Northern region cement despatches grew by an impressive 14.4% yoy in May 2010. The growth in all-India despatches was 8.1% yoy, lower than the previous year due to lower demand from real estate and infrastructure segments. The southern region reported a modest 8.2% growth, impacting the overall capacity utilization which plunged 750bps to 82%. Cement prices declined across India in May, with the southern region seeing the largest corrections of Rs20-45 per bag. Jaiprakash Associates and India Cements were the top performing companies, with volumes growing 54% and 11.4% yoy respectively.

1. Monthly Update | May 2010
June 16, 2010
Rupesh Sankhe
Cement Sector +91 22 4040 3800 Ext: 319
rupeshd.sankhe@angeltrade.com
Tepid show
V Srinivasan
All-India Cement Despatches up 8.1% yoy: The growth in cement despatches +91 22 4040 3800 Ext: 330
decelarated during May 2010 due to lower off-take from the real estate and v.srinivasan@angeltrade.com
infrastructure segments. Cement despatches grew at a lower 8.1% yoy in May
2010 as against 10.7% yoy growth in May 2009. While the Northern region clocked
an impressive 14.4% yoy growth in despatches, the Southern region impacted by
poor demand reported a moderate 8.2% yoy growth. The Eastern and Central
regions clocked marginal yoy growth of 5.5% and 2.1%, respectively.
All-India Capacity Utilisation at 82%: All-India capacity utilisation plunged by
750bp yoy to 82% in May2010, primarily on account of low utilisation levels reported
in the Southern region. Utilisation levels in the region nose-dived by 900bp yoy to
70% due to the slowdown in demand and increase in capacity. The Northern
region registered healthy capacity utilisation at 87% (flat on yoy basis).
Prices drop, to continue to remain under pressure: Cement prices declined
across the country in May 2010, with the Southern region experiencing the highest
price correction in the range of Rs20-45 till date. The fall was steep in Andhra
Pradesh, where the prices have collapsed by Rs30-45 per bag and are currently
selling at Rs160 per bag. The Western region too witnessed decline in prices by
around Rs10-20 per bag as there was inter-region stock movement from the
Southern region. However, prices remained stable in the Northern region in May
though on a decline since the beginning of June 2010. Going ahead, we expect
prices to remain under pressure due to the monsoons, commissioning of new
capacities and stabilisation of new plants, which have already been commissioned.
Top Performers: Jaiprakash Associates, predominantly a North-based player, was
Performers:
the top performer among the majors. The company posted 54% yoy jump in sales
volumes in May to 1.24mn tonnes (0.81mn tonnes) on account of substantial
capacity addition backed by healthy demand. India Cements delivered decent
11.4% yoy growth in despatches for May 2010. The company's despatches grew
aided by capacity addition carried out at its Parli facility in Maharashtra in FY2010.
All-India Performance - Highlights
(mn tonnes) May-10
May-10 May-09
May-09 yoy(%) 2MFY11 2MFY10 yoy(%)
Production 18.22 16.70 9.1 36.61 33.54 9.2
Despatches 17.82 16.48 8.1 35.94 33.14 8.4
Source: CMA, Angel Research
Please refer to important disclosures at the end of this report

2. Monthly Update | May 2010
All-India Cement Despatches up by moderate 8.1% yoy
Northern region despatches grew by The growth in cement despatches decelarated during May 2010 due to lower off-take
an impressive 14.4% yoy from the real estate and infrastructure segments. Cement despatches grew at a lower
8.1% yoy in May 2010 as against 10.7% yoy growth in May 2009. The growth in
all-India despatches was aided by the impressive 14.4% yoy growth in despatches
recorded by the Northern region. However, the Southern region, the second largest in
terms of overall capacity and despatches, was impacted by poor demand and reported
a modest 8.2% yoy growth in despatches. The poor demand in the Southern region is
largely attributed to the slowdown in the Andhra Pradesh government's expenditure
on irrigation and housing. The Eastern and Central regions clocked marginal growth
of 5.5% and 2.1% yoy, respectively.
Exhibit 1: Region-wise Cement Despatches (mn tonnes)
Region May-10
May-10 May-09
May-09 yoy(%) 2MFY11 2MFY10 yoy(%)
South 5.69 5.26 8.2 11.55 10.59 9.1
North 4.37 3.82 14.4 8.62 7.59 13.6
West 2.81 2.64 6.4 5.76 5.36 7.5
East 2.48 2.35 5.5 5.19 4.74 9.5
Central 2.47 2.42 2.1 4.82 4.86 (0.8)
All-India 17.82 16.48 8.1 35.94 33.14 8.4
Source: Company, CMA; Note: The regional despatches include the despatches of ACC and Ambuja
All-India Capacity Utilisation plunged by 750bp
Southern region drags down overall The all-India capacity utilisation plunged by 750bp yoy during May 2010 to 82%,
capacity utilisation primarily on account of low utilisation levels reported in the Southern region. Utilisation
levels in the region nose-dived by 900bp yoy to 70% due to the slow-down in demand
and increase in capacity. The Southern region witnessed the highest capacity addition
of 18mtpa over the last one year, which accounted for more than 30% of the all-India
capacity addition during the period. The Northern region registered healthy capacity
utilisation at 87% (flat on yoy basis).
Exhibit 2: All-India Capacity Utilisation
100.0
96.0
95.0 92.3
90.0 89.2 89.1
89.5 87.8
(%)
85.0 85.8
84.4 83.7
81.7
79.7
80.0 80.3
82.0
75.0 76.6
70.0
Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10
Source: CMA, Angel Research
June16, 2010 2

3. Monthly Update | May 2010
Top Performers
Jaiprakash Associates extended its Jaiprakash Associates: Among the majors, Jaiprakash Associates emerged the top
outperformance to May 2010 performer. The company posted a 54% yoy jump in sales volumes in May to 1.24mn
tonnes (0.81mn tonnes), on account of substantial capacity addition backed by robust
demand.
India Cements: India Cements delivered a healthy 11.4% yoy growth in despatches
for May 2010. The company's despatches grew on the back of the capacity addition
carried out by it at its Parli facility in Maharashtra during FY2010.
Exhibit 3: Cement Despatches of Majors (mn tonnes)
May-10 May-09
May-10 May-09 yoy Apr-10
Apr-10 mom 2MFY11 2MFY10 yoy
chg(%) chg(%) chg (%)
Grasim 1.78 1.62 10.0 1.67 6.4 3.45 3.20 7.9
Ultratech 1.55 1.53 1.3 1.69 (8.1) 3.24 3.11 4.2
ACC 1.75 1.82 (3.8) 1.79 (2.2) 3.54 3.56 (0.5)
Ambuja Cements 1.86 1.64 13.7 1.90 (1.7) 3.76 3.28 14.7
JP Associates 1.24 0.81 53.6 1.20 3.6 2.44 1.60 52.5
India Cements 0.89 0.80 11.4 0.92 (2.5) 1.81 1.59 14.2
Madras Cements 0.63 0.60 4.5 0.66 (5.6) 1.29 1.21 6.9
JK Lakshmi Cements 0.33 0.31 7.2 0.34 (0.7) 0.67 0.62 8.7
Dalmia Cement 0.33 0.32 3.6 0.36 (8.5) 0.69 0.33 109.8
Source: Company, CMA
Cement Prices
Cement prices declined across the As per our interaction with the dealers, the cement prices declined across the country
country in May 2010, with the Southern in May 2010, with the Southern region registering the highest correction in the range
region registering the highest of Rs20-45 till date. The decline was quite steep in Andhra Pradesh with prices collapsing
correction in the range of Rs20-45 till by Rs30-45 per bag and are currently selling at Rs160 per bag. The Western region
date witnessed prices falling by around Rs10-20 per bag, as there was inter-region stock
movement from the Southern region. Prices in the Eastern region were lower by Rs5
per bag. However, prices remained stable in the Northern region.
Exhibit 4: Cement Prices (Rs/bag)
As on May-10
May-10 May-09
May-09 yoy Apr-10
Apr-10 mom
City June 12, 2010 chg (%) chg (%)
Chennai 240 245 277 (11.6) 260 (5.8)
Kolkata 260 270 275 (1.8) 290 (6.9)
Hyderabad 160 180 225 (20) 210 (14.3)
Mumbai 250 255 265 (3.8) 265 (3.8)
Delhi 220 240 234 2.6 250 (4.0)
Source: CMA, Angel Research
Coal situation
The global prices of coal (a major input in cement manufacturing) were up substantially
on a yoy basis during May 2010. Spot prices of the New Castle Mcloskey 6,700kc
coal stood at US $101, on an average, in May 2010, up 56% yoy. On mom basis too,
the coal prices increased marginally during the month.
June 16, 2010 3

4. Monthly Update | May 2010
Stock Performance
Most of the cement stocks underperformed the broader markets in May 2010. Among
the bigger players, Dalmia Cement was the major loser, shedding 19.5%. JP Associates
lost 15.3%, while Madras Cements and India Cements lost 14.4% and 14.1%,
respectively.
Exhibit 5: Stock Performance (mom)
(3.5) BSE Sensex
(19.5) Dalmia Cement
(9.0) Shree Cement
(13.8) JKLC
(14.4) Madras Cements
(%)
(14.1) India Cements
(15.3) JP Associates
(10.2) Ambuja Cements
(9.8) ACC
(5.1) Ultratech
(16.2) Grasim
(25.0) (20.0) (15.0) (10.0) (5.0) 0.0
Source: C-Line
Outlook and Valuation
India's cement consumption grew at an impressive CAGR of 9.3% over FY2004-10
driven by the robust demand from the housing and infrastructure sectors. The cement
prices too showed a continuous upward trend during the period thereby encouraging
the cement makers to set up new capacities. During FY2011-12E, we estimate total
capacity addition of 38mn tonnes. Further, the new plants commissioned over the
past few months are expected to stabilise and increase supply. We believe that the
new capacity additions would result in an oversupply situation with the growth in
demand not sufficient to absorb the increased supply. Overall, we expect all-India
demand to post 10.2% CAGR of over FY2010-12E. Excess supply is expected to
result in prices softening and capacity utilisation levels declining. We expect capacity
utilisation to remain at low 84% levels in FY2011E and to bottom out at these levels.
During the next few quarters, we expect cement demand to be hit by monsoons and
see low growth in volumes. We expect total capacity addition of 10.5mn tonnes during
2QFY2011E and 3QFY2011E by players such as ACC, Ambuja and JP Associates.
Capacity utilisation is expected to remain the lowest in the Southern region as bulk of
the capacity addition in FY2010 was carried out in this region. Prices are also expected
to remain under pressure due to excess supply and poor demand. We expect the
South-based players to turn in a poor performance in terms of profitability, while the
Northern players would perform relatively better than players in the other regions due
to better demand-supply dynamics.
June16, 2010 4

5. Monthly Update | May 2010
Exhibit 6: All-India Cement Demand-Supply Forecast
mn tonne FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Year-end capacity 167 194 219 255 275 293
Effective capacity 159 171 198 229 261 287
Production 156 168 182 203 221 245
Exports 6 4 3 3 3 3
Domestic consumption 149 164 178 196 215 238
Total demand 155 168 181 199.6 219.6 242.7
Effective capacity growth (%) 3 8 16 16 14 10
Demand growth (%) 9.4 8 8 10 10 11
Effective utilisation rate (%) 97 98 91 87 84 85
Source: CMA, Angel Research
We remain positive on India Cements, Madras Cements and JK Lakshmi Cement
owing to their attractive valuations (based on the EV/tonne and EV/EBITDA multiples).
On an EV/tonne basis, India Cements and Madras Cements are trading at
US $66/tonne and US $64/tonne respectively, which are at significant discount to
their replacement value. We maintain a Buy on these stocks. We maintain a Buy and
Accumulate on Grasim and Ultratech, respectively. We maintain our Neutral view on
ACC and Ambuja.
Exhibit 7: Valuation Summary
Company CMP Price
Tgt Price EPS (RS) P/E (x) Inst. Cap. E V/ EV/ Reco
(Rs) (Rs) FY10 FY11E FY12E FY10 FY11E FY12E (FY10) EBITDA (x) Tonne (US $)
BITDA
ACC* 863 - 85.5 66.0 72.2 10.1 13.1 11.9 26 6.2 98 Neutral
Ambuja* 116 - 8.0 6.8 7.4 14.5 17.1 15.6 23.5 7.8 117 Neutral
Grasim 1,795 2,216 337.6 207.9 260.5 5.3 8.6 6.9 25.7 3.6 90 Buy
India Cements 113 138 11.5 10.1 11.6 9.8 11.2 9.7 14 4.9 66 Buy
JK Lakshmi Cements 63 88 19.7 12.5 15.7 3.2 5.0 4.0 5.4 2.1 36 Buy
Madras Cements 102 141 14.9 6.6 10.7 6.9 15.4 9.6 11 5.7 64 Buy
Ultratech 979 1084 87.8 77.5 98.9 11.1 12.6 9.9 23.1 4.9 96 Accumulate
Source: C-Line, Angel Research, Note: * Y/E Dec; EV/EBITDA and EV/Tonne based on FY2012E Estimates
Exhibit 8: ACC - One year forward EV/tonne
25,000 EV/tonne : High - $200; Low - $60
20,000
EV (Rs cr)
15,000
10,000
5,000
0
April-96
April-97
April-98
April-99
April-00
April-01
April-02
April-03
April-04
April-05
April-06
April-07
April-08
April-09
April-10
$70 $100 $130 $160
Source: Angel Research
June 16, 2010 5

6. Monthly Update | May 2010
Exhibit 9: Ambuja - One year forward EV/tonne
25,000 EV/tonne : High - $290; Low - $70
20,000
EV (Rs cr)
15,000
10,000
5,000
0
April-96
April-97
April-98
April-99
April-00
April-01
April-02
April-03
April-04
April-05
April-06
April-07
April-08
April-09
April-10
$70 $100 $130 $160
Source: Angel Research
Exhibit 10: India Cement- One year forward EV/tonne
12,000 EV/tonne : High - $160; Low - $45
10,000
EV (Rs cr)
8,000
6,000
4,000
2,000
0
April-96
April-97
April-98
April-99
April-00
April-01
April-02
April-03
April-04
April-05
April-06
April-07
April-08
April-09
April-10
$40 $70 $100 $130
Source: Angel Research
Exhibit 11: Madras Cements- One year forward EV/tonne
8,000 EV/tonne : High - $150 ; Low - $40
7,000
6,000
EV (Rs cr)
5,000
4,000
3,000
2,000
1,000
0
April-96
April-97
April-98
April-99
April-00
April-01
April-02
April-03
April-04
April-05
April-06
April-07
April-08
April-09
April-10
$60 $80 $100 $120
Source: Angel Research
June16, 2010 6

7. Monthly Update | May 2010
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Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading
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The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources
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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section).
Disclosure of Interest Statement
Company Analyst owership Angel and its Group companies Angel and its Groupcompanies' Broking relationship
of the stock ownership of the stock Directors ownership of the stock with company covered
ACC No No No No
Ambuja No No No No
Grasim No Yes No No
Ultratech No No No No
India Cements No No No No
Madras Cements No No No No
JK Lakshmi Cements No No No No
Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
June 16, 2010 7

8. Monthly Update | May 2010
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Tel : (022) 3952 4568 / 4040 3800
Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
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Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
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