Date: 13 th January, 216 Panyam Cements and Mineral Industries Limited Stock Performance Details Shareholding Details September 215 Current Price : ` 74.35^ Face Value : ` 1 per share 52 wk High / Low : ` 14. / 3.65 Total Traded Volume : 1,358 shares^ Market Cap : ` 119.1 crore^ Sector : Cement & Cement Products EPS (H1 FY16) : ` 5.87 per share Equity Share Capital : ` 16.2 crore P/E (TTM) : 17.25 (x)^ P/BV (TTM) : 8.35 (x)^ Financial Year End : 1 st April 31 st March BSE Scrip Name : PANCM BSE Scrip Code : 5322 ^ as on 12 th January, 216 Particulars Shareholding Nos. (%) Promoter & Promoter Group Holding 83,67,879 52.24 Total Institutional Holdings (FIIs & DIIs) 36,47,495 22.77 Public Holdings 4,2,765 24.99 Total 1,6,18,139 1. Background Panyam Cements & Mineral Industries Limited (PCMIL) was established in the year 1955 in Kurnool District, Andhra Pradesh. The Company is engaged in the business of ordinary Portland cement, Portland Pozzolana cement and Portland slag cement. PCMIL started initially with an installation of one kiln with a capacity of 2 Tons Per Day (TPD) and later two more kilns with a capacity of 3 TPD and 6 TPD respectively were added. Over the years, the wet process kilns were converted into dry process and the capacities have been increased to a level of 2,2 TPD by 1997, running three kilns. PCMIL s products include OPC 53 Grade cement (Panyam Prestige), OPC 43 Grade cement (Super Panyam), Portland Pozzolana Cement (Panyam Power) and Panyam PSC. Its cement products are used in high-rise buildings, residential, commercial and industrial complexes, roads, runways, bridges, irrigation and power projects, cement tanks, asbestos cement products, concrete roads and Ferro-cement concrete elements, flyovers, plain cement concrete (PCC) solid and hollow blocks, heavy defense structures, such as bunkers and pre-stressed concrete structures. The Company markets its products to Rayalaseema, Andhra Pradesh, North and East Interior Karnataka, and Northern parts of Tamil Nadu and Kerala. Its cement work is carried out at Kurnool District in Andhra Pradesh. An Initiative of the BSE Investors Protection Fund1
Financial Snapshot Particulars Standalone (` Million) Income Statement H1 FY16 H1 FY15 Income from Operations 1,193.4 82.4 Y-o-Y Growth (%) 1,348.3 (82.3) EBITDA 155.7 (76.8) Y-o-Y Growth (%) 32.7 9.5 EBITDA Margin (%) 13. (93.2) Net Profit 88.5 (131.4) Y-o-Y Growth (%) 167.4 9. NPM (%) 7.4 (159.5) Balance Sheet Fixed Assets 939.5 1,8.1 Cash and Bank Balances 29.6 25.2 Inventories 227.9 191.1 Net Working Capital (871.3) (471.) Net Worth 238.5 167. Balance Sheet Ratios ROCE (%) 34.6 (5.) RONW (%) 37.1 (78.7) Source:Capitaline From the Research Desk of LKW s Gurukshetra On a Standalone basis, Revenue from Operations stood at Rs. 1,193.4 million in H1 FY16which is an increase from Rs. 82.4 million reported in H1 FY15. The performance of the Company has improved during the period under review due to favourable market conditions and higher quantity of manufacture of slag cement. Material Cost stood at Rs. 268.4 million in H1 FY16 as compared to Rs. 12.3 million in H1 FY15. Employee Benefit Expenses stood at Rs. 55.6 million in H1 FY16 as compared to Rs. 33.1 million in H1 FY15. Power & Fuel Expenses stood higher at Rs. 415.8 million in H1 FY16 as compared to Rs. 13.3 million in H1 FY15. Other Expenses increased to Rs. 267.2 million in H1 FY16 from Rs. 24.8 million in H1 FY15. PCMIL reported an Operating Profit during H1 FY16 on account of higher Topline and stood at Rs. 155.7 million from an Operating Loss of Rs. 76.8 million in H1 FY15. Depreciation Cost increased to Rs. 3.9 million in H1 FY16 from Rs. 28.9 million in H1 FY15. Interest Cost increased to Rs. 68.1 million in H1 FY16 from Rs. 48.6 million in H1 FY15. Other Income for H1 FY16increased by over 1% to Rs. 46.3 million from Rs. 22.8 million in H1 FY15. In line with the growth witnessed at the EBIDTA level, Net Profit for H1 FY16 stood at Rs. 88.5 million as compared to a Net Loss of Rs. 131.4 million in H1 FY15. An Initiative of the BSE Investors Protection Fund2
Total Debt comprising Short Term Borrowings and Long Term Borrowings reduced from Rs. 954.7 million in H1 FY15 to Rs. 5.9 in H1 FY16. Inventories increased by 19.3% y-o-y to Rs. 227.9 million in H1FY16 from Rs.191.1 million reported in H1FY15. Whereas, Debtors increased by 74.6% y-o-y to Rs. 198 million in H1 FY16 from Rs. 113.3 million in H1 FY15. Short Term Loans and Advances of the Company comprising advance to suppliers, employees, contractors and transporters, advance excise duties, income tax and TDS increased from Rs. 372.7 million in H1 FY15 to Rs. 439.8 million in H1 FY16. Performance on the Bourses % 33 3 27 24 21 18 15 12 9 6 3 Stock Performance Panyam Cements and Mineral Industries as on 11th January, 216 BSE Small Cap Peer Comparison The following table gives a snapshot view of the Company s performance vis-à-vis its closest peers for H1 FY16. (` In millions) Particulars Panyam Cements and Mineral Industries Kalyanpur Cements Shiva Cement Income from Operations 1,193.4 697.2 31.8 EBIDTA 155.7 (312.1) 49.5 Net Profit 88.5 (37.9) 5.6 EBIDTA Margins (%) 13. (44.8) 16.4 PAT Margins (%) 7.4 (53.2) 1.9 Book Value Per Share 8.9 (127.2) 4.9 P/E (x) 15.83^.^ 35.19^ P/BV (x) 7.66^.^.69^ RONW (%) 37.1 (11.2).6 Source: Capitaline; Financials on Standalone Basis; ^ On a Standalone Basis as on September, 215 (TTM Basis) An Initiative of the BSE Investors Protection Fund3
About the Industry 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. One of the important factors which aids the growth of this sector is the ready availability of raw materials for making cement, such as limestone and coal. 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 55-6 million tonnes per annum (MTPA) by 225. The housing sector is the biggest demand driver of cement, accounting for about 67% of the total consumption in India. The other major consumers of cement include infrastructure at 13%, commercial construction at 11% and industrial construction at 9%. 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 8% 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 217. The country's per capita consumption stands at around 19 kg. The Indian cement industry is dominated by a few companies. The top 2 cement companies account for almost 7% of the total cement production of the country. A total of 188 large cement plants together account for 97% of the total installed capacity in the country, with 365 small plants account for the rest. Of these large cement plants, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu. The cement sector in India has seen many investments and developments in recent times on the back of growing demand, due to increased construction and infrastructure activities. Management Outlook The Government of India plans to increase investment in infrastructure to the tune of US$ 1 trillion and increase the industry's capacity to 15 MT in the 12th Five Year Plan. The Government of India has decided to adopt cement instead of bitumen for the construction of all new road projects on the grounds that cement is more durable and cheaper to maintain than bitumen in the long run. India could become the main exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world in the next 1 years. 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. PCMIL expects the demand for cement to grow on account of several initiatives taken by the Government in terms of friendlier laws, lower taxation, and increased infrastructure spending, shall boost the sector and take India s economy forward along with it. Also, its cement plant being strategically located with high quality limestone mines very near to the plant can cater to the neighbouring States of Tamil Nadu, Karnataka, Goa and Kerala where the realizations are better. The Company has also made arrangements to augment its working capital by getting approval of working capital from the bank and is looking forward to reach optimum operational levels. Further, it has enhanced its capacity by modernization of Kiln No.1 whereby the existing capacity of the kiln is enhanced from 55 Metric Tonnes per day to 1,8 Metric Tonnes per day. Few of the concerns of the cement industry and the players operating within the sector are high power and coal cost, high freight costs, inadequate infrastructure, non-availability of wagons, poor quality of coal and heavy taxes/royalty levies. An Initiative of the BSE Investors Protection Fund4
Financial Graphs Net Income from Operations 14 12 ` in Million 1 8 6 4 2 82.4 H1 FY15 1,193.4 H1 FY16 EBIDTA & EBIDTA Margins 2 13. 2 15 ` in Million 1 5-5 -76.8 155.7-2 -4-6 -8 % -1-93.2 H1 FY15 H1 FY16-1 EBIDTA EBIDTA Margins ` in Million 1 5-5 -1-15 PAT & PAT Margins 7.4 88.5-131.4-159.5 H1 FY15 H1 FY16 2-2 -4-6 -8-1 -12-14 -16-18 % PAT PAT Margins An Initiative of the BSE Investors Protection Fund5
Disclaimer All information contained in the document has been obtained by LKW s Gurukshetra from sources believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and LKW s Gurukshetra in particular makes no representation or warranty express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements based on available data, and LKW s Gurukshetra shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage. Disclosure Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest. The report has been sponsored and published as part of Initiative of BSE s Investors Protection Fund About Us LOTUS KNOWLWEALTH (LKW)commenced business in 1991 and is currently engaged in providing CAPITAL MARKET RESEARCH, INVESTMENT ADVISORY and STRATEGY services. GURUKSHETRA is the Research and Training arm of LKW. LKW Investment Advisers is the SEBI registered Investment Advisory arm of LKW. 5 Contact Us LOTUS KNOWLWEALTH Pvt. Ltd. Regd. Office:B Wing, 55-56, Fairlink Centre, Off Andheri Link Road, Andheri (W), Mumbai 4 53. Email: enquiry@lotusknowlwealth.com Tel: 22-41 5482 41 5483 Website: www.lkwindia.com An Initiative of the BSE Investors Protection Fund6