DALMIA CEMENT (BHARAT) LIMITED

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1 DALMIA CEMENT (BHARAT) LIMITED BUY CMP: Rs Date: 1 December,2009 Key Ratios: Particulars FY08 A FY09 A FY10E FY11E OPM(%) NPM(%) ROE(%) ROCE(%) P/BV(x) P/E(x) EV/EBDITA(x) Debt Equity(x) Key Data: Sector Cement Face Value wk. High/Low (Rs.) /67.20 Volume (2 wk. Avg.) BSE Code V.S.R. Sastry Vice President Equity Research Desk vsrsastry@firstcallindiaequity.com Target Price:Rs Market Cap: Rs mn. SYNOPSIS Dalmia Cement (Dalmia), a member of the Dalmia Sanjay Group is engaged mainly in the activities of cement production. Besides, the company also produces dead burnt magnesite and monoliths, iron ore, multi layer ceramic chip capacitors, and sugar. The company also provides travel-related services and has a total wind energy generation capacity of 11.5 MW. Dalmia Cement Bharat has arranged funds of over Rs 3,100 crore from a syndicate of banks to undertake capital expenditure or capex plans. The funds have been raised via company s 100% subsidiary, Dalmia Cement Ventures as debt. The company is looking to augment its capacity in Meghalaya, Himachal Pradesh, Karnataka, Rajasthan and Madhya Pradesh. The revenue of the company for the quarter ended on Sept 30 th increased 24% YoY while profit increased 34% YoY. The topline of the company are expected to grow at a CAGR of 19% over 2008A to 2011E. Share Holding Pattern: Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer drsastry@firstcallindia.com

2 Table of Content Investment Highlights... 3 Peer Group Comparison... 6 Financials... 6 Charts... 8 Outlook and Conclusion Industry Overview... 11

3 Investment Highlights Results Updates (Q2 FY10) The bottomline of the company for the quarter increased 34% yoy that is Rs mn from Rs mn of same period of last year. Total revenue for the second quarter stood at Rs mn from Rs which is 24% increase than that of a year ago period. EPS for the quarter stood at Rs.6.65 per equity share of Rs.2.00 each. Expenditure of the company increased 23% YoY to Rs mn from Rs mn of same period of last year. Interest expenses for the quarter stood at Rs.402.2mn. OPM & NPM for the quarter stood at 27% and 10% respectively. Quarterly Results - Standalone (Rs in mn) As at Sep - 09 Sep - 08 %Change Net Sales Net Profit Basic EPS

5 Dalmia Cement arranges funds for capex plans Dalmia Cement Bharat has arranged funds of over Rs 3,100 crore from a syndicate of banks to undertake capital expenditure or capex plans. The funds have been raised via company s 100% subsidiary, Dalmia Cement Ventures as debt. The company is looking to augment its capacity in Meghalaya, Himachal Pradesh, Karnataka, Rajasthan and Madhya Pradesh. Apart from this, it is also eyeing for a pan-india presence in next ten years by adding around 35 million tonne of capacity every year. At present, Dalmia Cement is working on 10 million tonne capacity addition plan, which is likely to be completed in coming 2-3 years. Dalmia Cement scouting for land to set up three units Dalmia Cement (Bharat) is scouting for land required for setting up three new cement production units with 2.5 million tonnes (mt) capacity each. The company is considering various locations in Karnataka, Meghalaya, Madhya Pradesh, Himachal Pradesh and Rajasthan. It has raised Rs 3,000 crore through internal accruals and debt for these expansion plans. Meanwhile, the recently commissioned 2.5 mt plant at Kadapa in Andhra Pradesh is expected to reach full capacity utilization. Dalmia Cement to construct 1000 houses for the flood hit in Karnataka Dalmia Cement (Bharat) Limited (DCBL), a leading multi spectrum Cement player in South India, as relief measure has announced to build 1000 houses for the homeless people affected by the recent floods in Karnataka. The company is aggrieved by the loss of lives and property caused by the unprecedented natural calamity in parts of North Karnataka. As part of the Corporate Social Responsibility Company join hands with the Government and extend our support to rebuild the infrastructure in the affected areas. The company will construct 1000 houses in the State for rehabilitation of distressed people. Madras HC approves Dalmia - Eswar Cements amalgamation Madras has approved the Scheme of Amalgamation of Eswar Cements with the company.the company has submitted a copy of the order passed by high court of Madras (concerned high court for the transferee company) dated December 08, 2008 to Bombay Stock Exchange (BSE).The Group`s principal activities are to manufacture clinker, cement and cement dispatches, cane crushing, molasses and sugar. It also produces and sells dead burnt magnesite, and magnesia-carbon bricks and monoliths, iron ore, multilayer ceramic chip capacitors & chip resistors and consumer electronic equipment like audio deck amplifiers, TV (both color and black & white).

6 Peer Group Comparison Name of the company CMP (As on 1 Dec, 2009) Market Cap. (Rs. Mn.) EPS (Rs.) P/E (x) P/BV (x) Dividend(%) Dalmia Cement(Bharat) Ltd JK Lakshmi Cement Limited Binani Limited Cement The India Cements Ltd Key Concerns Any change in the existing policies of Government of India and/or State Governments or new policies, providing or withdrawing support to the industries in which the company operates or otherwise affecting these industries, would adversely affect the supply and demand balance and competition in markets in which the company operate there by impacting the margins of the company. The Company's exposure to currency risk arises out of the import of materials like coal for its cement plants and machinery and equipment for its projects.

7 Financials 12 Months Ended Profit & Loss Account (Standalone) Particulars FY 08 A FY 09 A FY 10 E FY11 E (Rs.Mn) 12m 12m 12m 12m Net Sales 14, , Other Income 1, Total Income 16, , Expenditure -10, , Operating Profit 6, , Interest -1, , Gross Profit 5, , Depreciation Profit before Tax 4, , Tax , Net Profit 3, , Equity Capital Reserves 10, , , , EPS *A=Actual, E=Estimated Quarterly Ended Profit & Loss Account (Standalone) Particulars Mar 09 A June 09 A Sep 09 A Dec 09 E (Rs.Mn) 3m 3m 3m 3m Net Sales 4, , ,

8 Other Income Total Income 4, , , Expenditure -3, , , Operating Profit 1, , , Interest Gross Profit 1, , , Depreciation Profit before Tax Tax Net Profit Equity Capital EPS Charts

Comparative Graph DALMIA CEMENTS BSE SENSEX Outlook and Conclusion At the current market price of Rs.147, the stock trades at a P/E of 5.93x and 4.94x for FY10E and FY11E respectively.

10 Comparative Graph DALMIA CEMENTS BSE SENSEX Outlook and Conclusion At the current market price of Rs.147, the stock trades at a P/E of 5.93x and 4.94x for FY10E and FY11E respectively. On the basis of EV/EBDITA, the stock trades at 2.23x and 2.03x for FY10E and FY11E respectively. Price to Book Value of the stock is expected to be at 0.85 and 0.72 respectively for FY10E and FY11E. The Net sales of the company are expected to grow at a CAGR of 19% over 2008 to 2011E. Dalmia Cement Bharat has arranged funds of over Rs 3,100 crore from a syndicate of banks to undertake capital expenditure or capex plans. The funds have been raised via company s 100% subsidiary, Dalmia Cement Ventures as debt. The company is looking to augment its capacity in Meghalaya, Himachal Pradesh, Karnataka, Rajasthan and Madhya Pradesh. Apart from this, it is also eyeing for a pan-india presence in next ten years by adding around 35 million tonne of capacity every year. At present, Dalmia Cement is working on 10 million tonne capacity addition plan, which is likely to be completed in coming 2-3 years. The company is focussed on becoming a pan-india player over a 10-year period. While the company is present in the South through Dalmia Cement (Bharat) and in the east through a

11 sister company OCL, it is planning to deepen its presence in these regions and also establish its footprint in North India. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long Term Gains. Industry Overview India is the world's second largest producer of cement after China, with cement companies adding nearly eight million tonnes (MT) capacity in April 2009, taking the total installed capacity to 219 MT. A few of the leading manufacturers are the UltraTech/Grasim combine, Dalmia Cements, India Cements, Holcim etc. With the boost given by the government to various infrastructure projects, road networks and housing facilities, growth in the cement consumption is anticipated in the coming years. According to Jyotiraditya Scindia, Minister of State, Ministry of Commerce and Industry, cement production could rise to MT in FY11 and touch MT in FY12. With almost total capacity utilisation levels in the industry, cement despatches have maintained a 10 per cent growth rate. Total despatches grew to 170 MT during as against 155 MT in Moreover, cement despatches were MT in July 2009, showing a growth of 9.92 per cent as compared to MT in July During July 2009, cement production was MT, registering a growth of per cent as compared to MT in July Between April to July 2009, cement production totaled MT while cement despatches totaled MT. Technological change Continuous technological upgrading and assimilation of latest technology has been going on in the cement industry. Presently, 93 per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology and only 7 per cent of the capacity is based on old wet and semi-dry process technology. There is tremendous scope for waste heat recovery in cement plants and thereby reduction in emission level. New Investments JSW Cement, part of the OP Jindal Group, plans to set up cement units near the group s steel plants at Kurnool, Andhra Pradesh, and Vijayanagar, Karnataka. The units which will have a combined capacity of 5.5 MT per annum will be set up at a cost of US$ million.

12 Anil Ambani Group company Reliance Infrastructure will invest US$ 2.1 billion to set up cement plants with a total capacity of 20 MT per annum over the next five years. Reliance Cementation, an Anil Dhirubhai Ambani Group (ADAG) company, plans to set up a 5 MT integrated cement plant in Yavatmal district of Maharashtra at a cost of US$ million. Jaiprakash Associates Ltd has inked a MoU with state-owned Assam Mineral Development Corporation Limited (AMDC) for setting up a 2 MT per annum capacity cement plant at an estimated cost of US$ million. Iron ore mining firm Rungta Mines (RML), the flagship company of SR Rungta group, plans to set up a one million tonne cement plant in Orissa with an investment of around US$ 123 million. Mergers and Acquistions (M&As) Holcim strengthened its position in India by increasing its holding in Ambuja Cement from 22 per cent to 56 per cent through various open market transactions with an open offer for a total investment of US$ 1.8 billion. Moreover, it also increased its stake in ACC Cement with US$ 486 million, being the single largest acquirer in the cement sector. Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund and Emerging Market Fund have together bought around 7.5 per cent in India's thirdlargest cement firm, India Cements (ICL), for US$ million. Cimpor, the Portugese cement maker, paid US$ million for Grasim Industries' per cent stake in Shree Digvijay Cement. CRH Plc, the world's second biggest maker and distributor of building materials, acquired a 50 per cent stake in My Home Industries Ltd for almost US$ million. Vicat SA, a French cement maker acquired a 6.67 per cent stake in Hyderabad-based Sagar Cement for US$ million. Government Initiatives Government initiatives in the infrastructure sector, coupled with the housing sector boom and urban development, continue being the main drivers of growth for the Indian cement industry. Increased infrastructure spending has been a key focus area over the last five years indicating good times ahead for cement manufacturers. The government has increased budgetary allocation for roads under National Highways Development Project (NHDP). Appointing a coal regulator is looked upon as a positive move as it will facilitate timely and proper allocation of coal (a key raw material) blocks to the core sectors, cement being one of them.

13 Keeping in mind the global meltdown which is impacting the cement companies in India, the government re-imposed the counter-veiling duty (CVD) and special CVD on imported cement in January. This is likely to provide a level playing field to domestic companies. Road Ahead According to a report by the ICRA Industry Monitor, the installed capacity is expected to increase to 241 MTPA by FY 2010-end. India's cement industry is likely to record an annual growth of 10 per cent in the coming years with higher domestic demand resulting in increased capacity utilisation. Moreover, according to the Centre for Monitoring Indian Economy (CMIE), cement production is expected to grow by 8.1 per cent and demand for the same is likely to rise by a healthy per cent in FY Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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ACC LIMITED (ASSOCIATED CEMENT COMPANIES)

ACC LIMITED (ASSOCIATED CEMENT COMPANIES) BUY CMP: Rs.730.10 Date: 18 Nov,2009 Key Ratios: Particulars CY07 A CY08A CY09E CY10E OPM(%) 29 25 33 32 NPM(%) 20 14 20 19 ROE(%) 34 23 26 22 ROCE(%) 38 31 36