India Cements reported an 8.6% increase in revenue for the fourth quarter of fiscal year 2010 but margins declined. Revenue grew due to a 26.5% rise in cement sales volumes but realizations fell 19.4% due to excess capacity. Margins fell due to higher raw material and freight costs, causing net profit to decline 59.2% year-over-year. The analyst recommends buying the stock based on valuation and expects capacity expansion projects to be completed on schedule.

1. 4QFY2010 Result Update I Cement
May 6, 2010
India Cements BUY
CMP Rs119
Performance Highlights Target Price Rs138
India Cements (INC) posted an 8.6% yoy growth in the Top-line during Investment Period 12 Months
4QFY2010 to Rs974cr. The revenue from the cement business stood at
Rs920cr. The growth in the Top-line was primarily on account of a healthy Stock Info
26.5% yoy increase in the sales volume, even as the realisation declined by
Sector Cement
19.4% yoy to Rs2,488/tonne. On the operating front, the margins of the
company declined by 941bp yoy to 15.2%, on account of a surge in the raw Market Cap (Rs cr) 3,651
material and freight costs. The Net profit declined by 59.2% yoy to Rs38cr,
primarily on account of a poor operating performance. We recommend a Beta 1.0
Buy on the stock. 52 WK High / Low 180/97
A steep decline in realisations drags the net profit: INC’s 4QFY2010 net sales Avg. Daily Volume 481907
were up by 8.6% to Rs974cr (Rs897cr), in-line with our estimates. The growth Face Value (Rs) 10
in the top-line was on account of a 26.5% yoy growth in cement sales
volumes to 2.9mn tonnes. However, the realisation was down by 19.4% yoy BSE Sensex 16,987
to Rs2,488/tonne, on account of over capacity in the southern region, Nifty 5,091
coupled with poor demand. The OPM was down by 941bp yoy, on account of
the fall in realisations, and higher raw material and freight costs. The raw Reuters Code ICMN.BO
material costs were up by 52.1%, while the freight costs increased by 50.7%
Bloomberg Code ICEM@IN
yoy, on account of the increase in the fuel costs and higher dispatches to the
East and North-East regions. Employee expenses were also up by 30.9% yoy, Shareholding Pattern (%)
primarily on account of a provision of Rs13cr made under AS-15. On the
Bottom-line front, the company reported a net profit of Rs38cr, down 59.2% Promoters 25.2
yoy. The company made a forex translation gain of Rs12cr on outstanding MF/Banks/Indian FIs 33.7
FCCBs during the quarter (as against a forex translation loss of Rs14.9cr
made during 4QFY2009), which bolstered its bottom-line to an extent. FII/NRIs/OCBs 32.2
Indian Public 8.9
Valuation
Abs. (%) 3m 1yr 3yr
At the CMP of Rs119, India Cements is trading at an EV/EBITDA of 5.7x and
Sensex 6.7 42.1 21.9
an EV/tonne of US $68/tonne, according to its FY2012E estimates. We have
arrived at a Target Price of Rs138/share for the stock, by valuing its Cement
INC 6.2 15.2 (35.5)
business at an average of a Target EV/EBITDA of 5x and Target EV/Tonne of
US $65. Hence, we recommend a Buy on the stock.
Key Financials
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 3,427 3,771 4,479 5,050
% chg 12.1 10.1 18.8 12.7
Net Profit 432 354 310 357
% chg (32.2) (18.0) (12.4) 15.1
OPM (%) 29.1 21.9 19.4 18.9
EPS (Rs) 15.3 11.5 10.1 11.6
P/E (x) 7.8 10.3 11.8 10.2
P/BV (x) 1.1 1.0 0.9 0.9 Rupesh Sankhe
RoE (%) 14.7 9.0 7.1 7.7 Tel: 022 – 4040 3800 Ext: 319
RoCE (%) 14.1 9.6 8.5 8.9 E-mail: rupeshd.sankhe@angeltrade.com
EV/Sales (x) 1.5 1.4 1.2 1.1
V Srinivasan
EV/EBITDA (x) 5.3 6.6 6.4 5.7
Tel: 022 – 4040 3800 Ext: 330
Installed Capacity (mtpa) 14.3 14.3 15.8 15.8
E-mail: v.srinivasan@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. India Cements I 4QFY2010 Result Update
Exhibit 1: 4QFY2010 Performance
Y/E March (Rs cr) 4QFY10 4QFY09 % chg FY10 FY09 % chg
Net Sales 974.3 897.3 8.6 3,805 3,472 9.6
Consumption of Raw Material 154.1 101.3 52.1 479.9 356.5 34.6
(% of Net Sales) 15.8 11.3 12.6 10.3
Power and Fuel 261.0 233.9 11.6 999.9 891.6 12.1
(% of Net Sales) 26.8 26.1 26.3 25.7
Staff Costs 80.2 61.3 30.9 250.0 198.3 26.0
(% of Net Sales) 8.2 6.8 6.6 5.7
Freight & Forwarding 190.8 126.6 50.7 643.1 486.0 32.3
(% of Net Sales) 19.6 14.1 16.9 14.0
Other expenses 140.0 153.3 (8.7) 528.4 578.7 (8.7)
(% of Net Sales) 14.4 17.1 13.9 16.7
Total Expenditure 826.1 676.4 22.1 2,901 2,511 15.5
Operating Profit 148.2 220.9 (32.9) 904.3 960.8 (5.9)
OPM (%) 15.2 24.6 23.8 27.7
Interest 36.9 35.0 5.4 142.6 112.2 27.2
Depreciation 61.6 53.3 15.5 233.1 203.3 14.7
Other Income 2.8 2.8 2.8 3.0 (5.4)
Profit before Tax 52.6 135.4 (61.2) 531.3 648.3 (18.0)
Current Tax 14.3 41.5 177.0 216.1 (18.1)
(% of PBT) 27.1 30.7 33.3 33.3
Profit after Tax 38.3 93.8 (59.2) 354.3 432.2 (18.0)
PAT Margin 3.9 10.5 9.3 12.4
EPS (Rs) 1.2 3.3 (62.5) 11.5 15.3 (24.6)
Source: Company, Angel Research
Operational Highlights
The company’s per tonne cement realisation was down by 19.4% yoy during the
quarter, and stood at Rs2,488. The decline in realisation was on account of excess
capacity and a slowdown in demand in the southern region. The company’s per
tonne raw material cost was up by 20.1% yoy, while the freight and forwarding costs
were up by 19% yoy. The power and fuel costs were down by 11.9% yoy. The
company’s operating profit per tonne stood at Rs435 during the quarter, down
53.8% yoy.
Exhibit 2: Per tonne analysis (Rs)
yoy chg qoq
4QFY10 3QFY10 4QFY09
(%) chg (%)
Realisation/tonne 2,488 2,410 3,087 (19.4) 3.2
Raw Material Cost/tonne 531 488 442.3 20.1 9.0
Power & Fuel Cost /tonne 900 981 1,021 (11.9) (8.3)
Freight & Forwarding Cost/tonne 658 687 553 19.0 (4.2)
Operating Profit/tonne 435 467 943 (53.8) (6.8)
Depreciation/tonne 212 224 232.8 (8.8) (5.3)
Net Profit/tonne 132 136 409.8 (67.8) (2.9)
Source: Company, Angel Research
May 6, 2010 2

3. India Cements I 4QFY2010 Result Update
Capacity expansions well on track
The company is currently setting up a 1.5mtpa green-field plant at Rajasthan,
through its subsidiary, Indo Zinc Ltd. The plant is at an advanced stage of
completion and is expected to be commissioned in 2QFY2011. The company is also
in the process of setting up two captive power plants of 50MW each in Tamil Nadu
and in Andhra Pradesh. While the Tamil Nadu Plant is expected to be operational in
1QFY2012, the Andhra Pradesh plant is expected to be operational in 3QFY2012.
INC has also completed the formalities for obtaining coal mining rights in
Indonesia, to meet the requirement of coal for power generation and cement
manufacturing. INC has planned for a total capex of Rs1,300cr over the next three
years.
Exhibit 3: Capacity Ramp-up
20
15.8 15.8
14.3 14.3
15
(mtpa)
10 8.5 9.1
5
0
FY07 FY08 FY09 FY10E FY11E FY12E
Source: Company, Angel Research
Key Developments
QIP Issue: India Cements raised US $65mn (Rs295.62cr) via the QIP route, during
the quarter. The QIP involved an issue of 2,45,94,000 equity shares at a price of
Rs120.2. The company expects to utilise the money raised for repaying its existing
debt, for capital expenditure and for general corporate purposes.
IPL auction: India Cements acquired its Indian Premier League (IPL) franchisee,
Chennai Super Kings, for US $91mn in 2008, for a 10-year period. During the
quarter, the governing board of the IPL completed the auction for including two
more new teams in the league. The two franchisees for Pune and Kochi were
auctioned for US $370mn and US $333mn, respectively, well above the fixed base
price of US $250mn.
May 6, 2010 3

4. India Cements I 4QFY2010 Result Update
Outlook and Valuation
All the frontline states in the southern region, like Andhra Pradesh, Tamil Nadu and
Karnataka, had been witnessing low demand in the recent months. The industry had
also witnessed aggressive inter-regional stock movement, pending the expansions in
the other regions, which exerted pressure on the prices and profitability. Overall, the
cement companies have been reporting strong sales volumes, on the back of new
capacities coming on stream, which has enabled most of the cement manufacturers
to increase their total cement production. Cement capacity addition in India during
FY2010 stood at 27mn tonnes, taking the total capacity of the sector to around
252mtpa at the end of FY2010. Going ahead, we expect the industry to add around
76mn tonnes of capacity through FY2010-12E.
All-India demand is expected to remain robust, but accelerated capacity additions
and the stabilisation of new capacities would exert pressure on prices after May
2010.
Exhibit 4: Valuation based on EV/EBITDA multiple and Asset Replacement (FY12E)
Target EV/EBITDA (x) 5 Target EV/tonne (US $) 65
EV (Rs cr) 4,770 EV (Rs cr) 5,229
CPP (100MW) 400
Market Cap (Rs cr) 4,089
Market Cap (Rs cr) 4,390
No. of shares (cr) 30.7 No. of shares (cr) 30.7
Fair Price (Rs) 133 Fair Price (Rs) 143
Source: Company, Angel Research
At the CMP of Rs119, India Cements is trading at an EV/EBITDA of 5.7x and an
EV/tonne of US $68/tonne, according to its FY2012E estimates. We have arrived at
a Target Price of Rs138/share for the stock, by valuing its Cement business at an
average of a Target EV/EBITDA of 5x and Target EV/Tonne of US $65. We
recommend a Buy on the stock.
May 6, 2010 4

5. India Cements I 4QFY2010 Result Update
Exhibit 5: 1-year forward EV/EBITDA band
10,200 11x
8,200
8x
EV (Rs cr)
6,200
4,200 5x
2,200
2x
200
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Company, Angel Research
Exhibit 6: 1-year forward EV/tonne band
12,000
9,000
$110
EV (Rs cr)
$90
6,000
$70
$50
3,000
0
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Company, Angel Research
May 6, 2010 5

6. India Cements I 4QFY2010 Result Update
Profit & Loss Statement (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Net Sales 2,255 3,058 3,427 3,771 4,479 5,050
Other operating income - - - - - -
Total operating income 2,255 3,058 3,427 3,771 4,479 5,050
% chg 46.3 35.6 12.1 10.1 18.8 12.7
Total Expenditure 1,521 1,965 2,431 2,945 3,611 4,096
Net Raw Materials 238 283 357 480 495 533
Other Mfg costs 549 691 892 1,000 1,279 1,442
Personnel 103 188 198 250 275 308
Other 631 804 984 1,215 1,562 1,813
EBITDA 734 1,093 996 827 869 954
% chg 181.4 48.8 (8.8) (17.0) 5.1 9.8
(% of Net Sales) 32.6 35.7 29.1 21.9 19.4 18.9
Depreciation& Amortisation 103 128 203 233 303 346
EBIT 632 965 793 593 565 608
% chg 246.9 52.8 (17.8) (25.2) (4.7) 7.6
(% of Net Sales) 28 32 23 16 13 12
Interest & other Charges 150 110 112 143 149 143
Other Income 10 28 47 81 54 76
(% of PBT) 2 3 7 15 11 14
Share in profit of Associates - - - - - -
Recurring PBT 492 883 728 531 470 541
% chg 1,117 79 (18) (27) (12) 15
Extraordinary Expense/(Inc.) - 38 79 - - -
PBT (reported) 492 845 648 531 470 541
Tax 13 207 216 177 160 184
(% of PBT) 2.7 24.5 33.3 33.3 34.0 34.0
PAT (reported) 479 638 432 354 310 357
ADJ. PAT 479 676 512 354 310 357
% chg 1,239.5 41.1 (24.3) (30.7) (12.4) 15.1
(% of Net Sales) 21 22 15 9 7 7
Basic EPS (Rs) 18.4 22.6 15.3 11.5 10.1 11.6
Fully Diluted EPS (Rs) 18.4 22.6 15.3 11.5 10.1 11.6
% chg 832 23 (32) (25) (12) 15
May 6, 2010 6

7. India Cements I 4QFY2010 Result Update
Balance Sheet (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 260 282 282 307 307 307
Preference Capital - - - - - -
Reserves& Surplus 1,948 3,039 3,349 3,942 4,221 4,442
Shareholders Funds 2,209 3,321 3,631 4,249 4,528 4,749
Total Loans 2,059 1,812 1,988 1,988 1,988 1,848
Deferred Tax Liability 43 226 274 274 274 274
Total Liabilities 4,310 5,358 5,893 6,511 6,790 6,871
APPLICATION OF FUNDS
Gross Block 3,856 4,709 5,314 5,614 6,064 6,914
Less: Acc. Depreciation 1,060 1,244 1,505 1,738 2,042 2,387
Net Block 2,796 3,464 3,808 3,875 4,022 4,526
Capital Work-in-Progress 143 575 904 1,054 1,154 554
Goodwill - - - - - -
Investments 55 129 159 159 159 159
Current Assets 1,718 2,149 2,152 2,370 2,277 2,478
Cash 230 426 93 219 39 73
Loans & Advances 979 1,062 1,313 1,313 1,213 1,213
Other 509 662 745 838 1,024 1,191
Current liabilities 434 984 1,153 971 845 870
Net Current Assets 1,284 1,166 998 1,399 1,431 1,608
Mis. Exp. not written off 33 24 24 24 24 24
Total Assets 4,310 5,358 5,893 6,511 6,790 6,871
Cash Flow Statement (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Profit before tax 492 845 648 531 470 541
Depreciation 103 128 203 233 303 346
Change in Working Capital 125 576 (8) (99) (58) (104)
Less: Other income 10 28 47 81 54 76
Direct taxes paid 13 207 216 177 160 184
Cash Flow from Operations 697 1,314 581 408 501 522
(Inc)/ Decin Fixed Assets (965) (1,285) (934) (450) (550) (250)
(Inc)/ Dec in Investments (20) (74) (30) - - -
(Inc)/ Dec in loans and advances
Other income 10 28 47 81 54 76
Cash Flow from Investing (975) (1,332) (917) (369) (496) (174)
Issue of Equity 81 601 5 296 - -
Inc./(Dec.) in loans 534 (247) 177 - - (140)
Dividend Paid (Incl. Tax) - 30 66 66 35 31
Others 150 110 112 143 149 143
Cash Flow from Financing 465 213 4 87 (185) (315)
Inc./(Dec.) in Cash 187 195 (332) 125 (179) 34
Opening Cash balances 44 230 426 93 219 39
Closing Cash balances 230 426 93 219 39 73
May 6, 2010 7

8. India Cements I 4QFY2010 Result Update
Key Ratios
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Valuation Ratio (x)
P/E (on FDEPS) 6.5 5.3 7.8 10.3 11.8 10.2
P/CEPS 5.3 4.4 5.3 6.2 5.9 5.2
P/BV 2.2 1.3 1.1 1.0 0.9 0.9
Dividend yield (%) - 0.9 2.0 1.8 1.0 0.9
EV/Sales 2.2 1.5 1.5 1.4 1.2 1.1
EV/EBITDA 6.7 4.3 5.3 6.6 6.4 5.7
EV / Total Assets 1.1 0.9 0.9 0.8 0.8 0.8
Per Share Data (Rs)
EPS (Basic) 18.4 22.6 15.3 11.5 10.1 11.6
EPS (fully diluted) 18.4 22.6 15.3 11.5 10.1 11.6
Cash EPS 22.3 27.2 22.5 19.1 20.0 22.9
DPS - 1.1 2.3 2.2 1.2 1.0
Book Value 54.8 92.1 105.0 116.7 125.8 133.0
Dupont Analysis (%)
EBIT margin 28.0 31.6 23.1 15.7 12.6 12.0
Tax retention ratio 97.3 75.5 66.7 66.7 66.0 66.0
Asset turnover (x) 0.6 0.7 0.6 0.6 0.7 0.7
ROIC (Post-tax) 16.7 16.2 9.9 6.6 5.7 5.9
Cost of Debt (Post Tax) 8.1 4.3 3.9 4.8 5.0 4.9
Leverage (x) 0.8 0.6 0.5 0.5 0.4 0.4
Operating ROE 23.9 23.6 12.6 7.4 6.1 6.3
Returns (%)
ROCE (Pre-tax) 16.5 20.0 14.1 9.6 8.5 8.9
Angel ROIC (Pre-tax) 17.6 23.3 17.2 11.7 10.4 10.3
ROE 24.2 24.4 14.7 9.0 7.1 7.7
Turnover ratios (x)
Asset Turnover (Gross Block) 0.7 0.7 0.7 0.7 0.8 0.8
Inventory / Sales (days) 34.1 33.3 37.3 41.3 44.3 46.5
Receivables (days) 40.5 34.1 35.4 33.4 29.9 32.1
Payables (days) 96.8 131.7 160.4 131.6 91.8 76.4
Working capital cycle (ex-cash)
173.9 107.0 87.6 100.9 104.8 105.8
(days)
Solvency ratios (x)
Net debt to equity 0.8 0.4 0.5 0.4 0.4 0.4
Net debt to EBITDA 2.5 1.3 1.9 2.1 2.2 1.9
Interest Coverage (EBIT /
4.2 8.8 7.1 4.2 3.8 4.2
Interest)
May 6, 2010 8

9. India Cements I 4QFY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as
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Disclosure of Interest Statement India Cement
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
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Tel : (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
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May 6, 2010 9