SHARETIPSINFO >>Research Reports >>Binani Cement research report (14-01-2010)

COMPANY OVERVIEW:
Binani Cement ltd is the flagship subsidiary of Binani Industries ltd of Braj Binani Group.
Company has fully integrated cement plant in Sirohi with capacity of 6 MTPA. It also has 25 mw captive power plant which helps in reducing the cost of power. Company is planning to raise its production capacity to 14 mtpa by 2012.
Company is planning to invest Rs 800 crore in two for building a 2.5 million tons clinker plant in Gujarat.

Regional Market share:

Subsidiary:
Binani (Dubai): The Binani Cement Factory LLC, established in 1996 is located in Jebel Ali Industrial Area. The capacity of the plant is 1.2 mtpa.
Binani (Shanghai): The production capacity of the plant is 0.5 mtpa which is expected to be upgraded to 3 mtpa by 2011.

PRODUCT:
The company product portfolio includes ordinary Portland cement and Pozzolana Portland cement. Products are being marketed under the brand name of ‘Binani’.

Overseas Acquisition:
Company is in talk to acquire Turkish company for around Rs 1000 crore. This is the part of the strategy to grow inorganically.

PRODUCT MIX:

INDUSTRY OUTLOOK
Indian cement industry has total installed capacity of 219 million tons. It is the second largest cement producer in the world.
Industry is expected to do well at least for next 5 years. Higher government spending on infrastructure will keep the demand buoyant. Cement demand is expected to grow at 10% annually. While the global cement industry is growing at 5%. The per capita consumption of cement in India is low at 156 kg while globally it is at 396 kg.
Demand for cement is also expected to be good from the housing sector. There is short supply of houses which needs to be filled.
Government social projects under NAREGA scheme will also see good demand for cement. Overall cement sector will outperform market in coming quarters.

INVESTMENT RATIONAL:
Company planning to double its capacity in the growth market Dubai and China.
Good demand is expected from the Infrastructure and Housing projects.
Higher government expenditure on infrastructure makes it recession proof.
Recent hikes in cement prices will help the company to better its margin.
Company investment in brand will create loyal customer base.
Overseas acquisition by the company could add as trigger.

SHAREHOLDING PATTERN:

FINANCIAL:

Key Highlights:
CAGR IN TOTAL INCOME IS 36.2%.
CAGR IN PBDITA IS 31%.
CAGR IN PAT IS 26.8%.
RATIOS:

Key Highlights:
EPS has grown over the period of four years at CAGR of 26.8% to Rs 5.35.
PBDITA margin has shown rising trend from 22.9% to 34.9% in FY08 but after that suddenly fell in FY09 due to rising input cost of raw materials.
NPM has risen from 8.9% to 17.7% in FY08 but fell drastically in FY09.
Interest cover has risen from 2.69 to 3.1.

COMPARISION OF Q2FY2010 WITH Q2FY2009:

Key Highlights:
Total Income has increased by 56% in Q2FY10 to Rs 485.49 crore on YoY basis.
PBDITA has increased by 143%in Q2FY10 to Rs 163.28 crore on YoY basis.
PAT has increased by 277.2% in Q2FY10 to Rs 101.14 crore on YoY basis.

VALUATION &OUTLOOK:
At cmp of Rs 80 stock is trading at 6.4X to trailing twelve months earning. The industry average is 11X. If we value the company at 9X on conservative basis the stock fair value come at Rs 112.5.
Stock looks undervalued at current price. The expansion plan and acquisition could see the EPS doubling in the FY11.

CONCLUSION:
Investors with 6-8 months investment horizon could take position on the counter.

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