SUBMITTED TO

Prof. Hemant Kulkarni

SUBMITTED BY
Aditya Bikram Singh 2016E01
Somya Goyal 2016E48
VALUATION OF
ULTRATECH CEMENT
Economy, Industry & Company Analysis

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Table of Contents
Introduction .................................................................................................................................................. 2
Economy Analysis.......................................................................................................................................... 2
GDP/GNP projections of the country .................................................................................................... 2
World economy trend and impact on our economy ............................................................................ 3
Shift towards /away from specific economy sectors ............................................................................ 3
Inflation expectations. .......................................................................................................................... 4
Economic performance expectations (Growth expectations for India vis--vis world) ....................... 5
Choice of industries based on global trends ......................................................................................... 5
Industry Analysis ........................................................................................................................................... 6
Permanence of Industry........................................................................................................................ 6
Competition .......................................................................................................................................... 7
Other Problems ..................................................................................................................................... 8
Michael Porters Structural Analysis ...................................................................................................... 9
SWOT Analysis....................................................................................................................................... 9
Company Analysis ....................................................................................................................................... 11
Fund flow analysis ............................................................................................................................... 11
Profitability analysis ............................................................................................................................ 11
Trend analysis ........................................................................................ Error! Bookmark not defined.
An assessment of quality of assets ..................................................................................................... 11
Ratio analysis ...................................................................................................................................... 11
Sustainable growth of the company ................................................................................................... 13
Common size analysis ......................................................................................................................... 14
Intrinsic Value of Ultratech cement .................................................................................................... 17
References: ................................................................................................................................................. 17

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Ultratech Cement
Introduction
The company is part of the Aditya Birla Group and division of Grasim Industries

Parent Company Grasim Industries

Category Construction Materials- Cement
Sector Real Estate and Constructions
STP
Segment Tier I/ II/ III cities, Public Sector/ Private Sector, Customer/ Builder
Target Customers and Builders in both Public and Private sector in all tier cities
Positioning High strength and reliable cement

Economy Analysis

GDP/GNP projections of the country

The Indian economy has sustained a macro-economic environment of relatively lower inflation, fiscal
discipline and moderate current account deficit coupled with broadly stable rupee-dollar exchange rate.

2
 The growth of infrastructure is directly related to the GDP (gross domestic product)
growth.
The realistic prediction for GDP growth is in the range of 7 to 7.5 per cent for the current
fiscal.
And going by that estimate, cement demand would rise by seven to 8 per cent, or may
touch 8.5 per cent. The production in FY15 was around 270 million tons (MT).
But with demand growth showing a sluggish trend during the first half of FY16, the pace
of recovery in cement industry is expected to be moderate at 3.8-4.0% during 2015-16

World economy trend and impact on our economy

Global growth has been tepid since the global financial crisis broke out almost 10 years ago, having
declined from an average of 4.5% during the five years preceding the crisis to 3.5% over the past five
years. Both advanced economies and emerging markets have suffered. Growing significantly faster than
global gross domestic product (GDP) in the pre-crisis period on the back of global production chains, the
extent of decline in global trade is particularly surprising, considering that the G-20 moved nimbly to
forestall a cascading Smoot-Hawley type protectionist response that occurred during the Great
Depression of the 1930s.
Indian growth and exports have also shrunk. Central Statistics Organization and International Monetary
Fund numbers indicate that India is now the fastest growing major economy in the world. The divergence
between macro growth estimates and other indicators such as Index of Industrial Production, exports,
corporate profits, credit growth, investment data has, however, fueled speculation that Indias growth
may have suffered as much as China.

Shift towards /away from specific economy sectors

It is clearly understood from the graph that, the primary sector which mainly constitutes Agriculture is
declining. However, the growth of secondary sector has been very slow vis-a-vis the services clearly
indicating that there is a lot of scope for the growth of secondary sector in India.
Manufacturing holds a key position in the Indian economy, accounting for nearly 16 percent of the real
GDP in FY12 and employing about 12 percent of the countrys labor. Growth in the sector has been strong,
outpacing overall GDP growth since the past few years.

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During a decadal shift in policy regulations, urban development and professional attitudes, the growth of
Indias leading cities and the evolution of some of our major commercial office spaces has emerged as the
backbone of Indias organized real estate landscape.
Indias housing landscape also witnessed vast transformations over the last 10 years, shifting from largely
independent low-rise plotted developments to high-rise apartment complexes.

Inflation expectations.
The official inflation rate dipped to 1.5% last month, the lowest in almost two decades.
Inflation displayed a mixed picture in FY17. While retail (CPI) inflation moderated during the course of the
year, from 5.4% in Apr16 to 3.8% in Mar17, aided by lower food prices, the wholesale price index (WPI)
inflation increased continuously during the year from 0.8% in Apr16 to end the year at 5.7% in March17
with the increase in fuel and manufactured good prices. Inflation (WPI and CPI) continued to be within
the RBIs target levels of 4% with a band of -/+ 2%.

Consumer prices in India went up 5.69 percent year-on-year in January of 2016, higher
than 5.61 percent in December of 2015 and accelerating for the sixth straight month.
It is the highest figure since August of 2014 and above market expectations of 5.4
percent.
Food inflation increased to 6.85 percent from 6.4 percent in December, also the highest
in seventeen months
Inflation Rate in India averaged 7.90 percent from 2012 until 2016, reaching an all time
high of 11.16 percent in November of 2013 and a record low of 3.69 percent in July of
2015
In the ongoing fiscal, there is an upside risk to the inflation due to a possible increase in global crude oil
prices and firming up of global metals prices.

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Economic performance expectations (Growth expectations for India vis--vis world)
The Indian economy is expected to embark on higher economic growth trajectory in FY18 owing to
proactive measures taken by the government as well as favorable economic conditions expected to prevail
during the course of the year.

The main driving forces in FY18 would be

Increased government spending in infrastructure
Pick up in private investment
Good monsoon
Expected surge in consumer spending with pent up demand being satiated
The Goods and Services Tax (GST), which was implemented from July 1, 2017, has potential to spur the
economy further
The economic outlook of the Indian economy looks positive with the country expected to grow at more
than 7.5% in FY18 before moving past the 8% trajectory in FY19. Certain threats, however, prevail in terms
of upside risk to inflation, increasing global commodity prices especially crude oil prices, slower growth in
investment and credit, rising bad loans issue and uncertain trade prospects with appreciating rupee and
uncertain global economic conditions. Globally, protectionism adopted by the US and higher interest rates
by the Fed, revival in European countries and higher growth in China causing diversion of funds from India
could counter the prospective growth story of the country, going ahead.

Choice of industries based on global trends

India is the second largest producer of cement in the world. India's cement industry is a
vital part of its economy, providing employment to more than a million people, directly
or indirectly.
The Indian cement industry with a total capacity of 390 million tons (MT) is the 2nd
largest market after China accounting for about 8% of the total global production.
Cement is a cyclical commodity with a high correlation with GDP.
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.
Expecting such developments in the country and aided by suitable government foreign
policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, and Vicat
have invested in the country in the recent past.
A significant factor which aids the growth of this sector is the ready availability of the
raw materials for making cement, such as limestone and coal.
The housing sector is the biggest demand driver of cement, accounting for about 67% of
the total consumption. The other major consumers of cement include infrastructure
(13%), commercial construction (11%) and industrial construction (9%)
The country's per capita consumption stands at around 190 kg.
The Indian cement industry is dominated by a few companies. The top 20 cement
companies account for almost 70 per cent of the total cement production of the country.
A total of 188 large cement plants together account for 97 per cent of the total installed

5
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.

Industry Analysis

Introduction

India is the second largest producer of cement in the world. No wonder, 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.

Market Size

Cement prices in India recorded a 6.7 per cent month-on-month growth in April 2017, thereby indicating
the probability of growth in volume and profitability of cement companies in the quarter ending June
2017.

The housing sector is the biggest demand driver of cement, accounting for about 67 per cent of the total
consumption in India. The other major consumers of cement include infrastructure at 13 per cent,
commercial construction at 11 per cent and industrial construction at 9 per cent.
The cement capacity in India is estimated to be at 420 MT as of March 2017 with production growing at
5-6 per cent per year. The country's per capita consumption stands at around 225 kg.
The Indian cement industry is dominated by a few companies. The top 20 cement companies account for
almost 70 per cent of the total cement production of the country. A total of 188 large cement plants
together account for 97 per cent 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.

Permanence of Industry

a. Foreseeable growth. (domestic vs export opportunities)

The eastern states of India are likely to be the newer and virgin markets for cement companies and could
contribute to their bottom line in future. In the next 10 years, India could become the main exporter of
clinker and gray cement to the Middle East, Africa, and other developing nations of the world. 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.
A large number of foreign players are also expected to enter the cement sector, owing to the profit
margins and steady demand. In future, domestic cement companies could go for global listings either
through the FCCB route or the GDR route.

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With help from the government in terms of friendlier laws, lower taxation, and increased infrastructure
spending, the sector will grow and take Indias economy forward along with it.

b. Threat of obsolescence etc.

Delay in awarding infrastructure projects by the government agencies and further hardening of fuel and
power costs may also prove to be hurdles to growth. Non-availability of sand and aggregates impacting
construction activities, are also the possible dampener of growth. According to the Cement
Manufacturers Association (CMA), the industry had a decline of 1 per cent last fiscal although the CAGR
growth of the industry of last five years was around 4 per cent

Competition

a. Present demand Vs Capacity

Demand Drivers
Demand for cement is highly correlated with cyclical activities like construction and development.
Housing sector accounts for a significant 67 per cent of the total cement demand (USA: 22 per cent; China:
25 per cent; Brazil 56 per cent)
Real estate market is expected to grow at a CAGR of 17.2 per cent during 201115 to USD126 billion. It is
anticipated to reach USD180 billion by 2020

Capacity Additions
Total cement production capacity in India stood at 395 million in FY16.
The strong momentum in capacity addition is not surprising given the sharp growth in construction,
infrastructure and real estate in Indian economy. Hence, the 12th Five Year Plan is estimated to have an
additional capacity requirement of 139.7 million tons by FY17.The total FDI in cement and gypsum
industry reached USD3.11 billion, between April 2000-September 2016 Adani Cementation Ltd signed an
MoU with Gujarat government to set up a clinkering unit with an investment of US$ 840.20 million.
Companies like Ultratech Cement, Shree Cement and Vadraj Cement Ltd Signed MoUs with the Gujarat
government for setting up cement manufacturing plants in the state with investment of US$ 381.9 million
each.

b. Number of players
1. Ambuja Cement

2. ACC Limited

3. Shree Cement

4. The Indian Cement

5. JK Cements

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c. Competitive edge, Technology, Cost etc.

With 100+ Ready Mix Concrete (RMC) plants in 35 cities, UltraTech is the largest
manufacturer of concrete in India. It also has a slew of specialty concretes that meet
specific needs of discerning customers. Building Products business is an innovation hub that offers an
array of scientifically
engineered products to cater to new-age constructions. Aerated Autoclaved Concrete
(AAC) blocks are economical, light-weight blocks ideal for high-rise buildings, while Dry
Mix Products include waterproofing, grouting and plastering solutions designed for faster
completion of projects. The retail format of UltraTech Building Solutions offers a wide
range of construction products to the end customers under one roof.

Other Problems

a. Inadequate availability of wagons

Rail is the ideal mode of transportation for cement industry. However, there is a short supply of
wagons, particularly during the peak period. The detrimental policies of the railways have been
hampering the planned movement of cement to the consumption centers, adversely impacting the
production schedule and also increasing the overall transportation cost of cement. Rail share for
cement which was 53 per cent a couple of years back has come down to 35 per cent now.

b. Excess Cement Capacity

Mammoth mismatch between cement demand and its supply. Higher government
projections for infrastructure development in the country led the industry players to allocate
funds for capacity expansion. However, the cement demand, as projected, has not materialized,
despite the capacity having been created well in advance after making huge investments.

c. Use of fly ash unviable

Fly ash that created health and environmental hazards was being supplied by power plants to
cement companies free of cost. However, as per the order of the Ministry of Environment and
Forests, these power companies started charging for fly ash from November 2009. The Ministry
of Environment and Forests order has made it mandatory for the cement plants having captive
power plants to supply 20 per cent of the fly ash generated as free of cost to the small scale brick
manufacturers, etc. within the vicinity of 100 kms of their plants. Both these have severely
impacted the production cost of cement and also seriously threatened the fly ash recycling
potential in the country.

d. Environmental Issues
There are a number of environmental issues related to the cement sector, such as control
of air pollutants (dust and gaseous emissions), reduction of greenhouse gases (GHG), the

8
control of fugitive dust, utilization of hazardous wastes as alternate fuels and the
conservation of natural resources.

e. Govt. controls /Decontrols

The government of India (GoI) has allowed 100% Foreign Direct Investment (FDI) in the cement sector.
Cement and gypsum products have attracted FDI of INR 133.70 billion during April 2000 to February 2014.
To ensure uninterrupted and cheap supply of cement in various projects under central government,
MoRTH has launched an online platform in FY 201415 with the name INAM-PRO, which will facilitate
cement procurement and fulfil the demand-supply gap.

Michael Porters Structural Analysis

Entry Barriers- High Huge capital investments required present substantial barriers to entry and
achieving economies of scale
Suppliers Power- Moderate Cement players have to depend on the railways for carriage outward and
local coal companies for fuel, although diversification of freight options and fuel sources is diminishing
the suppliers power
Buyers Power- Low Substantial market concentration among large players ensures low bargaining
power of buyers
Substitute Threat- Low Although there are partial substitutes such as asphalt, glass, steel, wood, etc;
practically cement has no direct substitutes
Interfirm Rivalry- Low The Indian cement market is oligopolistic in nature, characterized by tacit
collusion, where large players partially control supply for better price disciple

SWOT Analysis
Strengths
The cement industry has many strengths to be considered. Cement is, literally, the building block of the
construction industry. Almost every building constructed relies on cement for its foundation. The cement
business is a $10 billion industry, measured by annual cement shipments. There is also a strong reputation

9
behind the cement industry. Cement is a solid material and consumers rarely have complaints about the
product. Regional distribution plants have also made cement widely available to any type of buyer.
Weaknesses
The cement industry is not without its drawbacks. The cement industry relies on construction jobs to
create a profit. But the cement industry heavily relies on weather. About two-thirds of cement production
takes place between May and October. Cement producers often use the winter months to produce and
stockpile cement, to meet demand. Another weakness is the cost of transport; the cost of transporting
cement is high and this keeps cement from being profitable over long distances. In other words, shipping
cement costs more than the profit from selling it.
Opportunities
The cement industries have opportunities as well. One such opportunity is the cement industry's
efficiency. The cement industry has recently streamlined its production efforts, using dry manufacturing
instead of wet, which is heavier and more time-consuming. The cement industry has also invested about
$6 billion in expansion efforts to meet unmet cement needs. Projections show that by 2012, the cement
industry will have 25 percent more production capabilities.
Threats
The nature of the economy has uncovered a number of threats to the cement industry. The cement
industry greatly relies on construction. The current economy has lessened the number of construction
jobs, which in turn hurts the cement industry. The cement industry controls the majority of the United
States market, but not all of it. About 11.5 metric tons of cement are imported annually to support the
unmet need. If other countries can produce and ship cement for a reduced price, the U.S. cement industry
is in danger. The U.S. government is also attempting to regulate the cement industry's waste. The
Environmental Protection Agency has introduced regulations for the cement industry to cut down
emissions.

The cement industry SWOT analysis indicates that the industry has been greatly affected by the economic
downturn. However, with investments, the industry believes it can rebuild and increase production. This
will lessen the need for foreign imports. The industry has become very renationalized because of the high
costs of transporting cement. However, the regional market caters to all types of jobs, from residential to
commercial projects, just within one region. And the shortened profitability period of cement has allowed
cement producers to stretch production across the year, to avoid overwork from May to December.

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Company Analysis

Fund flow analysis

Particulars Units 2016-17 2015-16
Net Worth represented by: -
Equity Share Capital Rs. Crs 275 274
Reserves & Surplus Rs. Crs 23,667 21,357
Net Worth Rs. Crs 23,941 21,632
Loan Funds * Rs. Crs 6,240 8,250
Deferred Tax Liabilities Rs. Crs 2,774 2,432
Capital Employed Rs. Crs 32,955 32,313
* Short Term Borrowings and Current maturities of Long Term debts have been included in Loan Funds.

Profitability analysis
Particulars FY 2017 FY 2016
Operating Profit Margin (%) 20.79 19.14
Net Profit Margin (%) 10.99 9.02

A higher operating margin is more favorable as it shows that company is making enough money from
its ongoing operations to pay for its variable and fixed costs.
High net profit ratio shows how well a company manages its expenses relative to its net sales and
what % of net profit company is earning out of total sales.

An assessment of quality of assets

Ultratech Cement has adequate liquidity and a strong Balance Sheet. CRISIL has re-affirmed its credit
rating as CRISIL AAA for Long Term and CRISIL A1+ for Short Term.

Ratio analysis

Ratios Mar '17 Mar '16 Description

Profitability Ratios
Operating Profit Margin (%)
Gross Profit Margin (%)
A higher operating margin is more favorable as it shows
20.79 19.14 that company is making enough money from its ongoing
operations to pay for its variable and fixed costs.
15.49 13.8 Higher ratio shows how efficiently the business can
produce and sell products

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Net Profit Margin (%)
Return On Equity (%)
Return on Assets (%)
Return on Long Term Funds
(%)
Liquidity and Solvency Ratios
Current Ratio
Quick Ratio
Debt Equity Ratio
Long Term Debt Equity Ratio
Debt Coverage Ratios
Interest Cover
Management Efficiency Ratios
Inventory Turnover Ratio
Debtors Turnover Ratio
Investments Turnover Ratio
Fixed Assets Turnover Ratio
Total Assets Turnover Ratio
Cash Flow Indicator Ratios
Dividend Payout Ratio Net
Profit
High ratio shows how well a company manages its
10.99 9.02 expenses relative to its net sales and what % of net profit
company is earning out of total sales.
10.97 10.48 Higher ratio indicates that the company is using its
investors' funds effectively.
Higher ratio shows that the company is more effectively
872.14 755.6 managing its assets to produce greater amounts of net
income.
15.49 15.33 Higher ratio shows that company is getting better return
on the long term funds
<2 shows that the company will find some problem in
0.7 0.59 meeting the short term obligation with its short term
assets
0.55 0.52 <1 shows that the company could pay off its current
liabilities without selling any long-term assets
0.22 0.23 A lower debt to equity ratio (<1) usually implies a more
financially stable business.
0.18 0.12 <0.5 is considered good or healthy.
Ratio shows that company is making enough money from
7.63 7.05 its current operations to pay the current interest rates 7.63
times over. Company is extremely liquid and shouldnt
have problem getting a loan to expand.
12.21 11.27 This shows that the company sells the inventory 12 times
to what it buys.
A ratio of 17 means that the company collected its average
17.76 18.42 receivables 17 times during the year. It shows quality of
credit sales and receivables
12.21 11.27 Higher ratio shows ability of a management team to
generate revenue with a specific amount of funding.
0.95 0.7 A low turn over indicates that the company isnt using its
fixed assets to their fullest extent.
0.83 0.95 A low turn over indicates that the company isnt using its
total assets to their fullest extent.
This ratio shows 9.92% dividend is paid to the investors out
9.92 11.98 of total net profit but this ratio decreases from the last
year
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 This ratio shows 6.69% dividend is paid to the investors out
Dividend Payout Ratio Cash
6.69 7.52 of total cash profit but this ratio decreases from the last
Profit
year

Sustainable growth of the company

Sustainable Growth = Retention Ratio X ROE

ROE=PAT/NW=PAT/ PBT X PBT/ Sales X Sales/ TA x TA/ NW

ROE=Tax Rate X Profitability Margin X Turnover X Leverage

2013 2014 2015 2016 2017

PAT/PBT 0.69 0.77 0.70 0.71 0.70

Sales/TA 0.75 0.69 0.66 0.64 0.63

TA/NW 1.80 1.74 1.87 1.83 1.64

PBT/Sales 0.19 0.13 0.12 0.13 0.15

Retention Ratio 0.91 0.88 0.88 0.89 0.90 0.89

ROE 17.43% 12.54% 10.68% 10.49% 10.98% 12.42% AAGR

Sustainable
Growth 15.81% 11.10% 9.37% 9.33% 9.83% 11.09% AAGR

Actual eps 95.32 76.67 71.59 86.37 95.72

- -
Growth in EPS 0.20 0.07 0.21 0.11 0.01 AAGR

CAGR 0.10% CAGR

2,655.4 2,144.4 2,014.7 2,174.6 2,627.7

Actual Profits 3 7 3 5 2

Growth in - -
profits 0.19 0.06 0.08 0.21 0.01 AAGR

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 CAGR -0.26% CAGR

Common size analysis

Balance Sheet Analysis

Ultratech Cement JK Cement
Amount % Amount % Amount % Amount %
Mar-15 Mar-16 Mar-17 Mar-17

EQUITIES AND
LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 274.4 1% 274.43 1% 274.51 1% 58.85 1%
Total Share Capital 274.4 1% 274.43 1% 274.51 1% 58.85 1%
Reserves and Surplus 18,583.28 53% 20,461.66 54% 23,666.50 60% 1,322.84 29%
Total Reserves and
18,583.28 20,461.66 54% 23,666.50 1,322.84
Surplus 53% 60% 29%
Total Shareholders
18,857.68 20,736.09 55% 23,941.01 1,381.69
Funds 54% 61% 30%
NON-CURRENT
LIABILITIES
Long Term Borrowings 4,613.75 13% 2,490.84 7% 4,200.12 11% 1,590.06 35%
Deferred Tax Liabilities
2,792.01 3,227.37 9% 2,773.56 140.27
[Net] 8% 7% 3%
Other Long Term
1.34 7.98 0.02% 37.27 3.63
Liabilities 0.004% 0.09% 0.08%
Long Term Provisions 163.36 0.46% 180.77 0.48% 270.73 1% 10.77 0.23%
Total Non-Current
7,570.46 5,906.96 16% 7,281.68 1,744.73
Liabilities 21% 19% 38%
CURRENT LIABILITIES
Short Term Borrowings 1,898.08 5% 2,339.07 6% 1,015.84 3% 376.25 8%
Trade Payables 2,738.97 8% 1,613.57 4% 1,713.80 4% 264.78 6%
Other Current Liabilities 3,010.11 9% 6,310.49 17% 159.43 0.41% 808.5 18%
Short Term Provisions 1,139.65 3% 945.9 2% 5,169.33 13% 7.46 0.16%
Total Current Liabilities 8,786.81 25% 11,209.03 30% 8,058.40 21% 1,456.99 32%
Total Capital And
35,214.95 37,852.08 100% 39,281.09 4,583.41
Liabilities 100% 100% 100%
ASSETS
NON-CURRENT ASSETS
Tangible Assets 20,878.66 59% 22,434.71 59% 22,898.23 58% 2,824.00 62%

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 Intangible Assets 68.8 0.20% 98 0.26% 333.53 1% 1.68 0.04%
Capital Work-In-
2,068.85 1,414.48 4% 877.76 205.08
Progress 6% 2% 4%
Intangible Assets Under
4.84 1.08 0.00% 0.63 0.66
Development 0.01% 0.002% 0.01%
Fixed Assets 23,021.15 65% 23,948.27 63% 24,110.15 61% 3,031.42 66%
Non-Current
2,685.77 3,080.51 8% 2,002.72 309.49
Investments 8% 5% 7%
Long Term Loans And
1,595.61 1,617.84 4% 55.53 54.36
Advances 5% 0.14% 1%
Other Non-Current
0 14.46 0.04% 637.64 59.27
Assets 0.00% 2% 1%
Total Non-Current
27,302.53 28,661.08 76% 26,806.04 3,454.54
Assets 78% 68% 75%
CURRENT ASSETS
Current Investments 2,522.98 7% 2,027.61 5% 5,405.95 14% 499.7 11%
Inventories 2,751.41 8% 2,426.09 6% 2,224.99 6% 277.64 6%
Trade Receivables 1,203.19 3% 1,414.89 4% 1,276.17 3% 89.5 2%
Cash And Cash
213.94 2,235.20 6% 2,217.74 8.98
Equivalents 1% 6% 0.20%
Short Term Loans And
1,204.91 1,058.14 3% 123.95 0
Advances 3% 0.32% 0.00%
OtherCurrentAssets 15.99 0.05% 29.07 0.08% 1,226.25 3% 253.05 6%
Total Current Assets 7,912.42 22% 9,191.00 24% 12,475.05 32% 1,128.87 25%
Total Assets 35,214.95 100% 37,852.08 100% 39,281.09 100% 4,583.41 100%

Interpretation:

Reserve and surplus are increasing from 53% to 60%indicates that company is making more profit
and after giving desired dividend to the shareholders, an ample amount of money is left to reinvest
in business.
Ultratech cement's equity is more than that of its competitor and shows less dependency on debt.
In year 2016, company was least dependent on long term debt and more on short term debt
indicates the low working capital at that time.
In year 2016, apart from payables and short term borrowings, all other current assets decreased
from9% to 0.41% that makes the company to pay its short term obligation easily as current assets
are increasing from 22% in 2015 to 32% in 2017.
JK Cement on the contrary in 2017 would not be able to pay its short term obligation on time.

15
P & L Statement Analysis
Ultratech Cement JK Cement
Amount % Amount % Amount % Amount %
Mar-15 Mar-16 Mar-17 Mar-17
23,307.9 24,342.5 100 24,551.3 2,980.2
100%
Total Revenue 5 2 % 8 100% 2 100%
Cost Of Materials
3,280.62 14% 3,553.71 15% 3,467.82 524.94
Consumed 14% 18%
20,027.3 20,788.8 21,083.5 2,455.2
Gross profit 86% 85%
3 1 6 86% 8 82%
Operating Expenses 1497.75 6% 1768.89 7% 11741.9 48% 445.41 15%
Finance Costs 547.45 2% 505.29 2% 571.39 2% 188.65 6%
Depreciation And
1,133.11 5% 1,289.03 5% 1,267.87 172.37
Amortisation Expenses 5% 6%
13,962.7 14,168.6 1,574.6
Other Expenses 60% 58%
7 4 3,712.76 15% 5 53%
20,421.7 21,285.5 20,761.7 2,906.0
Total Expenses 88% 87%
0 6 4 85% 2 98%
-
0.00
0 0 0% -13.69 0.06
Exceptional Items % 0
% 0%
Profit/Loss Before Tax 2,886.25 12% 3,056.96 13% 3,775.95 15% 74.2 2%
-
Total Tax Expenses 871.52 4% 882.31 4% 1,148.23 -7.8 0.26
5% %
Profit/Loss For The
2,014.73 9% 2,174.65 9% 2,627.72 82
Period 11% 3%

Interpretation:

From 2015 to 2017, there is no much change in gross profit of the company indicates that company
is not doing or using any new technology to decrease their cost of goods sold to increase their
revenue.
On the other hand, there is not much difference in gross profit of Ultratech and its competitor.
There is a sudden hike in operating expenses of the company from 6% in 2015 to 48% in 2017 which
is very greater than its competitors.
But at the same time, company manages to reduces its other expenses from 60% to 15% that results
in increase in their net profit by 2%.

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Intrinsic Value of Ultratech cement
Model 1: P/E Model
Calculation of Intrinsic Value of Ultratech Cement
Average Dividend payout ratio (DPOR) 15%
Average Retention Ratio (1- Average DPOR) 85%
Average Return on Equity (ROE) 11.93%

Growth in Equity (Average Retention Ratio * Average ROE) 10.14%

Normalized Average PE ratio 36.36

Long term growth in dividend and Equity ( average PE ratio *
average retention ratio) 30.9
Projected EPS [EPS*(1+Growth in Equity)] 105.4444458
Intrinsic value (Average PE ratio * Projected EPS) 3833.977874
*All the numbers except percentage are in Rs./share.

Comparison with market price & clear buy / sell / hold recommendation

Intrinsic value/share'17 3838.13

Market Price/share'17 3968.45
Eps CAGR 19%

As the intrinsic value is near to the market price of the value and cement industry is expected to
grow at about 7% in this fiscal year is also showing growth as per the current scenario, so it is
suggested to HOLD the shares of Ultratech cement.

References:
1. Company Annual Reports
2. Centre for Monitoring Indian Economy (CMIE)
3. http://www.livemint.com/Opinion/ODKLk4hpJ9zbePQM3eD2OI/India-in-the-global-
economy.html
4. www.careratings.com/upload/NewsFiles/Economics/Prognosis%20FY18.pdf
5. www.careratings.com/upload/NewsFiles/Economics/Prognosis%20FY18.pdf
6. https://www.ibef.org/industry/cement-india.aspx
7. https://www.scribd.com/doc/241563335/PORTER-S-FIVE-FORCES-ANALYSIS-OF-CEMENT
CONSTRUCTION-AND-AUTOMOBILE-INDUSTRY
8. http://economictimes.indiatimes.com/articleshow/58998845.cms?utm_source=contentofintere
st&utm_medium=text&utm_campaign=cppst

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9. http://capitalquery.com/index.php/technicalanalysis/stocks/ULTRACEMCO~~TrendAnalysis/3-
Year
10. http://www.moneycontrol.com/financials/ultratechcement/ratios/UTC01
11. http://economictimes.indiatimes.com/industry/indl-goods/svs/cement/cement-industry-to-
grow-at-about-7-per-cent-in-fy17-heidelberg-cement-india/articleshow/58998845.cms
12. http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php

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