(1/20)
About:
India is the 2nd largest cement producer in the world with a market share of 8%, behind China (54%)
However the Indian market is one of the most underpenetrated with per capita cement consumption being half of the world, behind countries like Brazil & Indonesia.
About:
India is the 2nd largest cement producer in the world with a market share of 8%, behind China (54%)
However the Indian market is one of the most underpenetrated with per capita cement consumption being half of the world, behind countries like Brazil & Indonesia.
(2/20)
Region was cement consumption:
• Cement consumption is lowest in India’s eastern region (131kg)
• West and North belt has the highest cement consumption in India
• However, going forward, east and central India is all set to provide the next leg of growth
Region was cement consumption:
• Cement consumption is lowest in India’s eastern region (131kg)
• West and North belt has the highest cement consumption in India
• However, going forward, east and central India is all set to provide the next leg of growth
(3/20)
• Greater focus by the govt (21 out of the 110 smart cities commissioned in this region)
• Limestone availability makes this market an attractive destination
• Out of the total housing shortage in urban India, east & central India contribute 35% & 25% respectively.
• Greater focus by the govt (21 out of the 110 smart cities commissioned in this region)
• Limestone availability makes this market an attractive destination
• Out of the total housing shortage in urban India, east & central India contribute 35% & 25% respectively.
(4/20)
Let’s look at some of the data coming from Indian Urban Housing:
• Urban housing remains in its best-ever scenario with a decadal low inventory and decadal high absorption
• Ready to move in Inventory is decreasing
• Under construction inventory is decreasing
Let’s look at some of the data coming from Indian Urban Housing:
• Urban housing remains in its best-ever scenario with a decadal low inventory and decadal high absorption
• Ready to move in Inventory is decreasing
• Under construction inventory is decreasing
(5/20)
• Cities with highest growth in Housing market (5 year CAGR)
1. Gandhinagar - 32%
2. Nashik - 19%
3. Vishakapatnam - 16%
4. Bhubaneswar - 14%
5. Mohali - 14%
6. Nagpur - 11%
7. Ahmedabad - 10%
8. Vadodara- 8%
MH, UP, TN, WB & AP have the highest urban population in 🇮🇳
• Cities with highest growth in Housing market (5 year CAGR)
1. Gandhinagar - 32%
2. Nashik - 19%
3. Vishakapatnam - 16%
4. Bhubaneswar - 14%
5. Mohali - 14%
6. Nagpur - 11%
7. Ahmedabad - 10%
8. Vadodara- 8%
MH, UP, TN, WB & AP have the highest urban population in 🇮🇳
(6/20)
• Sector wise annual capital expenditure in infrastructure (INR bn) (FY 20-25)
source: National Infrastructure Pipeline PPT volume I
1. Energy: 26,900
2. Roads: 20,338
3. Railways: 13,676
4. Ports & Airports: 2,646
5. Urban: 19,193
6. Irrigation: 8,945
7. Rural: 7,739
• Sector wise annual capital expenditure in infrastructure (INR bn) (FY 20-25)
source: National Infrastructure Pipeline PPT volume I
1. Energy: 26,900
2. Roads: 20,338
3. Railways: 13,676
4. Ports & Airports: 2,646
5. Urban: 19,193
6. Irrigation: 8,945
7. Rural: 7,739
(7/20)
• Major schemes as per India FY22-23 budget:
1. Pradhan Mantri Awas Yojna (PMAY)
2. Pradhan Mantri Gram Sadak Yojna
3. Metro Projects
4. National Highways Authority of India (Highest focus of GOI)
5. Residential
6. Non-residential
7. Road Works
• Major schemes as per India FY22-23 budget:
1. Pradhan Mantri Awas Yojna (PMAY)
2. Pradhan Mantri Gram Sadak Yojna
3. Metro Projects
4. National Highways Authority of India (Highest focus of GOI)
5. Residential
6. Non-residential
7. Road Works
(8/20)
Factors to focus on while looking into the Indian Cement sector for the medium term:
• Inorganic expansions by larger players to gain market share:
Mid-caps / small caps cement stocks are trading at 14% / 44% discount on EV / EBITDA compared to large caps
Factors to focus on while looking into the Indian Cement sector for the medium term:
• Inorganic expansions by larger players to gain market share:
Mid-caps / small caps cement stocks are trading at 14% / 44% discount on EV / EBITDA compared to large caps
(9/20)
• Given the significant premium enjoyed by large cap players (especially Ambuja) compared to mid-cap players, and the minimal leverage they enjoy, they remain in an extremely favourable position to bid aggressively for smaller assets and scale up capacity quickly.
• Given the significant premium enjoyed by large cap players (especially Ambuja) compared to mid-cap players, and the minimal leverage they enjoy, they remain in an extremely favourable position to bid aggressively for smaller assets and scale up capacity quickly.
(10/20)
• Since large caps are trading at a premium compared to mid/small caps, they tend to benefit when they acquire assets at cheaper valuations
However, target stocks may move further upwards due to higher probability of that company getting acquired.
• Since large caps are trading at a premium compared to mid/small caps, they tend to benefit when they acquire assets at cheaper valuations
However, target stocks may move further upwards due to higher probability of that company getting acquired.
(11/20)
What the history says:
Acquisitions of Binani, Century, Reliance Cement & ACC & Ambuja have all happened at premium valuations & the ones at discount have some issues related to promoter debt, lower clinker connectivity & lower utilisation, leading to forced selling.
What the history says:
Acquisitions of Binani, Century, Reliance Cement & ACC & Ambuja have all happened at premium valuations & the ones at discount have some issues related to promoter debt, lower clinker connectivity & lower utilisation, leading to forced selling.
(12/20)
Evidence of consolidation already visible:
• Dalmia / Sagar bidding for Andhra Cement assets
• Shree Cement talking about acquisitions in Central India
• Heidelberg plans to merge with Zuari Cement
• Ultratech to acquire India Cement MP project
Evidence of consolidation already visible:
• Dalmia / Sagar bidding for Andhra Cement assets
• Shree Cement talking about acquisitions in Central India
• Heidelberg plans to merge with Zuari Cement
• Ultratech to acquire India Cement MP project
(13/20)
• Strong demand - supply match:
1. FY08-17 – where capacity addition was 2x of demand; as a result capacity utilisation fell
2. FY17-22 – where supply was 1.3x of demand
3. FY22-25 – supply addition is broadly equal to demand
• Strong demand - supply match:
1. FY08-17 – where capacity addition was 2x of demand; as a result capacity utilisation fell
2. FY17-22 – where supply was 1.3x of demand
3. FY22-25 – supply addition is broadly equal to demand
(14/20)
• Cost deflation : A Tailwind for cement
Current Margins are under pressure mainly on account of escalation of :
1. power & fuel costs
2. pet coke (a key raw material) prices
3. diesel prices (freight and logistics).
However we believe the peak is behind us.
• Cost deflation : A Tailwind for cement
Current Margins are under pressure mainly on account of escalation of :
1. power & fuel costs
2. pet coke (a key raw material) prices
3. diesel prices (freight and logistics).
However we believe the peak is behind us.
(15/20)
• Pet coke prices peaked in 1QFY23, it has declined 14% MoM (Aug’22 to Sept’22)
• Diesel prices have declined by 8% since 1QFY23, although the prices are still elevated. The domestic diesel prices (per litre) is hovering around ₹90-95, from ₹70 seen in late 2020
• Pet coke prices peaked in 1QFY23, it has declined 14% MoM (Aug’22 to Sept’22)
• Diesel prices have declined by 8% since 1QFY23, although the prices are still elevated. The domestic diesel prices (per litre) is hovering around ₹90-95, from ₹70 seen in late 2020
(16/20)
• Increase utilisation of renewable energy sources:
Renewable energy usage has increased in FY22 compared to FY19 for all companies.
UltraTech currently has the highest capacity while Shree Cement has the highest renewable power contribution of 48%
• Increase utilisation of renewable energy sources:
Renewable energy usage has increased in FY22 compared to FY19 for all companies.
UltraTech currently has the highest capacity while Shree Cement has the highest renewable power contribution of 48%
(17/20)
• Premiumisation:
Another reason to expect a recovery in margins is the premiumisation of products across brands.
Rising housing demand will likely to further increase the share of premium products.
• Premiumisation:
Another reason to expect a recovery in margins is the premiumisation of products across brands.
Rising housing demand will likely to further increase the share of premium products.
(18/20)
Valuation:
• Ambuja cements has the highest EV/EBITDA amongst its closest rivals, followed by Shree, Ultratech, Ramco & ACC
• Ambuja & Dalmia has the highest capacity expansion plans till FY30.
Ambuja has planned 160% expansion vs Ultratech’s 30% expansion plan.
Valuation:
• Ambuja cements has the highest EV/EBITDA amongst its closest rivals, followed by Shree, Ultratech, Ramco & ACC
• Ambuja & Dalmia has the highest capacity expansion plans till FY30.
Ambuja has planned 160% expansion vs Ultratech’s 30% expansion plan.
(19/20)
• JK Lakshmi has the highest ROE(20%) and RoCE(16%) amongst its peers.
• Dalmia bharat has the lowest ROE and RoCE of 8% each amongst its peers.
• Ultratech has the highest volume/capacity of 114 MT followed by Shree Cement’s 46 MT
• JK Lakshmi has the highest ROE(20%) and RoCE(16%) amongst its peers.
• Dalmia bharat has the lowest ROE and RoCE of 8% each amongst its peers.
• Ultratech has the highest volume/capacity of 114 MT followed by Shree Cement’s 46 MT
(20/20)
Which company will be your long term pick from the Indian cement sector?
@caniravkaria @stockifi_Invest @VRtrendfollower @kuttrapali26 @mehrotra_saket @aparanjape @MadhusudanKela
Which company will be your long term pick from the Indian cement sector?
@caniravkaria @stockifi_Invest @VRtrendfollower @kuttrapali26 @mehrotra_saket @aparanjape @MadhusudanKela
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