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    Heidelberg Cem.

    HEIDELBERGNeutral
    Construction Materials·20 Jul 2023
    Management Summary

    HeidelbergCement India reported a mixed Q1 FY24, achieving robust volume growth and a significant PAT increase, primarily driven by effective cost management. Despite a 10% YoY decline in EBITDA per ton and lower realizations, the company maintained a strong financial position with healthy cash balances. Strategic focus remains on increasing green power usage, optimizing sales mix, and executing planned capacity debottlenecking amidst intensifying competition and price pressure in key markets.

    Highlights

    8

    • Volume growth stood at 8.2% YoY, reaching 75% capacity utilization.

    • EBITDA per ton was INR 772, marking a 10% drop YoY from INR 855 in Q1 FY23.

    • Revenue increased by 1% YoY, while PAT saw a significant 50% increase.

    • Realization per ton declined by 6.7%, but costs were managed, decreasing by 6.1%.

    • Green power share increased to 33%, with an ambitious target to cross 40% next year.

    • Net cash and bank balance stood at INR 4,093 million, with INR 2,010 million in debt.

    • The company targets 7-8% volume growth for the full FY24.

    • A debottlenecking project of INR 70 crores is underway to add 200,000 tons of cement capacity by December 2024.

    What Changed3

    vs Q4 FY24

    Tone shiftMixed → NeutralGuidance items9 → 11 (+2)Risks discussed6 → 4 (-2)

    Key financials

    Single quarter

    15 metrics
    1. 01Volume Growth8.2%+8.2%YoY
    2. 02Capacity Utilization75%
    3. 03EBITDA/ton₹772-10%YoY
    4. 04Revenue Growth1%+1%YoY
    5. 05PAT Growth50%+50%YoY

    Guidance & targets

    11
    CategoryTargetPriority
    Green Power
    Green Power Share
    40%
    		High
    Capacity
    Debottlenecking Capacity Addition
    200,000 tons
    		High
    Capacity
    Gujarat Expansion (Clinker)
    2 million tons
    		Medium
    Capacity
    Gujarat Expansion (Grinding)
    3.5 million tons
    		Medium
    Capacity
    Debottlenecking Benefit Realization
    —
    		High
    Cost
    Fuel Prices
    further softening
    		Medium
    Volume
    Volume Growth
    7-8%
    		High
    Capex
    Debottlenecking Capex
    INR 70 crores
    		High
    Capex
    Regular Capex
    INR 40-45 crores
    		High
    Capex
    Total Capex FY24
    INR 75 crores
    		High
    Capex
    Debottlenecking Capex Spillover
    INR 40 crores
    		High

    Risks & concerns

    6
    RiskSeverity

    Intensifying competition from new capacities

    Competition is intensifying with new capacities, specifically around their plant, coming up very aggressively. — Management acknowledged

    medium

    Unseasonal rain episodes impacting crop output

    A few unseasonal rain episodes might lead to slightly lower rabi crop output. — Management acknowledged

    low

    Cement prices under pressure during monsoon season

    Cement prices are traditionally under pressure in the current season due to rains, though management does not see it as alarming. — Management acknowledged

    medium

    Pricing pressure due to capacity expansion

    Pricing would be under pressure due to market expansion, though healthy demand growth is expected to absorb it. — Management acknowledged

    medium

    Areas of Evasion(2)

    • specific timeline for Zuari Cement merger
    • very long-term fuel price projections

    Q&A highlights

    3

    “Trade mix was 80% in the March quarter... premium product in March quarter was around 32%... lead distance, we don't think there is a major increase or decrease. So this quarter it is 361... Coal again is about flattish that's around it was 32% which is now 33%.”

    Provided crucial missing operational data for the previous quarter and current quarter, aiding in trend analysis.

    asked by Shravan Shah

    2 min read7 chapters

    Detailed Narrative

    01

    Q1 FY24 Performance Overview

    HeidelbergCement India reported an 8.2% YoY volume growth in Q1 FY24, achieving 75% capacity utilization. Revenue increased by 1% YoY, while PAT saw a robust 50% increase. However, EBITDA per ton declined by 10% YoY to INR 772, down from INR 855 in Q1 FY23, primarily due to a 6.7% drop in realization per ton. Despite this, the company managed to reduce overall costs by 6.1%.

    02

    Cost Management and Profitability Drivers

    The company's cost management efforts led to a 6.1% reduction in overall costs, offsetting some of the realization decline. An EBITDA bridge analysis showed a significant advantage of INR 334 per ton from power and fuel, while raw material impact was INR 26 per ton and freight had a negative impact of INR 62 per ton. Pet-coke prices saw a good 15% reduction from the previous quarter, with further softening anticipated in coming quarters.

    03

    ESG Initiatives and Green Power Adoption

    HeidelbergCement India continues its strong focus on ESG, operating with 100% blended cement and a CO2 footprint of 504 kg per ton. The company's green power share has increased to 33%, with an ambitious target to cross 40% next year. Alternative fuel usage stands at 6% of the total fuel mix, up 3% YoY, contributing to sustainability goals and cost efficiency.

    04

    Capacity Expansion and Future Outlook

    The company is undertaking a debottlenecking exercise in its central Damoh area, expected to be completed by December 2024, adding approximately 200,000 tons of cement capacity. This project involves a capex of INR 70 crores over 15-18 months, with benefits expected in FY25. A larger Gujarat expansion of 2 million tons clinker and 3.5 million tons grinding capacity is planned for FY27, pending environmental clearance.

    05

    Market Dynamics and Competitive Landscape

    The company's sales mix includes 30% premium products, up 8% YoY, and 82% trade sales. Road dispatches accounted for 45% of volumes. Management acknowledged intensifying competition from new capacities, including Dalmia's acquisition of JP assets, JK Cement's new operations, and Adani's expansion. Despite this, the company aims for 7-8% volume growth in FY24, focusing on defending core markets and growing in profitable segments.

    06

    Capex and Financial Position

    HeidelbergCement India maintains a strong financial position with a net cash and bank balance of INR 4,093 million and debt of INR 2,010 million. Total capex for FY24 is projected at INR 75 crores, comprising INR 45 crores for sustainable capex and INR 30 crores for debottlenecking. The remaining INR 40 crores for debottlenecking will spill over into FY25.

    07

    Digital Strategy Update

    The company is in the process of a complete revamp of its digital strategy, moving beyond WhatsApp-based pricing communication. The new holistic approach will encompass CRM and various social networking channels, with more details to be revealed once the program is fully in place.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.