ENAM Securities
India Research
ENAM Research is available on Bloomberg (ENAM <Go>), Reuters.com and Firstcall.com 30 September 2008
Cement Skim
SECTOR UPDATE Sector avg. upside: 35% to 55%
(mkt cap wtd)
Relative Performance
40
100
160
Jul-07
Jan-08
Jul-08
ENAM Cement Sector index
Sensex
Source: Bloomberg, ENAM Research
Our Current Ratings
Co
Name
EV/ Ton#
($)
Tgt
Price
%
Upside
Rel. to
sec*
ACC
82 684
12
UP
ACEM
108
88
12
UP
Grasim
58 2,927
73
OP
UTCEM
61 854
62
OP
ICEM
75 177
43
N
MC
72 3,237
59
OP
SRCM
23 1,253
146
OP
PRSC
32
43
56
OP
Source: ENAM Research; *All recommendations
are relative to sector avg. OP: Outperformer;
N: Neutral; U: Underperformer, #: FY10E
Capacity additions (ENAM Estimates)
(mn tonnes)
FY09
FY10
North
10
4
East
1
8
South
14
11
West
5
2
Central
1
6
All India
30
30
Year end Capacity
225
255
Effective Supply*
191
225
Demand @
9%
8%
Demand (mn tonnes)
183
197
Demand/Eff. Supply
96%
88%
PREDATORS ON PROWL
Almost eight years ago, Russian cement assets were available for a
bargain of USD 10/ tonne, while the normal global deal was at USD
250/ tonne (Cemex-Southdown US deal). Last weak, a Russian
Cement Co (Euro Cement) acquired a 6.5% share in Holcim – world’s
largest cement producer, sending the stock up by 40% in a matter of
few days (Refer to page 6 for Holcim's top five shareholders). The
stock, however corrected after clarification on ‘no open offer/hostile
takeover’. Given the current attractive market valuation of Indian
cement cos, we expect consolidation activity to pick up.
Holcim Stock price
Recent M&A deals in India
(CHF)
60
70
80
90
100
Jul-08
Aug-08 Sep-08
Target
Acquirer
Stake
acq. (%)
Val (EV/
ton - $)
Jun-08 Sagar
Cements
Vicat,
France
6.7
110
Mar-08 Myhome
Indus.
CRH
Group
50.0
196
Dec-07 Digvijay
Cement
Cimpor,
Portugal
53.