This document summarizes Madras Cements' (MAC) financial performance in the second quarter of fiscal year 2011. Key points include: - MAC's net revenue declined 20.4% year-over-year to Rs. 650 crore due to a 22.7% decline in cement revenue. - Operating profit margin plunged to 17.7% from 41.6% a year ago due to falling cement prices and rising fuel costs. - The analyst maintains a "Buy" rating with a target price of Rs. 141, valuing MAC's cement assets at $75 per tonne.

1. Please refer to important disclosures at the end of this report 1
Y/E March (` cr) 2QFY11 1QFY11 % chg (qoq) 2QFY10 % chg (yoy)
Net revenue 650 700 (7.2) 817 (20.4)
Operating profit 115 196 (41.3) 340 (66.2)
OPM (%) 17.7 27.9 (1,026bp) 41.6 (2,390bp)
Net profit 31 73 (57.1) 169 (81.6)
Source: Company, Angel Research
For 2QFY2011, Madras Cements (MAC) posted a 20.4% yoy decline in its top
line to `650cr, which was below our estimates of `692cr. The lacklustre
performance was primarily because of a 22.7% yoy decline in the cement
segment’s revenue to `576cr. Going ahead, we expect the offtake to improve in
the southern region, with cessation of monsoon and improvement in demand
from the housing and infrastructure segments in the southern region. Realisation
is also set to improve post the recent price hikes carried out in the region. We
maintain a Buy rating on the stock.
OPM at 17.7%, down 2,390bp yoy: The company’s top-line declined by 20.4%
yoy as the cement segment, which derives bulk of its revenue from the southern
region, suffered due to low offtake and poor realisation in the region. While the
company’s cement despatches were down by 6% yoy to 1.95mn tonnes,
realisation fell by a steep 16.8% yoy to `2,952/tonne. OPM plunged by a huge
2,390bp yoy to 17.7%, primarily due to fall in cement realisations and a 12.4%
yoy increase in power and fuel costs to `172cr. The bottom line fell by 81.6% yoy
to `31cr, in line with our estimates.
Outlook and valuation: At the CMP, the stock is trading at 6.7x EV/EBITDA based
on FY2012E numbers. We have valued the company’s cement assets at
US $75/tonne and have assigned a value of `4cr/MW to the captive power
plants. We maintain a Buy rating on the stock with a Target Price of `141.
Key financials
Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E
Net sales 2,530 2,801 2,769 3,060
% chg 25.8 10.7 (1.1) 10.5
Net profit 364 354 180 202
% chg (11.0) (2.7) (49.0) 12.2
FDEPS (`) 15.3 14.9 7.6 8.5
OPM (%) 30.8 30.6 21.0 21.7
P/E (x) 7.4 7.6 14.9 13.3
P/BV (x) 2.1 1.7 1.6 1.4
RoE (%) 32.9 25.1 11.1 11.4
RoCE (%) 17.9 14.8 7.9 8.9
EV/Sales (x) 2.0 1.8 1.7 1.5
EV/tonne 110 102 85 79
EV/EBITDA 6.4 5.9 8.3 6.7
Source: Company, Angel Research
BUY
CMP `113
Target Price `141
Investment Period 12 Months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 42.0
MF / Banks / Indian Fls 28.3
FII / NRIs / OCBs 8.2
Indian Public / Others 21.5
Abs. (%) 3m 1yr 3yr
Sensex 12.0 20.8 29.3
MAC 9.7 1.0 (34.1)
1
20,303
6,106
MSCM.BO
MC@IN
Face Value (`)
BSE Sensex
Nifty
Reuters Code
2,691
0.6
140/91
125910
Cement
Avg. Daily Volume
Market Cap (` cr)
Beta
52 Week High / Low
Rupesh Sankhe
022-40403800 Ext 319
rupeshd.sankhe@angelbroking.com
V Srinivasan
022-40403800 Ext 330
v.srinivasan@angelbroking.com
Madras Cements
Performance Highlights
2QFY2011 Result Update | Cement
October 25, 2010

2. Madras Cements | 2QFY2011 Result Update
October 25, 2010 2
Exhibit 1: 2QFY2011 performance
Y/E March (` cr) 2QFY2011 1QFY2011 % chg (qoq) 2QFY2010 % chg (yoy) 1HFY2011 1HFY2010 % chg
Net sales 650 700 (7.2) 817 (20.4) 1,350 1,621 (16.7)
Net raw-material costs 120 84 42.8 86 38.4 203 226 (9.9)
(% of sales) 18.4 12.0 10.6 15.1 13.9
Power & fuel 172 174 (1.5) 153 12.4 346 293 17.8
(% of sales) 26.4 24.9 18.7 25.6 18.1
Staff costs 37 39 (5.7) 31 20.2 77 64 20.6
(% of sales) 5.7 5.6 3.8 5.7 3.9
Freight & forwarding 122 123 (0.1) 119 2.5 245 246 (0.3)
(% of sales) 18.8 17.5 14.6 18.1 15.2
Other expenses 85 85 (0.4) 87.9 (4) 169.5 163 4.3
(% of sales) 13.0 12.1 10.8 12.6 10.0
Total expenditure 535.1 504.8 6.0 477.2 12.2 1,040 991 5.0
Operating profit 115 196 (41.3) 340 (66.2) 310 630 (50.8)
OPM (%) 17.7 27.9 41.6 23.0 38.9
Interest 35 35 - 38 (6.7) 70 75 (6.7)
Depreciation 55 54 2.1 47 15.6 109 93 17.5
Other income 3 2 44.1 2 63.3 5 4 21.4
Extr. income/(expense) - - - -
Provision for taxation (4) 36 (109.7) 87 (104.0) 32 158 (79.4)
(% of PBT) (12.7) 33.2 33.9 23.9 33.9
Reported PAT 31.1 72.6 (57.1) 169.4 (81.6) 103 308 (66.4)
PATM (%) 4.8 10.4 20.7 7.7 19.0
Equity capital 23.8 23.8 23.8 23.8 23.8
EPS (`) 1.3 3.1 7.1 4.3 13.0
Adjusted PAT 31 73 (57) 169.4 (81.6) 103 308 (66.4)
Source: Company, Angel Research
Exhibit 2: Financial performance
Source: Company, Angel Research
770 817
611 577
700
650
138 169
16 29 73 31
0
10
20
30
40
50
0
250
500
750
1,000
1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11
Net Sales (LHS) Net Profit (LHS) OPM (RHS)
(` cr) (%)

3. Madras Cements | 2QFY2011 Result Update
October 25, 2010 3
Exhibit 3: 2QFY2011 – Actual v/s Angel estimates
(` cr) Actual Estimates Variation (%)
Net sales 650 692 (6.1)
Operating profit 115 132 (13.2)
Net profit 31 32 (2.8)
Source: Company, Angel Research
Operational performance
During the quarter, MAC’s per tonne cement realisations declined by 16.8%
yoy to `2,952. The company’s operating profit per tonne of cement stood at
`291, down 78.4% yoy. MAC’s incurred net loss per tonne stood at `21.
Exhibit 4: Per tonne analysis
Particulars (`) 2QFY2011 1QFY2010 2QFY2010
% chg
(yoy)
% chg
(qoq)
Realisation/tonne 2,952 3,189 3,547 (16.8) (7.4)
Raw-material cost/tonne 570 406 525 8.5 40.5
Power & fuel cost /tonne 880 843 727 21.0 4.3
Freight cost/tonne 627 593 620 1.2 5.8
Operating profit/tonne 291 826 1,343 (78.4) (64.8)
Depreciation/tonne 215 197 167 28.8 8.9
Net profit/tonne (21) 231 567 (103.6) (108.9)
Source: Company, Angel Research
Exhibit 5: Despatches and realisation trend
Source: Company, Angel Research
0
1,000
2,000
3,000
4,000
1.60
1.80
2.00
2.20
1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11
Despatches Realisation (RHS)
(mtpa) `/ton

4. Madras Cements | 2QFY2011 Result Update
October 25, 2010 4
Investment arguments
Major player in the south, but limited presence in Andhra Pradesh: MAC is a
major cement player in the southern region, with total cement capacity of
10.5mtpa. The company’s despatches have grown at a 12% CAGR over
FY2007–10, aided by a 4.5mtpa increase in capacity over the same period.
Further, MAC, which is currently facing clinker shortage, is setting up a second
clinkerisation unit at its Ariyalur Plant, with capacity of 2mtpa. The total project
cost is estimated to be `600cr. Post this expansion, MAC’s cement capacity
would expand to 12.5mtpa by the end of FY2011. Thus, the company’s overall
capacity is set to more than double over FY2007–12E.
MAC derives ~50% of its cement revenue from Tamil Nadu and only 19%
from Andhra Pradesh, which is the worst affected region in terms of demand
slowdown and price correction. Thus, the company is better placed as
compared to players with major exposure to Andhra Pradesh.
Exhibit 6: Geography-wise revenue breakup (FY2010)
Source: Company, Angel Research
Exhibit 7: Installed capacity
Source: Company, Angel Research
Installation of new captive power capacities to improve margins: MAC has been
adding up its windmill capacity to reduce dependence on the state grid for power
requirement. The company’s windmill capacity currently stands at 163MW, which
is sufficient to handle close to 61% of its total power requirements. Going ahead,
MAC is planning to invest `310cr to establish 85MW of captive thermal power
plant capacity, which includes a 60MW unit at Ariyalur and a 25MW plant
at RR Nagar.
Outlook and valuation: At the CMP, the stock is trading at an EV/EBITDA of 6.7x
based on FY2012E numbers. We have valued the company’s cement assets at
US $75/tonne and have assigned a value of `4cr/MW to the captive power plants.
We maintain a Buy rating on the stock with a Target Price of `141.
47%
24%
19%
8%
2%
Tamil Nadu Kerala Andhra Karnataka Others
6.0
8.0
10.0 10.5
12.5 12.5
0.0
4.0
8.0
12.0
16.0
FY07 FY08 FY09 FY10 FY11E FY12E
(mtpa)

5. Madras Cements | 2QFY2011 Result Update
October 25, 2010 5
Exhibit 8: SOTP-based target price (FY2012E)
Particulars Parameter Value (` cr)
Target EV/tonne US $75 5,191
CPP* (244 MW) `4cr/MW 976
Market cap (` cr) 3,363
No. of shares (cr) 23.8
Target price (`) 141
Source: Angel Research; Note: * CPP refers to captive power plants
Exhibit 9: Change in estimates
(` cr) FY2011E FY2012E
Earlier Revised Var. (%) Earlier Revised Var. (%)
Net sales 2,746 2,769 0.8 3,117 3,060 (1.8)
Operating exp. 2,180 2,188 0.4 2,441 2,395 (1.9)
Operating profit 566 581 2.5 676 665 (1.6)
Depreciation 209 209 0.0 248 248 0.0
Interest 148 148 (0.0) 133 133 (0.0)
PBT 226 241 6.4 313 302 (3.5)
Tax 75 60 (19.4) 103 100 (3.6)
PAT 152 180 19.1 210 202 (3.5)
Source: Company, Angel Research
Exhibit 10: Key assumptions
Earlier estimates Revised estimates
Particulars FY11E FY12E FY11E FY12E
Installed capacity – Cement (mtpa) 12.5 12.5 12.5 12.5
YoY growth (%) 19.1 - 19.1 -
Utilisation (%) 69.0 76.0 67.0 73.0
Despatches growth (%) 9.1 10.4 5.1 9.0
Realisation growth (%) (14.0) 2.5 (15.0) 1.0
Source: Angel Research
Exhibit 11: One-year forward EV/tonne (US $)
Source: Company, Angel Research
0
3,000
6,000
9,000
12,000
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
EV(`cr)
EV $70 $90 $110 $130

6. Madras Cements | 2QFY2011 Result Update
October 25, 2010 6
Exhibit 12: Recommendation summary
Company Reco. CMP Tgt. Price Upside FY2012E FY2012E FY2010-12E FY2012E FY2012E
(`) (`) (%) P/BV (x) P/E (x) EPS CAGR (%) RoCE (%) RoE (%)
ACC* Neutral 984 - - 2.5 19.3 (22.5) 16.1 13.4
Ambuja Cements* Neutral 139 - - 2.7 21.4 (9.9) 16.7 13.3
Grasim Ind. Neutral 2,252 - - 1.1 9.0 (10.9) 14.1 12.4
India Cements Buy 113 139 23.0 1.0 26.9 (39.6) 4.5 3.0
JK Lakshmi Buy 62 92 48.3 0.6 5.3 (22.9) 10.0 11.3
Kesoram Ind. Buy 304 437 44.0 0.7 4.6 13.1 11.8 16.3
Madras Cements Buy 113 141 24.7 1.4 13.3 (24.4) 8.9 11.4
UltraTech Cement Neutral 1,111 - - 1.9 14.9 (7.9) 15.2 14.0
Source: Company, Angel Research; Note: *Year ending December.

7. Madras Cements | 2QFY2011 Result Update
October 25, 2010 7
Profit and loss statement (Standalone)
Y/E March (` cr) FY07 FY08 FY09 FY10 FY11E FY12E
Net Sales 1,574 2,012 2,530 2,801 2,769 3,060
Total operating income 1,574 2,012 2,530 2,801 2,769 3,060
% chg 56 28 26 11 (1.1) 10.5
Total Expenditure 1,018 1,260 1,752 1,943 2,188 2,395
Net Raw Materials 214 248 362 398 474 509
Other Mfg costs 310 408 602 598 663 714
Personnel 57 81 110 137 158 181
Other 438 523 678 810 893 992
EBITDA 556 752 778 858 581 665
% chg 163.7 35.3 3.5 10.2 (32.3) 14.5
(% of Net Sales) 35.3 37.4 30.8 30.6 21.0 21.7
Depreciation& Amortisation 72 93 138 196 209 248
EBIT 484 659 641 662 372 417
% chg 232.4 36.1 (2.8) 3.2 (43.8) 12.0
(% of Net Sales) 30.8 32.8 25.3 23.6 13.4 13.6
Interest & other Charges 23 52 110 152 148 133
Other Income 8 9 15 20 17 18
(% of PBT) 1.6 1.5 2.8 3.9 6.9 6.1
Recurring PBT 469 617 546 530 241 302
% chg 303.6 31.6 (11.5) (2.8) (54.6) 25.6
Extraordinary Expense/(Inc.) - - - - - -
PBT (reported) 469 617 545 530 241 302
Tax 161 209 182 177 60 100
(% of PBT) 34.3 33.8 33.4 33.3 25.0 33.0
PAT (reported) 308 408 364 354 180 202
ADJ. PAT 308 408 364 354 180 202
% chg 285.7 32.5 (10.9) (2.8) (49.0) 12.2
(% of Net Sales) 19.6 20.3 14.4 12.6 6.5 6.6
Basic EPS (`) 26 34 15 15 8 9
Fully Diluted EPS (`) 26 34 15 15 8 9
% chg 288.9 34.5 (55.5) (2.7) (49.0) 12.2

8. Madras Cements | 2QFY2011 Result Update
October 25, 2010 8
Balance Sheet (Standalone)
Y/E March (` cr) FY07 FY08 FY09 FY10 FY11E FY12E
SOURCES OF FUNDS
Equity Share Capital 12 12 24 24 24 24
Preference Capital - - - -
Reserves& Surplus 654 942 1,236 1,534 1,671 1,845
Shareholders’ Funds 666 954 1,260 1,558 1,694 1,868
Total Loans 677 1,636 2,463 2,567 2,467 2,217
Deferred Tax Liability 226 363 490 585 585 585
Total Liabilities 1,569 2,952 4,214 4,710 4,746 4,670
APPLICATION OF FUNDS
Gross Block 1,799 2,714 3,918 4,811 4,911 5,511
Less: Acc. Depreciation 718 808 918 1,119 1,327 1,575
Net Block 1,081 1,906 3,000 3,693 3,584 3,936
Capital Work-in-Progress 178 576 635 318 418 268
Goodwill - - - - - -
Investments 89 89 89 89 89 89
Current Assets 615 779 914 1,135 1,184 1,012
Cash 57 23 39 35 47 32
Loans & Advances 365 452 456 532 532 532
Other 194 304 419 568 605 448
Current liabilities 395 402 440 546 550 656
Net Current Assets 220 378 473 589 634 356
Mis. Exp. not written off 2 3 16 21 21 21
Total Assets 1,569 2,952 4,214 4,710 4,746 4,670

9. Madras Cements | 2QFY2011 Result Update
October 25, 2010 9
Cash flow statement (Standalone)
Y/E March (` cr) FY07 FY08 FY09 FY10 FY11E FY12E
Profit before tax 469 617 545 530 241 302
Depreciation 72 93 138 196 209 248
Change in Working Capital (64) (72) 114 121 (52) 262
Less: Other income 8 9 15 20 17 18
Direct taxes paid 161 209 182 177 60 100
Cash Flow from Operations 308 420 600 651 321 694
(Inc)/ Decin Fixed Assets (326) (1,314) (1,262) (576) (200) (450)
(Inc)/ Dec in Investments - - - - - -
Other income 8 9 15 20 17 18
Cash Flow from Investing (318) (1,304) (1,247) (556) (183) (432)
Issue of Equity - - - - - -
Inc./(Dec.) in loans 75 958 828 103 (100) (250)
Dividend Paid (Incl. Tax) 35 56 56 50 25 28
Others 23 52 110 152 - -
Cash Flow from Financing 17 850 662 (98) (125) (278)
Inc./(Dec.) in Cash 7 (34) 16 (3) 12 (16)
Opening Cash balances 49 57 23 39 35 47
Closing Cash balances 57 23 39 35 47 32

10. Madras Cements | 2QFY2011 Result Update
October 25, 2010 10
Key ratios
Y/E March FY07 FY08 FY09 FY10 FY11E FY12E
Valuation Ratio (x)
P/E (on FDEPS) 3.9 2.9 6.6 6.8 14.9 13.3
P/CEPS 3.2 2.4 4.8 4.4 6.9 6.0
P/BV 1.8 1.3 1.9 1.5 1.6 1.4
Dividend yield (%) 2.9 4.7 2.3 2.1 0.9 1.1
EV/Sales 1.1 1.3 1.8 1.7 1.7 1.5
EV/EBITDA 3.0 3.5 6.0 5.6 8.3 6.7
EV / Total Assets 1.1 0.9 1.1 1.0 1.0 1.0
Per Share Data (`)
EPS (Basic) 25.5 34.3 15.3 14.9 7.6 8.5
EPS (fully diluted) 25.5 34.3 15.3 14.9 7.6 8.5
Cash EPS 31.5 42.1 21.1 23.1 16.4 18.9
DPS 2.9 4.7 2.3 2.1 1.1 1.2
Book Value 55.2 80.1 53.0 65.5 71.2 78.5
DuPont Analysis
EBIT margin 30.8 32.8 25.3 23.6 13.4 13.6
Tax retention ratio 65.7 66.2 66.6 66.7 75.0 67.0
Asset turnover (x) 1.2 0.9 0.7 0.6 0.6 0.7
ROIC (Post-tax) 24.0 19.6 12.0 10.0 6.0 6.0
Cost of Debt (Post Tax) 2.3 3.0 3.6 4.0 4.4 3.8
Leverage (x) 1.1 1.2 1.7 1.7 1.5 1.3
Operating ROE 48.2 40.1 26.8 20.2 8.2 8.7
Returns (%)
ROCE (Pre-tax) 35.1 29.1 17.9 14.8 7.9 8.9
Angel ROIC (Pre-tax) 41.5 37.1 22.2 17.0 8.7 9.8
ROE 58.2 50.4 32.9 25.1 11.1 11.4
Turnover ratios (x)
Asset Turnover (Gross Block) 0.9 0.9 0.8 0.6 0.6 0.6
Inventory / Sales (days) 27 34 41 48 57.9 49.5
Receivables (days) 13 12 11 16 19.4 13.3
Payables (days) 112 115 88 93 91.4 91.9
WC cycle (ex-cash) (days) 25 47 57 64 75.2 54.3
Solvency ratios (x)
Net debt to equity 0.8 1.6 1.9 1.6 1.4 1.1
Net debt to EBITDA 1.0 2.1 3.0 2.9 4.1 3.2
Interest Coverage (EBIT / Int.) 21.2 12.7 5.8 4.4 2.5 3.1

11. Madras Cements | 2QFY2011 Result Update
October 25, 2010 11
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Madras Cements
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 ` 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%)