis suggests that realisation declined in strong volume growth regions like South India. Companies based in the southern region gained only in lower single digit (2% YoY) because of weak pricing in this region. Effectively, EBITDA margin of these companies weakened sharply in the range of ~2bps with the exception of Sagar Cements (SGC) being largely driven by strong operational efficiency following lower energy costs. Companies based in the northern and western regions which posted realisation gains - mainly HEIM, JKLC and SNGI - witnessed their volume declining or growing at a slower pace. However, pan-india companies like UTCEM, ACC and Ambuja Cements (ACEM) witnessed realisation gain in mid single-digit (~ 5%/6%) with equal volume gain. This only aided these companies to negate the impact of cost escalation and helped EBITDA margin gain except for companies based in the southern region. Operating cost inflation continues: Operating costs of cement companies showed signs of northward movement on account of a rise in energy and logistic costs. Average power and fuel costs at Rs1,5/tn witnessed a steady upward movement in FY18 because of spiraling pet-coke costs (our coverage universe companies are predominantly using pet-coke as a dominant fuel in kilns). However, raw material costs weakened by ~6% YoY and companies aggressively controlled other expenses which got reflected by the 4% fall in this expenditure. The highest YoY jump in operating cost/tn was reported by DBEL among large-sized companies of ~1% (costs of other companies like ACC, ACEM and UTCEM increased only by 5%). Among mid-sized companies, JKLC s costs shot up by 11% YoY. Energy cost declined for Sagar Cements following the commissioning of its captive power plant. Outlook: We have retained our negative view on the cement sector as we maintain our opinion of demand-supply imbalance keeping pricing power at bay for cement companies (except for an aberration like in ). Announcement of further capacity expansion only adds to our worries. We expect limited pricing power and cost escalation to cap margin expansion. Despite moderation of valuations (following the recent market weakness), we feel cement companies are still optimally valued that have captured the growth expected in the next two years. We have retained Sell rating on Dalmia Bharat, The India Cements, Shree Cement and JK Lakshmi Cement. However The Ramco Cements, JK Cement and Sagar Cements continue to be our top picks in the sector. We are participating in AsiaMoney s Brokers Poll 218. We would be pleased if you vote for us as the feedback helps us align our equity research offerings to meet your requirements. Click Here Milind Raginwar Research Analyst milind.raginwar@nirmalbang.com Harshit Dhoot Research Associate harshit.dhoot@nirmalbang.com

2 DBEL TRCL SRCM HEIM UTCEM SNGI JKCE ACEM ACC ICEM SGC JKLC Exhibit 1: Snapshot of the performance of our coverage universe Company Revenues YoY (% change) QoQ (% change) EBITDA EBITDA margin (%) Revenues EBITDA EBITDA margin (%) Revenues ACC 35,57 4, ,997 4, ,171 4, Ambuja Cements 27,63 5, ,32 3, ,143 5, (.1) (121) UltraTech Cement 9,25 17, ,953 12, (47) 75,899 12, Shree Cement 28,111 6, ,39 5, (75) 23,27 5, (235) Dalmia Bharat 26,38 5, ,812 5, (284) 2,96 4, The India Cements 13,978 1, ,436 1, (17.3) (29) 12,131 1, (5.2) (245) The Ramco Cement 12,58 2, ,132 2, (47) 1,475 2, JK Lakshmi 8,97 1, , , JK Cement 13,16 1, ,282 1, (4.6) (473) 11,261 1, (129) HeidelbergCement 5,254 1, , , Sagar Cements 2, , , Sanghi Industries 2, , , (9.3) (2.3) (269) EBITDA EBITDA margin (bps) Revenues EBITDA Exhibit 2: EBTIDA/tn decline for companies based in the southern region EBITDA margin (%) Revenues (%) 1,2 1, , (2) (4) (6) Exhibit 3: Logistics/energy costs rise steadily, while there was control over other expenses 596 EBITDA/tn YoY (%) (1) (2) (3) EBITDA EBITDA margin (%) 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 8% 8% 8% 8% 8% 9% 9% 9% 8% 8% 9% 8% 7% 19% 18% 19% 19% 19% 19% 21% 2% 19% 19% 18% 17% 17% 27% 28% 26% 27% 29% 28% 27% 27% 28% 29% 28% 29% 3% 28% 26% 26% 25% 24% 22% 24% 24% 25% 26% 27% 26% 27% 18% 21% 21% 21% 2% 22% 19% 2% 2% 19% 18% 2% 19% Raw Material Energy Logistics Others Staff 2 Cement Sector

3 SNGI JKLC JKLC SNGI HEIM TRCL SRCM JKCE UTCEM UTCEM SRCM JKCE ACEM ACEM DBEL ACC ACC DBEL HEIM TRCL ICEM SGC SGC ICEM SNGI DBEL ACC ICEM TRCL JKCE SRCM UTCEM JKLC ACEM HEIM SGC Exhibit 4: Better cost pass-through in helps to maintain EBITDA margin (%) (5) (1) (15) Realisation Growth (YoY, %) Operating cost Growth (YoY, %) Exhibit 5: Realisation improves on a low base Exhibit 6: Volume growth strongest for companies in the southern region (%) (%) Realisation Growth (YoY, %) Exhibit 7: High pet-coke prices drive energy cost inflation Aggregate Volumes Volume Growth (YoY, %) Exhibit 8: Raw material costs show a mixed trend (%) (5) (1) (%) (1) (2) (3) Power and fuel cost/tn (YoY, %) Raw Material cost/tn (YoY, %) 3 Cement Sector

4 Jan-6 1QCY15 Aug-6 2QCY15 Mar-7 Oct-7 3QCY15 May-8 4QCY15 Dec-8 Jul-9 1QCY16 Feb-1 Sep-1 2QCY16 Apr-11 3QCY16 Nov-11 Jun-12 4QCY16 Jan-13 1QCY17 Aug-13 Mar-14 2QCY17 3QCY17 May-15 Dec-15 4QCY17 Jul-16 1QCY18 Feb-17 Sep-17 Apr-18 Jan-6 1QCY15 Aug-6 Mar-7 2QCY15 Oct-7 3QCY15 May-8 Dec-8 4QCY15 Jul-9 1QCY16 Feb-1 Sep-1 2QCY16 Apr-11 Nov-11 3QCY16 Jun-12 4QCY16 Jan-13 Aug-13 1QCY17 Mar-14 2QCY17 May-15 3QCY17 Dec-15 4QCY17 Jul-16 Feb-17 1QCY18 Sep-17 Apr-18 Summary of results of companies under our coverage and the change in our target price/rating Company ACC - Rating: Accumulate; TP: Rs1,488; CMP: Rs1,285 Brief result summary ACC reported a healthy performance in 1QCY18 on account of high volume and realisation growth. Volume grew ~8% YoY to 7.1mt on account of demand from the infrastructure sector and improved sand availability, and also realisation increased ~6% YoY to Rs4,721/tn (Rs 4,461/tn in 1QCY17) because of a better market mix with the eastern region s significant contribution. Overall revenues grew ~15% YoY to Rs35.6bn. Operating costs rose ~6% YoY to Rs4,47/tn on account of a sharp rise in energy, logistics costs (diesel and clinker transport) and higher raw material prices (slag and fly-ash prices). EBITDA grew 18% YoY to ~Rs4.9bn. EBITDA margin stood at 13.5%, flat compared to 13.1% in 1QCY17. EBITDA/tn up 15% YoY at Rs 596/tn. Interest costs declined ~23% YoY to Rs193mn (Rs252mn in 1QCY17). Consequently, PAT was up at ~Rs2.5bn (~Rs2.1bn in 1QCY17). EBITDA margin is expected to improve marginally to 14.2/14.6% in CY18/CY19 and strong 28%/24% EPS growth estimates for CY18/CY19, respectively. With the royalty payment agreement for technological knowhow with global parent Holcim remaining unchanged, we have continued with our CY18/CY19 EPS estimates of Rs55.1/Rs64.7, respectively. We have valued ACC at Rs7.bn/mt based on replacement cost valuation and arrived at a target price of Rs1,488 (Rs1,612 earlier) based on one-year forward capacity. We have retained Accumulate rating on ACC. Exhibit 9: Volume growth contributed by eastern region capacity Exhibit 1: Better market mix aids realisation gain (5.) (1.) (15.) 5,1 5, 4,9 4,8 4,7 4,6 4,5 4,4 4,3 4,2 4,1 4, (5.) (1.) (15.) Volumes (mn mt) Realisations (Rs/mt) Exhibit 11: One-year forward EV/EBITDA 2,4 1,8 1,2 6 Exhibit 12: One-year forward EV/tn 3, 2,4 1,8 1,2 6 Price Price $85 $11 $135 $16 $185 4 Cement Sector

5 Financials Exhibit 13: Income statement Y/E December (Rsmn) CY15 CY16 CY17P CY18E CY19E Net sales 114,328 19, ,31 139,48 15,84 Growth (%) (.4) (4.3) Operating expenses (12,292) (97,413) (113,756) (121,164) (129,763) EBITDA 13,531 13,511 18,248 2,14 22,186 Growth (%) (5.1) (.1) Depreciation &amortisation (6,521) (6,52) (6,41) (6,663) (6,917) EBIT 1,45 9,246 13,164 15,6 16,695 Other income 3,34 1,786 1,317 1,565 1,426 Interest paid (673) (729) (1,23) (95) (72) Extraordinary/\exceptional items PBT 7,84 8,89 12,983 14,1 15,993 Tax (1,924) (2,65) (3,829) (3,737) (3,838) Effective tax rate (%) (24.5) (25.5) (29.5) (26.5) (24.) Net profit 5,916 6,24 9,154 1,364 12,155 Reported net profit 5,916 6,24 9,154 1,364 12,155 Non-recurring items (1,532) (428) Adjusted net profit 7,447 6,452 8,312 1,364 12,155 Growth (%) (7.3) (13.4) Exhibit 15: Balance sheet Y/E December (Rsmn) CY15 CY16 CY17P CY18E CY19E Cash & bank balances 916 2,756 27,43 13,874 14,249 Other current assets 48,25 52,85 44,517 59,713 71,697 Investments 2,725 2,32 2,32 2,32 2,32 Net fixed assets 75,97 76,66 74,21 78,581 77,464 Goodwill & intangible assets ,26 1,126 Other non-current assets Total assets 128,45 134, , , ,838 Current liabilities 38,931 41,679 49,229 49,493 52,411 Borrowings Other non-current liabilities 4,692 5,581 5,414 5,414 5,414 Total liabilities 43,978 47,76 55,234 55,431 58,575 Share capital 1,88 1,88 1,88 1,88 1,88 Reserves & surplus 82,55 84,734 91,775 98,183 16,383 Shareholders' funds 84,427 86,614 93,655 1,63 18,263 Total equity & liabilities 128,44 134, , , ,838 Exhibit 14: Cash flow Y/E December (Rsmn) CY15 CY16 CY17P CY18E CY19E Pre-tax profit 11,352 8,89 12,983 14,1 15,993 Depreciation 4,567 5,46 6,41 6,663 6,917 Chg. in working capital 1,14 3,17 7,378 (9,151) (2,797) Total tax paid (4,72) (1,536) (3,788) (3,517) (3,68) Other operating activities Operating CF 12,987 15,66 22,974 8,96 16,55 Capital expenditure (16,462) (6,79) (4,197) (11,243) (5,9) Chg. in investments 6,21 (3,456) 7,349 (6,) (6,5) Other investment activities Investing CF (1,252) (9,535) 3,152 (17,243) (12,4) FCF 2,735 5,531 26,127 (9,147) 4,15 Equity raised/(repaid) - 6 (1) - - Debt raised/(repaid) (35) (67) 225 Dividend (incl. tax) (7,468) (3,842) (3,773) (3,955) (3,955) Other financing activities 3,92 4 1, Financing CF (4,727) (3,687) (1,841) (4,22) (3,73) Net chg. in cash & bank bal. (1,991) 1,844 24,286 (13,169) 375 Closing cash & bank bal ,756 27,43 13,874 14,249 Exhibit 16: Key ratios Y/E December CY15 CY16 CY17P CY18E CY19E Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE RoIC Per share data O/s shares EPS FDEPS CEPS BV DPS Valuation ratios (x) P/E P/BV EV/EBITDA EV/Sales Other key ratios D/E (x) (.2) (.3) (.4) (.3) (.4) DSO (days) DuPont analysis - RoE NPM (%) Asset turnover (x) Equity multiplier (x) RoE (%) Cement Sector

6 1QCY15 2QCY15 3QCY15 4QCY15 1QCY16 2QCY16 3QCY16 4QCY16 1QCY17 2QCY17 3QCY17 4QCY17 1QCY18 1QCY15 2QCY15 3QCY15 4QCY15 1QCY16 2QCY16 3QCY16 4QCY16 1QCY17 2QCY17 3QCY17 4QCY17 1QCY18 Company Ambuja Cements Rating: Accumulate; TP: Rs227; CMP: Rs22 Brief result summary Ambuja Cements (ACEM) reported healthy performance in 1QCY18 with revenue growth of 9.2% YoY to Rs27.6bn on account of higher realisation growth. ACEM s realisation increased 6% YoY/flat QoQ to Rs4,442/tn (Rs 4,189/tn in 1QCY17), on account of better prices in the eastern and northern regions. ACEM s volume stood at 6.22mt, up 3% YoY, on account of demand from infrastructure and rural housing segments. ACEM s operating costs/t rose 5.6% YoY/2.2% QoQ to Rs3,787/tn because of higher energy, logistics and raw material costs. EBITDA grew 28.7% YoY to ~Rs 5.1bn (~Rs 3.9bn in 1QCY17). EBITDA margin rose to 17.7%, up 232bps YoY from 15.4% in 1QCY17. Higher realisation led EBITDA/tn to grow 8.4% YoY to Rs655/tn (Rs64/tn in 1QCY17). Interest costs fell by ~31.8% to Rs257mn (Rs377mn in 1QCY17). Consequently ACEM s reported PAT was up 1.2% YoY at Rs2.7bn (~Rs2.5bn in 1QCY17) because of lower other income. ACEM s performance will continue to be capped because of capacity constraints. Volume CAGR was flat (1.9%) over CY1-CY17. Effectively, ACEM s market share declined from 11% to ~8%. New capacities are unlikely to be commissioned in the next two years, leaving limited headroom for volume growth. ACEM s cost structure has witnessed limited inflation. However, its advantage of being a low-cost producer is diluted as competitors have improved on the cost efficiency parameter, outpacing ACEM in some cases. Despite an understanding with ACC for clinker supply and other synergies, we believe there are limited triggers for earnings growth. We believe ACEM is currently fairly valued and hence have assigned Accumulate rating to it with a target price of Rs227 (unchanged). Exhibit 17: Volume growth contributed by eastern region Exhibit 18: Better market mix aids realisation gain (5.) (1.) 4,7 4,6 4,5 4,4 4,3 4,2 4,1 4, 3,9 3,8 3, (2.) (4.) (6.) (8.) (1.) (12.) Volumes (mn mt) Realisations (Rs/mt) Exhibit 19: One-year forward EV/EBITDA Exhibit 2: One-year forward EV/tn 6 Cement Sector

7 Financials Exhibit 21: Income statement Y/E December (Rsmn) CY15 CY16 CY17P CY18E CY19E Net sales 93,724 21,16 231,16 251, ,15 Growth (%) (5.5) Operating expenses (79,82) (172,264) (197,86) (213,65) (23,555) EBITDA 15,573 31,251 38,124 41,925 45,825 Growth (%) (19.5) Depreciation &amortisation (6,257) (14,632) (12,195) (11,975) (12,6) EBIT 12,64 21,741 28,831 32,67 36,613 Other income 3,323 5,122 2,91 2,72 2,794 Interest paid (918) (1,45) (2,58) (2,85) (1,952) Extraordinary/\exceptional items PBT 11,166 19,95 27,55 3,585 34,661 Tax (3,91) (5,76) (8,229) (8,284) (9,366) Effective tax rate (%) (28) (29) (3) (27) (27) Net profit 8,76 14,19 19,321 22,31 25,295 Minority interest - (2,979) (4,158) (5,54) (5,945) Reported net profit 8,76 11,211 15,164 17,247 19,349 Non-recurring items (556) (386) Adjusted net profit 8,631 11,597 14,387 17,247 19,349 Growth (%) (3.7) Exhibit 23: Balance sheet Y/E December (Rsmn) CY15 CY16 CY17P CY18E CY19E Cash & bank balances 28,484 16,962 62,315 44,497 51,328 Other current assets 47,5 89,28 75,372 1,33 11,3 Investments 1,69 1,35 1,662 1,62 1,612 Net fixed assets 64, ,215 19, , ,47 Goodwill & intangible assets ,639 16,467 13,275 1,179 Other non-current assets Total assets 141, , ,4 374, ,591 Current liabilities 32,615 77,246 9,479 93,55 96,731 Borrowings Other non-current liabilities 5,649 1,534 11,392 11,62 11,853 Total liabilities 38,551 88,97 12,22 15,518 18,949 Share capital 3,14 3,971 3,971 3,971 3,971 Reserves & surplus 99, ,483 22, , ,321 Shareholders' funds 13,74 239, ,81 268, ,643 Minority interest - 43,778 46,8 51,267 57,35 Total equity & liabilities 141, ,33 355,4 374, ,591 Exhibit 22: Cash flow Y/E December (Rsmn) CY15 CY16 CY17P CY18E CY19E Pre-tax profit 11,166 19,95 27,55 3,585 34,661 Depreciation 7,186 11,392 12,195 11,975 12,6 Chg. in working capital (59) 1,849 21,891 (2,32) (5,355) Total tax paid (586) 4,416 (8,948) (7,482) (8,531) Other operating activities (1,66) Operating CF 16, ,67 52,686 14,759 32,78 Capital expenditure (3,8) (256,179) (7,995) (24,429) (17,546) Chg. in investments (534) (5,69) 6,311 (1,938) (2,27) Other investment activities Investing CF (3,614) (261,869) (1,684) (26,367) (19,753) FCF 12,578 (134,262) 51,2 (11,68) 13,27 Equity raised/(repaid) , Debt raised/(repaid) Dividend (incl. tax) (8,939) (6,17) (6,416) (6,351) (6,344) Other financing activities (85) (22,59) 2,69 (8) (8) Financing CF (8,675) 122,74 (5,65) (6,21) (6,196) Net chg. in cash & bank bal. 3,93 (11,522) 45,353 (17,818) 6,831 Closing cash & bank bal. 28,484 16,962 62,315 44,497 51,328 Exhibit 24: Key ratios Y/E December CY15 CY16 CY17P CY18E CY19E Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE RoIC Per share data O/s shares 1, , , , ,985.7 EPS FDEPS CEPS BV DPS Valuation ratios (x) P/E P/BV EV/EBITDA EV/Sales Other key ratios D/E (x) (.5) (.2) (.3) (.2) (.3) DSO (days) DuPont analysis - RoE NPM (%) Asset turnover (x) Equity multiplier (x) RoE (%) Cement Sector

8 Jan-6 Aug-6 Mar-7 Oct-7 May-8 Dec-8 Jul-9 Feb-1 Sep-1 Apr-11 Nov-11 Jun-12 Jan-13 Aug-13 Mar-14 May-15 Dec-15 Jul-16 Feb-17 Sep-17 Apr-18 Jan-6 Aug-6 Mar-7 Oct-7 May-8 Dec-8 Jul-9 Feb-1 Sep-1 Apr-11 Nov-11 Jun-12 Jan-13 Aug-13 Mar-14 May-15 Dec-15 Jul-16 Feb-17 Sep-17 Apr-18 Company UltraTech Cement - Rating: Accumulate; TP: Rs4,166; CMP: Rs3,676 Brief result summary UltraTech Cement or UTCEM reported 36.5% YoY growth in revenues to ~Rs9bn for. Volumes stood at 18.1mt, gaining ~32% (contributed by JP Associates cement asset acquisition). Grey cement realisation increased 7% YoY/2.4% QoQ to Rs4,392/tn. Operating costs, however, jumped ~4% YoY to Rs4,42/tn which was attributed to higher pet-coke prices, logistic costs and other expenditure. EBITDA increased ~33% YoY to Rs17bn. However, overall EBITDA margin declined marginally to 18.9% from a high of 19.4% YoY. EBITDA/tn came in flat at Rs943/tn (Rs934/tn in ). APAT (after adjusted with one-off stamp duty charges) increased 26.6% YoY to Rs7.1bn versus Rs5.6bn in. We have estimated our earnings for FY19/FY2 at Rs12/Rs126.8/share respectively, factoring in the impact of merger with Century assets and utilisation ramp-up of JP Associates cement assets in FY19E/FY2E. JP Associates asset acquisition impact will be higher in FY19 which will trigger volume growth. Currently, the stock trades at a replacement cost of Rs13.2bn EV/mt FY2E capacity. We have valued UTCEM at Rs13.3bn EV/mt to arrive at a fair value target price of Rs4,166 (revised from Rs4,32) with Accumulate rating. Exhibit 25: Volume growth contributed by JP Associates assets Exhibit 26: Pan-India presence aids realisation gain (5.) (1.) (15.) (2.) 4,5 4,4 4,3 4,2 4,1 4, 3,9 3,8 3,7 3, (5.) (1.) (15.) Volumes (mn mt) Realisations (Rs/mt) Exhibit 27: One-year forward EV/EBITDA 2,4 1,8 1,2 6 Exhibit 28: One-year forward EV/tn 3, 2,4 1,8 1,2 6 Price Price $85 $11 $135 $16 $185 8 Cement Sector

9 Financials Exhibit 29: Income statement Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Net sales 237,88 238, ,91 355, ,514 Growth (%) Operating expenses (19,822) (189,225) (239,68) (285,15) (359,718) EBITDA 46,332 49,743 59,167 7,386 85,147 Growth (%) Depreciation &amortisation (12,97) (12,679) (17,636) (22,57) (23,717) EBIT 38,12 42,233 47,144 54,66 68,383 Other income 4,741 5,168 5,612 6,726 6,953 Interest paid (5,117) (5,714) (11,863) (16,551) (18,73) Extraordinary/\exceptional items PBT 32,986 37,76 35,281 38,55 49,653 Tax (9,284) (11,482) (1,76) (1,121) (13,98) Effective tax rate (%) (28) (3) (3) (27) (26) Net profit 23,72 26,277 24,576 27,934 36,555 Reported net profit 23,72 26,277 24,576 27,934 36,555 Non-recurring items - 1, Adjusted net profit 23,72 25,36 24,576 27,934 36,555 Growth (%) (1.8) Exhibit31: Balance sheet Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Cash & bank balances 22,497 22,177 1,993 6,839 2,796 Other current assets 16, ,472 13, , ,97 Investments 1,416 15,6-2,644 7,385 7,385 Net fixed assets 238,392 24, , ,61 42,439 Goodwill & intangible assets 1, Other non-current assets Total assets 378,52 392,85 543,73 68, ,72 Current liabilities 62,279 73,133 62,743 83,113 85,77 Borrowings 76,67 52,532 19,16 27,284 27,857 Other non-current liabilities 31,785 27,736 31,741 34,441 37,641 Total liabilities 17,67 153,41 284,5 324, ,267 Share capital 2,744 2,745 2,746 2,746 2,886 Reserves & surplus 25,15 236,66 256, , ,549 Shareholders' funds 27,85 239,45 259,23 284, ,435 Total equity & liabilities 378,52 392,85 543,73 68, ,72 Exhibit 3: Cash flow Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Pre-tax profit 32,986 37,76 35,281 38,55 49,653 Depreciation 11,75 (95,918) 17,636 22,57 23,717 Chg. in working capital 4,36 26,754 (22,146) (33,84) (24,933) Total tax paid (7,72) (2,723) (991) (5,631) (9,898) Other operating activities Operating CF 41,349 (52,128) 29,781 21,9 38,539 Capital expenditure (2,346) 94,35 (19,348) (35,594) (18,245) Chg. in investments 1,166 (23,6) 7,24 4,971 (22,) Other investment activities Investing CF (19,18) 71,3 (183,144) (3,623) (4,245) FCF 22,169 19,172 (153,364) (9,533) (1,76) Equity raised/(repaid) Debt raised/(repaid) 2,451 (24,74) 137,484 17, Dividend (incl. tax) (2,795) (3,83) (2,444) (2,889) (3,5) Other financing activities (2,41) 8,386 (1,861) - - Financing CF (1,811) (19,491) 133,179 14,378 (2,477) Net chg. in cash & bank bal. 2,358 (319) (2,185) 4,846 (4,182) Closing cash & bank bal. 22,497 22,177 1,993 6,839 2,796 Exhibit 32: Key ratios Y/E March FY16 FY17 FY18P FY19E FY2E Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE RoIC Per share data O/s shares EPS FDEPS CEPS BV DPS Valuation ratios (x) P/E P/BV EV/EBITDA EV/Sales Other key ratios D/E (x) DSO (days) DuPont analysis - RoE NPM (%) Asset turnover (x) Equity multiplier (x) RoE (%) Cement Sector

10 Apr-5 Aug-5 Jan-6 Jun-6 Nov-6 Mar-7 Aug-7 Jan-8 Jun-8 Oct-8 Mar-9 Aug-9 Jan-1 May-1 Oct-1 Mar-11 Aug-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Dec-13 May-14 Mar-15 Jul-15 Dec-15 May-16 Oct-16 Feb-17 Jul-17 Dec-17 May-18 Apr-9 Aug-9 Jan-1 Jun-1 Nov-1 Mar-11 Aug-11 Jan-12 Jun-12 Oct-12 Mar-13 Aug-13 Jan-14 May-14 Mar-15 Aug-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17 Dec-17 May-18 Company Shree Cement - Rating: Sell; TP: Rs 15,27; CMP: Rs 16,12 Brief result summary Shree Cement or SRCM reported 15.3% YoY growth in revenues to ~Rs28.1bn for. Volume (including clinker sales) stood at 6.44 mt, a gain of ~ 8.7%. Realisation jumped 7.4% YoY to Rs4,157/tn (flat QoQ). Operating costs jumped ~7.1% YoY to Rs3,386/ts. Power segment s sales declined ~21% to 344.6mn units (external sales). Power EBITDA came in at Rs138mn. Overall power & fuel costs rose 27% YoY to ~Rs734/tn which can be attributed to higher pet-coke prices, logistic costs up ~16.4% YoY to Rs1,191/tn on account of higher fuel costs. However, other expenditure declined 5.6% to ~Rs4.3bn. EBITDA increased 11.5% to ~Rs6.29bn. However, overall EBITDA margin declined to ~22.4% from 23.1% in. EBITDA/tn was up 5.3% YoY at Rs956.PAT rose 31.1% YoY to ~Rs3.9bn because of lower depreciation (~Rs2.3bn versus ~Rs3.1bn in ). We expect the earnings premium to taper off, given the cost inflation impacting earnings and volatile & weak pricing, especially in the eastern region. Further, the demand shift from housing segment to infrastructure segment will only mean price recovery is unlikely, although demand will gather strength (realisation gain of 1.8% over FY14-FY2E). This will lead to revenue traction, but EBITDA margin will reel under pressure. We have valued the company s cement business at an EV of Rs481bn (EV/mt of Rs12bn FY2E capacity) and the power segment with an EV of Rs3.1bn (RoE of 1%) to arrive at a fair value of Rs15,27/share. The stock currently trades at an EV/mt of Rs13.bn FY2E capacity, which we feel is at premium valuation. We have retained Sell rating on the stock with a target price of Rs15,27. Exhibit 33: Strong 9% volume growth (5.) (1.) (15.) (2.) Exhibit 34: EBTIDA margin maintained because of realisation gain 4,5 4, 3,5 3, 2,5 2, 1,5 1, (5.) (1.) (15.) Volumes (mn mt) Realisations (Rs/mt) Exhibit 35: EV/EBITDA 25, 2, 15, 1, 5, Exhibit 36: EV/tn 25, 2, 15, 1, 5, Price Price $15 $2 $25 $3 $35 1 Cement Sector

11 Financials Exhibit 37: Income statement Year Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Net sales 55,647 84,236 98, , ,888 Growth (%) Operating expenses (42,445) (6,564) (73,64) (87,74) (13,223) EBITDA 13,23 23,672 24,727 3,831 34,666 Growth (%) Depreciation & amortisation (9,17) (12,147) (8,994) (13,221) (14,543) EBIT 5,297 16,62 19,623 23,92 26,16 Other income 1,21 5,77 3,891 5,482 6,37 Interest paid (751) (1,271) (1,353) (3,292) (3,222) Extraordinary/exceptional items PBT 4,545 15,331 18,271 19,8 22,938 Tax 4 (1,917) (4,43) (2,66) (3,98) Effective tax rate (%).1 (12.5) (24.2) (13.4) (13.5) Net profit 4,549 13,414 13,841 17,141 19,84 Reported net profit 4,549 13,414 13,841 17,141 19,84 Non-recurring items Adjusted net profit 4,549 13,414 13,841 17,141 19,84 Growth (%) Exhibit 39: Balance sheet Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Cash & bank balances 2,83 3,11 1,21 1,798 1,348 Other current assets 24,633 29,953 32,677 36,193 41,622 Investments 3,35 4,426 57,837 56, 57,8 Net fixed assets 31,79 33,96 54,562 74,231 87,793 Goodwill & intangible assets 1, Other non-current assets Total assets 9,915 16, , , ,563 Current liabilities 11,56 12,162 13,772 19,359 21,737 Borrowings 15,57 22,454 48,678 48,853 48,48 Other non-current liabilities (3,652) (5,13) (5,131) (5,282) (5,538) Total liabilities 22,461 29,63 57,32 62,93 64,247 Share capital Reserves & surplus 68,17 76,633 88,618 14, ,968 Shareholders' funds 68,455 76,981 88,966 15, ,316 Total equity & liabilities 9,916 16, , , ,563 Exhibit 38: Cash flow Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Pre-tax profit 4,545 15,331 18,271 19,8 22,938 Depreciation 9,27 (45,117) 8,994 13,221 14,543 Chg in working capital (2,3) (4,22) (1,569) (1,257) (3,53) Total tax paid (515) (3,29) (5,316) 1,332 (2,876) Other operating activities 5, Operating CF 16,253 (37,198) 2,563 33,97 31,75 Capital expenditure (7,851) 45,167 (3,46) (32,89) (28,15) Chg. in investments (7,984) (1,121) (17,411) 1,837 (1,8) Other investing activities Investing CF (15,835) 35,46 (47,871) (31,53) (29,95) FCF 418 (2,151) (27,38) 2,43 1,17 Equity raised/(repaid) Debt raised/(repaid) (446) 7,397 26, (85) Dividend (incl. tax) (1,6) (4,864) (815) (1,63) (815) Other financing activities 789 (12) Financing CF (663) 2,432 25,49 (1,455) (1,62) Net chg. in cash & bank bal. (245) 28 (1,899) 588 (451) Closing cash & bank bal. 2,83 3,11 1,21 1,798 1,348 Exhibit 4: Key ratios Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE RoIC Per share data O/s shares EPS FDEPS CEPS BV 1, ,965. 2,29.7 2, ,22.4 DPS Valuation ratios (x) PE P/BV EV/EBITDA EV/Sales Other key ratios D/E (x) (.3) (.3) (.1) (.1) (.1) DSO (days) DuPont analysis - RoE NPM (%) Asset turnover (x) Leverage factor (x) RoE (%) Cement Sector

12 Apr-5 Oct-5 Apr-6 Oct-6 Apr-7 Oct-7 Apr-8 Oct-8 Apr-9 Oct-9 Apr-1 Oct-1 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Apr-9 Oct-9 Apr-1 Oct-1 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Company JK Lakshmi Cement - Rating: Sell; TP: Rs312; CMP: Rs33 Brief result summary JK Lakshmi Cement (JKLC) reported a steady set of numbers for driven by higher realisation. Cement realisation (adjusted with ready-mix concrete or RMC revenues of Rs 41mn) were up by ~13.6% YoY to Rs3,835/tn. However, volume declined 2.5% YoY to 2.23mnmt in a seasonally strong quarter, indicating supply pressure in its key markets. Revenues grew 11.2% YoY to ~Rs 9.bn. However, following higher energy, logistics and employee costs, the overall operating costs/tn rose ~11% YoY to Rs3,565. EBITDA grew ~41.5% YoY driven by realisation gain to ~Rs1,13mn. EBITDA margin improved 242bps YoY to 11.3% on a very weak base of 8.3%. EBITDA/mt was up 45.2% (on an equally weaker base) YoY/flat QoQ at Rs454 (Rs312/tn in ). APAT stood at Rs338mn, up 62.3% YoY (Rs28mn in ) because of lower tax payment. We feel that JKLC s presence in the crowded markets of Chhattisgarh in the eastern region and also in the northern region is likely to challenge the sustainability of higher realisation. This, along with high operating costs, is likely to limit margin expansion although PAT may show a healthy growth because of a lower base. To factor in this, we have valued JKLC at a replacement cost of Rs4.55bn/mt (~35% discount to Rs7.5bn/mt) to arrive at a fair value. Accordingly, we have retained Sell rating on the stock with a revised target price of Rs312 (earlier Rs359 earlier). Exhibit 41: Volume declines YoY in a seasonally strong quarter (mn mt) (%) (5) (1) (1) (15) (2) (2) Exhibit 42: Volume foregone for better realisation gain (mn mt) (%) 4,5 2 4, 15 3,5 1 3, 5 2,5 2, 1,5 (5) 1, (1) 5 (15) - (2) Volumes (mn mt) Realisations (Rs/mt) Exhibit 43: EV/EBITDA Exhibit 44: EV/tn 1, Price Price $5 $8 $11 $14 $17 12 Cement Sector

13 Financials Exhibit 45: Income statement Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Net sales 26,199 29,14 34,122 37,881 42,724 Growth (%) Operating expenses (23,497) (25,45) (3,8) (33,33) (37,286) EBITDA 2,71 3,654 4,113 4,578 5,438 Growth (%) (1.) Depreciation &amortisation (1,629) (1,724) (1,793) (1,636) (1,642) EBIT 1,675 2,629 3,1 3,547 4,42 Other income Interest paid (1,923) (1,887) (1,975) (1,798) (1,63) Extraordinary/exceptional items - PBT (355) 742 1,27 1,749 2,817 Tax (188) (324) (521) Effective tax rate (%) (117.7) 1.5 (18.3) (18.5) (18.5) Net profit ,426 2,296 Reported net profit ,426 2,296 Non-recurring items (17) Adjusted net profit ,426 2,296 Growth (%) (84.5) Exhibit 47: Balance sheet Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Cash & bank balances Other current assets 9,971 12,335 11,167 9,7 12,41 Investments 1,663 3,95 3,95 3,95 3,95 Net fixed assets 3,61 3,285 3,187 3,793 3,622 Goodwill & intangible assets Other non-current assets Total assets 42,419 45,834 44,888 43,217 46,555 Current liabilities 7,453 12,354 9,236 9,617 1,354 Borrowings 2,766 19,663 21,12 17,537 18,87 Other non-current liabilities Total liabilities 29,85 32,17 3,356 27,64 28,991 Share capital Reserves & surplus 12,746 13,228 13,944 15,25 16,976 Shareholders' funds 13,334 13,817 14,532 15,613 17,564 Total equity & liabilities 42,419 45,834 44,888 43,217 46,555 Exhibit 46: Cash flow Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Pre-tax profit (355) 742 1,27 1,749 2,817 Depreciation 1,64 (13,381) 1,635 1,636 1,642 Chg in working capital 248 5,192 (1,218) (25) (594) Total tax paid () (789) (387) 326 (421) Other operating activities Operating CF 1,497 (8,236) 1,55 3,461 3,443 Capital expenditure (2,832) 13,735 (1,536) (2,243) (1,47) Chg in investments 223 (4,87) (732) 2,729 (2,) Other investing activities Investing CF (2,69) 9,648 (2,268) 486 (3,47) FCF (1,112) 1,412 (1,213) 3,947 (27) Equity raised/(repaid) Debt raised/(repaid) 1,112 (1,13) 1,457 (3,583) 55 Dividend (incl. tax) (29) (35) (294) (294) (294) Other financing activities (6) (32) 171 (5) (5) Financing CF 1,77 (1,44) 1,334 (3,928) 25 Net chg in cash & bank bal. (35) (28) Closing cash & bank bal Exhibit 48: Key ratios Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE RoIC (1.) Per share data O/s shares EPS FDEPS CEPS BV DPS Valuation ratios (x) PE P/BV EV/EBITDA EV/Sales Other key ratios D/E (x) DSO (days) DuPont analysis - RoE NPM (%) Asset turnover (x) Leverage factor (x) RoE (%) Cement Sector

14 Apr-7 Oct-7 Apr-8 Oct-8 Apr-9 Oct-9 Apr-1 Oct-1 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Apr-7 Oct-7 Apr-8 Oct-8 Apr-9 Oct-9 Apr-1 Oct-1 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Company JK Cement - Rating: Buy; TP: Rs1,141; CMP: Rs912 Brief result summary JK Cement (JKCE) reported a steady set of numbers for driven by volume and realisation growth. JKCE posted volume growth of 26.1% YoY in grey cement to 2.35mt. In the white cement segment (including putty), JKCE reported volume growth of 1.7% YoY at.32mt. Grey cement realisation rose 7% YoY/remained flat QoQ at Rs3,974/tn. White cement segment realisation was up 2.8%/2.1% YoY/QoQ, respectively, at Rs11,67/tn. Overall revenues rose 28% YoY to ~Rs13.2bn. However, JKCE s operating costs increased 9.2% YoY on account of high energy and logistics costs to Rs4,25/tn. EBITDA was down 4.6% YoY at Rs1.8bn. EBITDA margin declined 473bps to 13.8% (from 18.6% in ). Following higher operating costs, EBITDA/tn of grey cement declined sharply to Rs277 from Rs48. However, white cement and putty s EBITDA/tn improved 5.2% YoY to Rs3,64n on account of higher realisation growth. Effectively, APAT stood at Rs1.5bn, up 14.9% YoY (Rs515mn in ) because of reclassification of deferred tax in the base year. We feel the white cement business including putty business will continue to guard JKCE s business. The revival in Maharashtra and Karnataka will help JKCE gain further revenue and earnings pace. The volume cushion will be aided by a multi-regional presence and earnings cushion by way of white cement segment s performance. However, cost inflation will continue to be challenging and there will be respite only from demand revival in grey cement business. JKCE stock currently trades around its replacement cost of Rs8.bn/mt (higher because of white cement capacity). We have retained Buy rating on the stock with a revised target price of Rs1,141 based on FY2E capacity. At our target price, the stock trades at a replacement cost of Rs9.5bn/mt, assigning ~ 14% premium and EV/EBITDA of 9.6x FY2E earnings. Exhibit 49: Strong volume growth in grey cement on YoY basis Exhibit 5: Realisation in grey cement increases 7% YoY (5.) (1.) (15.) (2.) 4,5 4, 3,5 3, 2,5 2, 1,5 1, (5.) (1.) (15.) Grey cement Volumes (mn mt) Grey Cement Realisations (Rs/mt) Exhibit 51: EV/EBITDA 1,75 1,4 1, Exhibit 52: EV/tn 1,75 1,4 1, Price Price $6 $8 $1 $12 $14 14 Cement Sector

15 Financials Exhibit 53: Income statement Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Net sales 35,212 37,36 45,912 49,428 53,58 Growth (%) Operating expenses (3,355) (3,621) (38,36) (4,131) (43,612) EBITDA 4,857 6,414 7,66 9,297 9,896 Growth (%) Depreciation & amortisation (1,641) (1,761) (1,863) (2,124) (2,192) EBIT 3,967 5,613 7,2 8,395 8,878 Other income ,277 1,222 1,174 Interest paid (2,77) (2,656) (2,454) (2,686) (2,434) Extraordinary/exceptional items PBT 1,26 2,923 4,397 5,79 6,444 Tax (388) (649) (979) (1,256) (1,192) Effective tax rate (%) (3.8) (22.2) (22.3) (22.) (18.5) Net profit 872 2,275 3,418 4,453 5,252 Reported net profit 872 2,275 3,418 4,453 5,252 Non-recurring items - (33) (17) - - Adjusted net profit 872 2,38 3,588 4,453 5,252 Growth (%) (44.9) Exhibit 55: Balance sheet Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Cash & bank balance 3,684 4,188 6,161 2,96 4,787 Other current assets 1,837 1,971 9,41 11,72 12,615 Investments 4,366 5,356 7,494 9,111 1,733 Net fixed assets 36,561 37,66 36,599 44,282 44,49 Goodwill & intangible assets Other non-current assets (566) (528) Total assets 55,72 57,837 59,911 68,267 72,796 Current liabilities 9,635 9,885 6,566 11,354 12,94 Borrowings 23,996 23,663 26,181 22,383 2,32 Other non-current liabilities 4,54 5,87 5,69 8,97 9,95 Total liabilities 38,17 38,634 38,437 42,77 42,345 Share capital Reserves & surplus 16,23 18,54 2,774 24,861 29,752 Shareholders' funds 16,93 19,23 21,473 25,56 3,451 Total equity & liabilities 55,72 57,837 59,911 68,267 72,796 Exhibit 54: Cash flow Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Pre-tax profit 1,26 2,923 4,397 5,79 6,444 Depreciation 1,614 1,499 2,91 2,124 2,192 Chg in working capital 1, (2,34) 4,651 1,34 Total tax paid (298) (674) (357) (149) (1,42) Other operating activities Operating CF 3,743 4,399 3,828 12,335 8,269 Capital expenditure (3,135) (2,598) (1,88) (9,81) (2,323) Chg in investments (1,172) (99) (2,138) (1,617) (1,622) Other investing activities Investing CF (4,37) (3,588) (3,226) (11,426) (3,945) FCF (564) ,324 Equity raised/(repaid) Debt raised/(repaid) 557 (333) 2,518 (3,798) (2,81) Dividend (incl. tax) (337) (654) (368) (368) (368) Other financing activities (779) 2 7 Financing CF 42 (37) 1,371 (4,165) (2,442) Net chg in cash & bank bal. (162) 54 1,973 (3,255) 1,882 Closing cash & bank bal 3,684 4,188 6,161 2,96 4,787 Exhibit 56: Key ratios Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE RoIC Per share data O/s shares EPS FDEPS CEPS BV DPS Valuation ratios (x) PE P/BV EV/EBITDA EV/Sales Other key ratios D/E (x) DSO (days) DuPont analysis - RoE NPM (%) Asset turnover (x) Equity multiplier(x) RoE (%) Cement Sector

16 Aug-14 Jan-15 May-15 Oct-15 Feb-16 Jul-16 Nov-16 Apr-17 Aug-17 Dec-17 May-18 Aug-14 Jan-15 May-15 Oct-15 Feb-16 Jul-16 Nov-16 Apr-17 Aug-17 Dec-17 May-18 Company Dalmia Bharat Enterprises- Rating: Sell; TP: Rs2,43; CMP: Rs2,624 Brief result summary Dalmia Bharat Enterprises (DBEL) reported a healthy performance for driven by higher volume. Volume grew ~14% YoY to 5.18mnmt, mainly contributed by the eastern region. Realisation was up ~4% YoY/down 1% QoQ to Rs4,892/tn on account of better pricing in the eastern region. Overall revenues grew ~21% YoY to Rs26.4bn. Operating costs increased ~1% YoY to Rs3,956/tn because of high raw material (following the rise in slag prices and increase in production of blended cement), energy, logistics and employee costs. EBITDA grew ~7% YoY to Rs5.9bn versus ~Rs5.5bn in. EBITDA/tn stood flat at Rs1,137, despite cost inflation which was commendable. However, interest costs fell ~2% YoY to Rs1.5bn (Rs1.9bn in ), as DBEL repaid debt of ~Rs 7.75bn in FY18. Effectively, DBEL reported PAT of ~Rs1.8bn, flat YoY/up 58% QoQ. Demand growth in the eastern region, Andhra Pradesh and Telangana is currently healthy and is likely to remain so for the next few quarters. However, these markets are highly crowded and hence realisation is likely to be capped. Thus we expect margins to hover ~ 2%-22% in the next two years given the limited pass-through of cost inflation. This is largely because of continued demand-supply mismatch. We have valued DBEL at a replacement cost of Rs11.7bn/mt to arrive at a fair value, given its better operating efficiency and lucrative markets. However, the stock is currently traded at Rs13.bn/mt, higher than its fair value. Hence, we have retained Sell rating on DBEL with a target price of Rs2,43. We have not factored in the impact of organic or inorganic expanded capacity of DBEL. Exhibit 57: Strong volume growth in (Rsmn) (%) (1) (1.) (2) Exhibit 58: Realisation improves because of contribution from the eastern region (Rsmn) (%) 6, 4 5, 4, 3, 2, 1, (1) (2) Volumes (mn mt) Realisations (Rs/mt) Exhibit 59: EV/EBITDA Exhibit 6: EV/tn 3,2 2,8 2,4 2, 1,6 1, ,2 3,15 2,1 1,5 Price Price $15 $175 $2 $225 $25 16 Cement Sector

17 Financials Exhibit 61: Income statement Year Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Net sales 64,38 74,44 86,88 98,54 15,762 Growth (%) Operating expenses (48,593) (55,25) (65,673) (73,458) (79,231) EBITDA 15,786 19,19 2,415 24,596 26,53 Growth (%) Depreciation & amortisation (4,528) (6,27) (7,37) (6,173) (6,71) EBIT 11,259 12,992 13,378 18,424 2,459 Other income 1,642 2,477 2,789 2,389 2,546 Interest paid (7,256) (8,9) (7,49) (7,459) (7,523) Extraordinary/exceptional items PBT 5,644 6,569 9,118 13,354 15,482 Tax (2,991) (2,762) (2,677) (4,841) (5,922) Effective tax rate (%) (53.) (42.) (29.4) (36.3) (38.3) Net profit 2,653 3,87 6,442 8,513 9,56 Minority interest (745) (87) (1,77) (1,439) (1,53) Reported net profit 1,98 2,937 5,365 7,75 8,31 Non-recurring items Adjusted net profit 1,98 2,937 5,365 7,75 8,31 Growth (%) 1, Exhibit 63: Balance sheet Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Cash & bank balances 2,336 1,75 3,538 1,757 2,135 Other current assets 49,713 53,922 54,936 54,851 58,419 Investments 1,119 1,2 8,431 1,524 1,524 Net fixed assets 98,727 94,949 85,177 94,27 95,926 Goodwill & intangible assets 27,81 28,137 28,264 28,391 28,517 Other non-current assets Total assets 179, ,778 18,345 18,55 186,522 Current liabilities 26,168 31,712 33,6 35,236 37,261 Borrowings 85,63 76,525 63,251 72,77 73,394 Other non-current liabilities 13,55 12,72 1,856 15,839 17,93 Total liabilities 124,852 12,38 17,76 123, ,748 Share capital Reserves & surplus 49,47 53,163 47,122 49,77 51,5 Shareholders' funds 49,584 53,341 47,3 49,947 51,678 Minority interest 5,259 6,129 25,339 6,758 7,95 Total equity & liabilities 179, ,778 18,345 18,55 186,522 Exhibit 62: Cash flow Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Pre-tax profit 5,644 6,569 1,398 13,354 15,482 Depreciation (19,635) 6,21 5,612 5,396 5,294 Chg. in working capital 6,548 2,21 4,37 (2,512) (653) Total tax paid 9,749 (3,744) (1,339) (3,477) (4,558) Other operating activities Operating CF 2,36 11,47 18,978 12,761 15,565 Capital expenditure (9,874) (2,579) (5,224) (5,115) (7,32) Chg. in investments (9,616) (768) 337 (42) (1,) Other investing activities - - (6,797) Investing CF (19,489) (3,347) (11,683) (4,26) (8,32) FCF (17,183) 7,7 7,294 8,555 7,245 Equity raised/(repaid) 6, Debt raised/(repaid) 3,63 (9,16) (2,955) (8) 625 Dividend (incl. tax) (269) (19) (19) (19) (19) Other financing activities 4, (4,864) (6,844) (7,32) Financing CF 14,238 (8,286) (8,9) (7,834) (6,867) Net chg. in cash & bank bal. (2,945) (586) (715) Closing cash & bank bal. 2,336 1,75 1,35 1,757 2,135 Exhibit 64: Key ratios Y/E March (Rsmn) FY16 FY17 FY18P FY19E FY2E Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE RoIC Per share data O/s shares EPS FDEPS CEPS BV DPS Valuation ratios (x) PE P/BV EV/EBITDA EV/Sales Other key ratios D/E (x) DSO (days) Du Pont analysis - RoE NPM (%) Asset turnover (x) Leverage factor (x) RoE (%) Cement Sector