Heidelberg Cement (MYSCEM) 113

Result Update Rating matrix Rating : Hold Target : 124 Target Period : 15-18 months Potential Upside : 1% What s Changed? Target Changed from 135 to 124 EPS FY17E Changed from 4.1 to 3.8 EPS FY18E Changed from 6. to 5.7 Rating Unchanged Quarterly Performance Q2FY17 Q2FY16 YoY (%) Q1FY17 QoQ (%) Revenue 384.2 396.4-3.1 461.8-16.8 EBITDA 59.8 44. 36. 79.9-25.1 EBITDA (%) 15.6 11.1 448 bps 17.3-173 bps PAT 16.4 2. 727.3 26.1-37.3 Key Financials FY15*# FY16 FY17E FY18E Net Sales 211.2 1628.1 1732. 1959.5 EBITDA 289. 21.5 274.4 333.3 Net Profit 59.6 38.5 87.1 128.7 EPS ( ) 2.6 1.7 3.8 5.7 *FY15 includes profit of 6.3 crore on sale of Raigarh unit # 15 montths period due to change in financial year Valuation summary FY15*# FY16 FY17E FY18E PE (x) 43. 66.5 29.4 19.9 Target PE (x) 47.2 72.9 32.3 21.8 EV to EBITDA (x) 11.6 17.1 12.5 9.7 EV/Tonne(US$) 13 111 16 1 Price to book (x) 2.9 2.9 2.6 2.3 RoNW (%) 6.8 4.3 8.9 11.7 RoCE (%) 8.4 6. 9.4 12.6 Stock data Particular Amount Mcap 2561 crore Debt (FY16) 154 crore Cash & Invest (FY16) 8 crore EV 367 crore 52 week H/L 15 / 6 Equity cap 226.6 crore Face value 1 Price performance (%) 1M 3M 6M 12M Heildelberg Cem -11.2-1.4 22.2 65.6 India Cement -17.2 7.8 47.8 67.9 JK Cement -14.4 9.3 47.7 26.5 JK Lakshmi Cem -16.5-5.4 22.2 14.6 Research Analyst Rashesh Shah rashes.shah@icicisecurities.com Devang Bhatt devang.bhatt@icicisecurities.com Pain to persist over medium term... November 16, 216 Heidelberg Cement (MYSCEM) 113 Heidelberg Cement s Q2FY17 results were lower than our estimates on the revenue and profitability front. Revenues (excluding excise duty) declined 3.1% YoY to 384.2 crore (below I-direct estimate of 419.7 crore) led by 5.7% YoY decline in volumes to 1 MT (vs. I- direct estimate of 1.1 MT) while realisation increased 2.7% YoY to 3842.2 (vs. I-direct estimate of 3815.) EBITDA margin increased from 11.1% to 15.6% (vs. I-direct estimate of 16.8%) in Q2FY17 mainly led by decline in RM expenses and lower power and fuel cost. EBITDA/tonne increased 43.7% YoY to 598/tonne (vs. I-direct estimate of 64/tonne) Heidelbeg s net profit increased from 2. crore to 16.4 crore mainly led by lower interest expenses (down 14.5% YoY) and higher other income (up 4.% YoY) Demonetisation to impact volume and realisation in near term We expect cement demand and realisation to remain subdued in the next few quarters mainly led by the recent demonetisation. However, in the long term, we expect cement demand to improve led by higher government spending on infra and Seventh Pay Commission. This coupled with absence of new capacity addition in the central region is expected to keep utilisation above 85%. Further, consolidation of cement capacity in the region is expected to bring pricing discipline in the region. Cost efficiency to drive EBITDA/t We expect improving utilisation (from 82.% in FY16 to 9.% in FY18E) to lead to operating leverage benefit of ~ 25-3/t. Further, the 12 MW waste heat recovery plant commissioned by the company will help the company in reducing power cost by ~1-2/t and lower dependence on grid power. In addition, we expect freight cost to reduce by ~ 45-5/tonne led by installation of a conveyor belt between its limestone reserves and clinker units. Considering these benefits, we expect EBITDA/t to improve from 474/t in FY16 to 689/t in FY18E. Healthy free cash flow generation to help reduce debt significantly With limited capex (due to no major capacity addition) and improving margins we expect the company to generate free cash flow of 37 crore over the next two years. We believe a significant portion of this will be used to reduce debt. As a result, we expect the company s debt to equity to decline to.6x in FY18E from 1.2x in FY16. Near term challenges to keep growth under check; maintain HOLD No major capacity addition coupled with pressure on volume & realisation due to recent demonetisation is expected to limit revenue growth in the near term. However, from a long term prospective, we expect revenues to improve led by higher government spending on infra and Seventh Pay Commission. Also, we expect EBITDA margin to improve from 12.6% to 16.6% in FY18E mainly led by operating leverage benefit and cost efficiency. Further, steady cash flow is expected to help reduce debt in FY16-18E. Hence, although we remain positive on the stock from a long term perspective, near term challenges prompt us to maintain HOLD rating on the stock with a revised target price of 124 (i.e. valuing at 1.5x FY18E EV/EBITDA, $11/tonne on capacity of 5.4 MT). ICICI Securities Ltd Retail Equity Research

Variance analysis Q2FY17 Q2FY17E Q2FY16 YoY (%) Q1FY17 QoQ (%) Comments Net Sales 384.2 419.7 396.4-3.1 461.8-16.8 Other Incomes 13.5 9.7 9.7 4. 9.6 41. Raw Material Expenses 72.8 93.5 8.3-9.3 85.1 195.6 Employee Expenses 27. 24.8 24.7 9.2 26.6 1.5 Change in stock -9.6. -4.8 NA 32.1 NA Revenue decline was led by 5.7% YoY dip in volumes, while realisation improved by 2.7% YoY Lower pet coke prices and commisioning of 12MW WHRMS led to fall in power & fue expenses Power and fuel 16.2 11.8 117.8-9.8 12.7 3.4 Freight 53.3 56.1 53.5 -.2 62.6-14.8 Others 74.7 73.2 81.1-7.9 72.7 2.6 EBITDA 59.8 7.4 44. 36. 79.9-25.1 EBITDA Margin (%) 15.6 16.8 11.1 448 bps 17.3-173 bps Decline in raw material and power cost led to rise in EBITDA margin Interest 23.5 24.6 27.5-14.5 24.6-4.7 Depreciation 25. 23.5 22.9 8.9 24.7 1.2 PBT 24.9 32. 3.3 664.4 4.2-38. Total Tax 8.5 11.2 1.3 567.2 14.1-39.3 Adjusted PAT 16.4 2.8 2. 727.3 26.1-37.3 Better performance at operating level and lower interest expenses led to increase in PAT Key Metrics Volume (MT) 1. 1.1 1.6-5.7 1.22-18. Volumes impacted by heavy rainfall Realisation ( ) 3,842 3,815 3,74 2.7 3,785 1.5 Healthy pricing scenario in central region led to higher realisation EBITDA per Tonne ( ) 598 64 415 44.2 655-8.7 EBITDA/tonne improved due to lower power & fuel and RM cost/tonne Change in estimates FY17E FY18E ( Crore) Old New % Change Old New % Change Comments Revenue 1,866. 1,777.1-4.8 2,89. 2,3.5-4.1 We have revised FY17E revenue estimates downwards due to demonetisation impact EBITDA 31.5 274.4-9. 357. 333.3-6.6 EBITDA Margin (%) 16.2 15.4-72 bps 17.1 16.6-46 bps We expect EBITDA margin to improve led by cost rationalisation and operating leverage benefit PAT 91.8 87.1-5.1 136. 128.7-5.4 EPS ( ) 4.1 3.8-5.1 6. 5.7-5.4 Assumptions Current Earlier Comments FY15 FY16 FY17E FY18E FY17E FY18E Volume (MT) 5.3 4.4 4.5 4.8 4.8 5.2 Volumes to improve from FY17E onwards Realisation ( ) 3,89 3,667 3,875 4,49 3,87 3,955 EBITDA per Tonne ( ) 547 474 614 689 628 69 We expect EBITDA/tonne of 689 in FY18E ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis Regional presence Others 6% Substantial portion of company s revenues from central region Heidelberg Cement India sells ~94% of total cement volumes in the central region, a favourable region in India considering the demandsupply scenario. The company sells the rest of the volume in the western and southern regions. Its share in the central region has gone up from 75% to over 94% led by the recent capacity expansion. With no major capacity addition on the cards, we believe it will likely remain a central regional player over the next two or three years. Demonetisation to impact volume and realisation in the near term Central 94% We expect cement demand and realisation to remain subdued in the near term mainly led by the recent demonetisation. However, in the long term we expect cement demand to improve led by higher government spending on infra, healthy monsoon and Seventh Pay Commission. This coupled with absence of new capacity addition in the central region is expected to keep utilisation above 85%. Further, consolidation of cement capacity in the region is expected to bring pricing discipline in the region. Cost efficiency to drive margins The company doubled its cement capacity to 6 MT from 3 MT in CY13 at a total capex of 1,57 crore. However, due to subdued demand, these major expansions took a heavy toll on its profitability with the company reporting a net loss of 41 crore in CY13 (vs. net profit of 31 crore in CY12) led by high interest and depreciation. However, with improving utilisation along with stabilisation of new capacity, its margins have improved. We expect its margin to climb over 16.6% by FY18E. Exhibit 1: Revival in demand to drive utilisation 7. 6. 5. 4. 3. 2. 1. - 6. 94.7 5.4 5.4 5.4 5.4 5.4 88. 82.4 89.6 3.1 3.1 78. 82.8 66.1 48.4 CY1 CY11 CY12 CY13 FY15 FY16 FY17E FY18E 1 9 8 7 6 5 4 Capacity (In MT) - LHS Capacity utilisation (%) - RHS Healthy free cash flow generation to help reduce debt significantly With limited capex (due to no major capacity addition) and improving margins we expect the company to generate free cash flow of 37 crore over the next two years. We believe a significant portion of this will be used to reduce debt. As a result, we expect the company s debt to equity to decline to.6x in FY18E from 1.2x in FY16. Large global promoter Heidelberg s Indian operations have the support of the rich experience of the German promoter (Heidelberg AG), a Germany-based company, which is one of the world s largest cement manufacturers with consolidated revenue of 13 billion in 214. This, we believe, would provide huge potential to grow inorganically over the longer run. ICICI Securities Ltd Retail Equity Research Page 3

Improvement in realisation and utilisation to drive revenues Utilisation has improved from 66.1% in CY13 to 82.4% in FY16. Going forward, we expect utilisation to further improve to 9.% in FY18E. We expect volumes to grow at a CAGR of 4.4% in FY16-18E led by improvement in demand from the private and public sector. Further, we expect pricing to improve in the central region. Consequently, we expect sales to increase at a CAGR of 9.7% over FY16-18E. Exhibit 2: Expect revenue at 1,96 crore by FY18E Exhibit 3: Cement capacity 2,5 2, 1,5 1, 111 1372 211 1628 1732 196 State Region MT Ammasandra, Tumkur Karnataka South.7 Village Imlai, Damoh Madhya Pradesh Central 2. Village Madora, Jhansi Uttar Pradesh Central 2.7 Gadab, Taluka Pen, Raigad Maharashtra West.7 Total Capacity 5.4 5 - CY12 CY13 FY15* FY16 FY17E FY18E *15 months period Exhibit 4: Volume expected at 4.8 MT by FY18E Exhibit 5: Realisation to improve in FY16-18E Million Tonnes 6. 5. 4. 3. 2. 1.. 4.84 5.28 4.47 4.44 3.61 2.91 CY12 CY13 FY15* FY16 FY17E FY18E 42 4 38 36 34 449 379 38 389 3875 3667 CY12 CY13 FY15* FY16 FY17E FY18E 15 1 5-5 Sales Volumes Realisation ( /tonne) -LS Growth (%) -RS Exhibit 6: Q2FY17 volume down 5.7% YoY Exhibit 7: Q2FY17 realisation increases 2.7% YoY Million Tonne 1.5 1..5. 1.1 1.9 1.18 1.6 1.9 1.11 1.22 1. 3 2 1-1 (%) /tonne 5 4 3 2 373 37 366 374 ` 3695 3578 3785 3842 2 1 Q4FY15 Q5FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17-1 Q4FY15 Q5FY15 (%) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Sales volumes -LHS Growth (%) -RHS Realisation-LHS Growth (%) -RHS ICICI Securities Ltd Retail Equity Research Page 4

Margins to improve, going forward, on economies of scale Higher utilisation and steps like overhead belt conveyor and WHRMS will drive cost downwards, going forward. Consequently, we expect margins to improve 4 bps to 16.6% in FY18E. Exhibit 8: Expect EBITDA/tonne of 689/tonne in FY18E 75 65 55 45 35 25 15 5-5 256 26 547 474 614 689 CY12 CY13 FY15* FY16 FY17E FY18E EBITDA/Tonne Exhibit 9: Margins to improve led by improvement in utilisation (%) 15. 14.4 16.6 12.6 15.4 1. 5. 6.2 6.8 6.3. CY11 CY12 CY13 FY15* FY16 FY17E FY18E EBITDA Margin (%) Exhibit 1: Q2FY17 EBITDA per tonne at 598/tonne 7 6 5 4 3 2 1 482 Q4FY15 576 Q5FY15 378 415 Q1FY16 Q2FY16 528 Q3FY16 579 Q4FY16 655 Q1FY17 598 Q2FY17 Exhibit 11: Pick-up in margins expected, going forward, led by improvement in capacity utilisation and cost efficiency 2 15 1 5 Q4FY15 12.9 Q5FY15 15.6 Q1FY16 1.3 11.1 Q2FY16 Q3FY16 14.3 Q4FY16 16.2 17.3 Q1FY17 Q2FY17 15.6 EBITDA/tonne ( ) EBITDA Margin (%) Expect sharp rebound in net profit growth by FY18E After witnessing a loss in CY13, mainly due to higher interest cost on debt due to expansion, we expect the company to report CAGR of 82.7% in FY16-18E. Exhibit 12: Profitability trend 15 129 1 crore 1 5-5 87 5. 6.6 2.8 6 2.4 3. 29 3. 31 39 (3.) CY11 CY12 CY13 FY15* FY16 FY17E FY18E -41 5-5 (%) Net profit - LS Net profit margin -RS ICICI Securities Ltd Retail Equity Research Page 5

Outlook and valuations No major capacity addition coupled with pressure on volume & realisation due to recent demonetisation is expected to limit revenue growth in the near term. However, from a long term prospective we expect revenues to improve led by higher government spending on infra and Seventh Pay Commission. In addition, we expect EBITDA margin to improve from 12.6% to 16.6% in FY18E mainly led by operating leverage benefit and cost efficiency. Further, steady cash flow is expected to help reduce debt in FY16-18E. Hence, although we remain positive on the stock from a long term perspective, near term challenges prompt us to continue to maintain HOLD rating with a revised target price of 124 (i.e. valuing at 1.5x FY18E EV/EBITDA, $11/tonne on capacity of 5.4 MT). Exhibit 13: Assumptions per tonne CY12 CY13 FY15* FY16 FY17E FY18E Sales Volume (mtpa) 2.9 3.6 5.3 4.4 4.5 4.8 Net Realisation 379 38 389 3667 3875 449 Total Expenditure 3534 354 3262 3193 3261 336 Stock Adjustment -88-77 -52-21 5 Raw material 178 143 841 772 72 75 Power & Fuel 155 177 165 118 128 114 Employees 318 288 253 238 253 255 Freight 526 58 519 523 528 53 Others 645 63 636 663 682 685 EBITDA per Tonne 256 26 547 474 614 689 * 15 months Exhibit 14: One year forward EV/EBITDA 14 12 1 ( crore) 8 6 4 2 Nov-1 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 EV 3.x 25.x 2.x 15.x 5.x Exhibit 15: Valuation Sales Growth EPS Growth PE EV/Tonne EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) ($) (x) (%) (%) CY13 1364.8 23.9-1.8-232.2 NA 181 44. -4.9 -.5 FY15 211.2 47.4 2.6 NA 43. 13 11.6 6.8 8.4 FY16 1628.1-19. 1.7-35.1 66.5 112 17.2 4.3 7.1 FY17E 1732. 6.4 3.8 125.3 29.4 16 12.5 8.9 9.4 FY18E 1959.5 13.1 5.7 47.8 19.9 1 9.7 11.7 12.6 ICICI Securities Ltd Retail Equity Research Page 6

Recommendation history vs. consensus estimate ( ) 15 13 11 9 7 5 3 1 Jan-15 Mar-15 Jun-15 Aug-15 Nov-15 Jan-16 Apr-16 Jun-16 Aug-16 Nov-16 1. 9. 8. 7. 6. 5. 4. 3. 2. 1.. (%) Price Idirect target Consensus Target Mean % Consensus with BUY Source: Bloomberg, Company, ICICIdirect.com Research Key events Date May-8 Jul-8 Oct-9 Jun-1 Feb-13 Event Board approves amalgamation of Indorama Cement and Heidelberg Cement India with Mysore Cements. Total capacity of the merged entity stands at 3.7 MTPA The Securities and Appellate Tribunal (SAT) dismisses the Securities and Exchange Board of India's (Sebi) directive on the structure of Heidelberg's open offer for Mysore Cement shares, which involved a non-compete fee for promoters. Thus, it clears the way for an open offer The board of HeidelbergCement India approves setting up of an expansion project at its plants at Damoh (Madhya Pradesh) and Jhansi (Uttar Pradesh) to increase cement production capacity from the existing 1.8 MTPA to 4.7 MTPA The board of HeidelbergCement India approves increasing the cement production at Raigad unit of the company in Maharashtra by.625 MTPA HeidelbergCement India successfully completes and commissions the expansion project at Damoh (MP). This comprises increase of clinker manufacturing capacity at its unit Narsingarh, district Damoh from 1.2 to 3.1 MTPA and increase of cement capacity at Imlai, district Damoh from 1. to 2. MTPA Feb-13 Jan-14 Feb-16 Board approves setting up of a waste heat recover based power generation plant at its clinkerisation unit at Narsingarh, district Damoh (MP). The proposed plant will produce approximately 12.15 MW of power HeidelbergCement India Ltd completes the sale and transfer of its cement grinding facility at Raigad, Maharashtra to JSW Steel on a slump sale basis in accordance with business transfer agreement executed between the company and JSW Steel on October 5, 213 Commisionsed 12 MW WHRMS Top 1 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 1 Heidelbergcement AG 3-Jun-16 69.4 157.2. Promoter 69.39 69.39 69.39 69.39 69.39 2 First State Investments (HK) Ltd. 3-Jun-16 1.8 4.1.1 FII 8.67 1.3 7.61 8.9 8.12 3 Stewart Investors 31-Aug-16 1.7 3.9.1 DII 7.42 6.32 9.16 9.31 9.71 4 Life Insurance Corporation of India 3-Jun-16 1.6 3.6. Others 14.52 14.26 13.84 13.21 12.78 5 HDFC Standard Life Insurance Company Limited 3-Jun-16 1.4 3.1 -.1 6 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Aug-16 1.4 3.1 -.1 7 J.P. Morgan Asset Management (Hong Kong) Ltd. 3-Jun-16 1.3 3.. 8 Birla Sun Life Asset Management Company Ltd. 3-Sep-16 1.2 2.8. 9 Dimensional Fund Advisors, L.P. 31-Aug-16 1. 2.3. 1 Caisse de Depot et Placement du Quebec 3-Jun-16 1. 2.3 1.4 Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Caisse de Depot et Placement du Quebec 2.5 1.4 Jupiter Asset Management Ltd. -2.5-2. First State Investments (HK) Ltd..2.1 HDFC Standard Life Insurance Company Limited -.2 -.1 Alquity Investment Management Ltd..2.1 Franklin Templeton Asset Management (India) Pvt. Ltd. -.2 -.1 Stewart Investors.2.1 Sahara Asset Management Company Pvt. Ltd... Birla Sun Life Asset Management Company Ltd... Goldman Sachs Asset Management (India) Private Ltd... Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 7

Financial summary Profit and loss statement Crore (Year-end March) FY15* FY16 FY17E FY18E Total operating Income 2,11.2 1,628.1 1,732. 1,959.5 Growth (%) 47.4-19. 6.4 13.1 Raw material 416.1 333.4 344.3 363. Power & Fuel 562.4 452. 459.3 551.8 Employees 133.8 15.6 113.2 123.4 Freight 274.3 232.4 236. 256.5 Others 335.6 294.2 34.9 331.5 Total Operating Exp. 1,722.2 1,417.6 1,457.7 1,626.2 EBITDA 289. 21.5 274.4 333.3 Growth (%) 234.6-27.2 3.3 21.5 Depreciation 137.5 94. 1.8 16.5 Interest 138.9 18.8 95.1 74.3 Other Income 46.9 42.5 45.1 44. Exceptional items -6.3... PBT 119.8 5.3 123.6 196.4 Total Tax 6.2 11.7 36.5 67.8 PAT 59.6 38.5 87.1 128.7 Growth (%) NA -35.3 126. 47.8 EPS ( ) 2.6 1.7 3.8 5.7 Source: ICICIdirect.com Research * 15months Balance sheet Crore (Year-end March) FY15* FY16 FY17E FY18E Liabilities Equity Capital 226.6 226.6 226.6 226.6 Reserve and Surplus 644.9 668.9 75.7 874. Total Shareholders funds 871.5 895.5 977.3 1,1.6 Total Debt 927.8 1,57.3 877.3 697.3 Deferred Tax Liability 65.2 74.9 74.9 74.9 Minority Interest / Others.... Total Liabilities 1,864.6 2,27.7 1,929.4 1,872.8 Assets Gross Block 2,673.2 2,876.9 3,72.9 3,212.9 Less: Acc Depreciation 879.4 973.4 1,74.2 1,18.8 Net Block 1,793.8 1,93.5 1,998.7 2,32.1 Capital WIP 127.4 56.1.. Total Fixed Assets 1,921.2 1,959.5 1,998.7 2,32.1 Investments.... Inventory 191. 178.2 214.7 229.8 Debtors 19.1 25.8 21.7 32. Loans and Advances 351.4 395.1 488.2 334.8 Other Current Assets 19.8 82.8 62.7 54.8 Cash 146.2 7.7 14.3 16.3 Total Current Assets 898.5 689.5 81.6 667.7 Creditors 743.5 393.4 622. 526.8 Provisions 211.6 228. 248.8 3.3 Total Current Liabilities 955.1 621.4 87.9 827.1 Net Current Assets -56.7 68.1-69.3-159.4 Application of Funds 1,864.6 2,27.7 1,929.4 1,872.8 * 15months Cash flow statement Crore (Year-end March) FY15* FY16 FY17E FY18E Profit after Tax 59.6 38.5 87.1 128.7 Add: Depreciation 137.5 94. 1.8 16.5 (Inc)/dec in Current Assets -62.1 7.4-15.5 135.9 Inc/(dec) in CL and Provisions 396.3-333.7 249.5-43.8 CF from operating activities 531.3-13.8 331.9 327.4 (Inc)/dec in Investments.... (Inc)/dec in Fixed Assets -16.2-132.3-14. -14. Others 6.3 9.7.. CF from investing activities -45.9-122.7-14. -14. Issue/(Buy back) of Equity.... Inc/(dec) in loan funds -431.9 129.4-18. -18. Dividend paid & dividend tax.. -5.3-5.3 Inc/(dec) in Sec. premium.... Others -21.4-14.5.. CF from financing activities -453.3 114.8-185.3-185.3 Net Cash flow 32.1-138.6 6.6 2.1 Opening Cash 114.1 146.2 7.7 14.3 Closing Cash 146.2 7.7 14.3 16.3 * 15months Key ratios (Year-end March) FY15* FY16 FY17E FY18E Per share data ( ) EPS 2.6 1.7 3.8 5.7 Cash EPS 8.7 5.8 8.3 1.4 BV 38 4 43 49 DPS...2.2 Cash Per Share 6.5.3.6.7 Operating Ratios (%) EBITDA Margin 14.4 12.9 15.8 17. PAT Margin 3. 2.4 5. 6.6 Inventory days 35.4 41.4 41.4 41.4 Debtor days 4.5 5. 5. 5. Creditor days 13.1 127.4 17. 17. Return Ratios (%) RoE 6.8 4.3 8.9 11.7 RoCE 8.4 6. 9.4 12.6 RoIC 9.5 5.9 9.1 12.2 Valuation Ratios (x) P/E 43. 66.5 29.4 19.9 EV / EBITDA 11.6 17.1 12.5 9.7 EV / Net Sales 1.7 2.2 2. 1.7 Market Cap / Sales 1.3 1.6 1.5 1.3 Price to Book Value 2.9 2.9 2.6 2.3 Solvency Ratios Debt/EBITDA 3.2 5. 3.2 2.1 Debt / Equity 1.1 1.2.9.6 Current Ratio.9 1.1.9.8 Quick Ratio.8 1.1.9.8 * 15months ICICI Securities Ltd Retail Equity Research Page 8

ICICIdirect.com coverage universe (Cement) CMP M Cap EPS ( ) EV/EBITDA (x) EV/Tonne ($) RoCE (%) RoE (%) Company ( ) TP( ) Rating ( Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E ACC* 1345 176 Buy 25,278 31.3 46.8 61.2 2.5 16.2 13.3 131 118 114 6. 9.8 11.9 7. 9.9 12. Ambuja Cement* 21 28 Buy 32,55 5.2 5.8 6.4 25.6 21. 18.2 164 135 135 7.9 11. 12.8 7.8 1.9 11.5 UltraTech Cem 337 46 Buy 92,473 79.3 14.3 127.8 22. 17.5 14.7 236 224 217 1.8 13.2 15.4 1.5 12. 13.5 Shree Cement 142 185 Hold 49,416 165 448 596 37.6 18.3 13.5 35 283 282 5.9 16.4 21.3 9.1 2.1 21.4 Heidelberg Cem 113 124 Hold 2,81 1.7 3.8 5.7 17.1 12.5 9.7 111 16 1 6. 9.4 12.6 4.3 8.9 11.7 India Cement 119 19 Buy 3,656 4.4 8.6 5.8 8.4 6.7 7.3 71 69 67 8.4 1.9 8.8 4.1 6.9 4.5 JK Cement 788 99 Hold 5,51 15.4 33.5 45. 15.8 11.3 1.1 11 15 16 8.9 12.3 13.7 6.3 12.8 14.4 JK Lakshmi Cem 379 55 Buy 4,461 1.1 7. 14.1 22.3 14.7 1.1 122 13 74 3.4 7.7 12.2 1. 5.9 1.7 Mangalam Cem 257 365 Buy 686-8.3 17.3 27.5 3.3 7.8 5.6 52 41 38 1.6 11.6 16. NA 8.9 12.5 SFCL 89 115 Hold 2,331 4.1 5.9 8.4 7.7 6.7 5.1 164 164 118 12. 15.7 19. 12.3 15.3 18.4 ICICI Securities Ltd Retail Equity Research Page 9

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1 st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 1

ANALYST CERTIFICATION We /I, Rashesh Shah, CA, and Devang Bhatt, PGDBM, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Rashesh Shah, CA, and Devang Bhattt, PGDBM, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. 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