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(880) 171 417 8460; amin@eplbangladesh.com Md. Ashfaque Alam (Research Associate) ashfaque@bracepl.com
2008A 6,211.9 2,183.5 176.5 2008A 40.2% 35.2% 2.8% 2008A 159% NM 2008A 3.04 0.00 59.00 2008A 1,229.5 409.2 .0 2008A 145.3x 7.5x 5% 1% 4%
2009E 7,618.9 2,552.3 1,133.9 2009E 40.0% 33.5% 14.9% 2009E 23% 542% 2009E 19.53 0.00 78.53 2009E 956.1 359.1 .0 2009E 22.6x 5.6x 25% 6% 9%
2010E 8,391.7 2,811.2 1,458.3 2010E 40.0% 33.5% 17.4% 2010E 10% 29% 2010E 25.11 0.00 103.64 2010E 2,409.5 356.9 .0 2010E 17.6x 4.3x 24% 8% 10%
2008A 2009E 2010E 12,788.1 12,570.5 10,080.1 69.5 373% 72% 449.0 276% 66% 11.1 167% 55%
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The industry realized about 20% sales growth in 2009, mostly because of the latent demand from last years. On a secular basis, ongoing demand growth is expected to be about 8%, The outlook for the cement industry seems positive for a number of reasons. First, the government seems to be on a war footing to increase both the amount and the efficiency of spending in social and physical infrastructure under the Annual Development Programs (ADP). Second, the private sector is also energized because of certain tax advantages for undeclared funds if they are invested in real estate. Third, a number of large infrastructure construction projects (such as the Padma Bridge) are on the horizon. Both the government and the private sector are soliciting funds for such projects. If implemented, these projects would significantly improve demand for construction materials. The largest 10 cement manufacturers hold about 70% of the market share. While Heidelberg, Holcim and Lafarge are the leaders among multinational cement manufacturers; Shah, Akij and MI are the leading domestic manufacturers. Shah cement is the market leader with close to 12% of the market share, closely followed by Heidelberg with about 10% of the market share.
Under these assumptions, we conducted a comparative as well as a discounted cash flow (DCF) valuation using free cash flow to equity method (FCFE).
Lafarge valuation 2011 estimates Multiple Target price Average Target price 12-month target price Dividend yield Total return
Discounted FCF, MM Operating Cash Capital Expenditure Change in Debt 2009 2010
2013
2014
2015
2016
2017
2018
2019
956.1 2,409.5 2,165.2 2,640.3 3,607.9 4,114.0 4,619.5 5,020.1 5,405.4 5,803.4 6,229.1 (359.1) (356.9) (354.8) (352.7) (876.4) (677.0) (458.1) (412.3) (411.0) (409.8) (408.6) (217.6) (2,490.4) (1,501.1) (2,153.1) (972.7) (1,252.8) (422.9) (422.9) 379.4 (437.8) 309.4 .0 .0 .0 134.5 1,758.9 2,184.2 3,738.5 4,185.0 4,994.4 5,393.6 5,820.5
Net Terminal Value Terminal Value Terminal liabilities FCFE Discount Rate Terminal Growth Rate NPV NPV/Share 15% 8% 28,162.1 484.98 379.4 (437.8) 309.4
Based on the valuation, our 12-month target price in BDT 575.00, which implies a price of 20x 2011 earning of BDT 30.23. This target also implies a 4.5x 2011 BVPS of BDT 133.88. This price target, if achieved, will provide a 12-month price-return of 30%.
Based on the valuation based on these assumptions, our 12-month target price in BDT 350.00, which implies a price of 18.0x 2012 earning of BDT 18.81. This target also implies a 3.0x 2012 BVPS of BDT 128.89. This price target, if achieved, will provide a 12-month negative return of 21%.
Lafarge valuation 2012 estimates Multiple Target price Average Target price 12-month target price Dividend yield Total return
Income Statement
MM BDT Revenue COGS Gross profit/loss General and admin Selling and distribution Total expenses Other operating income Operating profit/loss Exchange gain/loss Finance expenses Interest income Other expenses/ (income) Worker's welfare fund Net profit/loss before tax Income tax PAT Number of shares MM EPS 2006 153.2 (111.3) 41.9 (164.7) (36.6) (201.4) .0 (159.5) (363.1) (163.7) .5 .3 .0 (685.4) (123.0) (808.4) 58.1 -13.92 2007 2,399.9 (2,532.4) (132.6) (263.9) (108.5) (372.4) 160.6 (344.4) 110.1 (1,138.3) .9 (6.2) .0 (1,377.8) 281.2 (1,096.5) 58.1 -18.88 2008 6,211.9 (3,712.6) 2,499.3 (362.0) (131.6) (493.6) 177.8 2,183.5 (331.8) (1,224.5) .6 (94.5) (49.5) 483.9 (307.3) 176.5 58.1 3.04 2009E 7,618.9 (4,571.3) 3,047.6 (380.9) (114.3) (495.2) .0 2,552.3 .0 (852.3) 5.2 .0 (85.3) 1,619.9 (486.0) 1,133.9 58.1 19.53 2010E 8,391.7 (5,035.0) 3,356.7 (419.6) (125.9) (545.5) .0 2,811.2 .0 (622.9) 4.6 .0 (109.6) 2,083.3 (625.0) 1,458.3 58.1 25.11 2011E 9,263.9 (5,512.0) 3,751.9 (463.2) (139.0) (602.2) .0 3,149.7 .0 (513.1) 3.3 .0 (132.0) 2,507.9 (752.4) 1,755.5 58.1 30.23
.0 (359.1) (359.1)
.0 (356.9) (356.9)
.0 (354.8) (354.8)
Balance Sheet
MM BDT Current assets Inventories Trade receivables Advances, deposits & prepayments Derivative instruments-assets Cash and cash equivalents Total current assets Fixed assets Property plant and equipment Intangible assets Deferred income tax assets Total fixed assets Total assets Current liabilities Trade payables Other payables Derivative instruments-liabilities Current portion of long term debt Bank overdrafts Short-term debt Income tax payable Total current liabilities Long term liabilities Long term debt Lease obligation Deferred tax Total long term liabilities Equity Share capital Accumulated loss Foreign currency translation Share holder's equity; parent company Share money deposits Total equity Total liabilities and equity 2006 2007 2008 2009E 2010E 2011E
851.0 56.5 727.6 .0 29.6 1,664.7 15,446.3 225.6 393.8 16,065.6 17,730.3
1,092.2 640.6 701.6 2.0 69.5 2,506.0 14,961.8 217.3 81.8 15,260.9 17,766.9
2,057.1 761.9 687.6 2.0 449.0 3,957.5 14,872.0 206.5 81.8 15,160.2 19,117.8
1,678.3 839.2 687.6 2.0 11.1 3,218.2 14,782.8 196.2 81.8 15,060.7 18,278.9
1,852.8 926.4 687.6 2.0 320.5 3,789.3 14,694.1 186.3 81.8 14,962.2 18,751.4
579.4 304.8 .0 907.8 1,439.9 1.3 3,233.1 9,682.4 .0 121.7 9,804.1 5,806.9 (1,839.9) 112.9 4,079.9 .4 4,080.3 17,117.5
341.8 408.6 4.3 880.9 1,836.7 2,883.7 7.5 6,363.6 8,112.8 .0 .0 8,112.8 5,806.9 (2,708.4) 154.9 3,253.4 .5 3,253.9 17,730.3
843.4 626.7 79.7 1,717.6 1,628.0 3,037.6 2.6 7,935.7 6,404.9 .0 .0 6,404.9 5,806.9 (2,531.9) 150.9 3,425.9 .4 3,426.3 17,766.9
1,142.8 761.9 79.7 1,067.5 1,628.0 4,037.6 2.6 8,720.1 5,837.4 .0 .0 5,837.4 5,806.9 (1,398.0) 150.9 4,559.8 .4 4,560.2 19,117.8
1,258.8 839.2 79.7 1,117.5 407.0 3,835.7 2.6 7,540.4 4,720.0 .0 .0 4,720.0 5,806.9 60.3 150.9 6,018.1 .4 6,018.5 18,278.9
1,389.6 926.4 79.7 1,117.5 407.0 3,452.1 2.6 7,374.9 3,602.5 .0 .0 3,602.5 5,806.9 1,815.9 150.9 7,773.7 .4 7,774.1 18,751.4
Indicators
Indicators Grey cement Capacity '000 MT Sales '000 MT Capacity utilization Clinker Capacity '000 MT Sales '000 MT Capacity utilization Sales growth Earning growth Gross profit margin Operating margin Net margin Total debt Tk. MM Debt/Total equity Effective tax rate Per share figures Number of shares (MM) Earning per share (EPS) Dividend per share Payout ratio Return on equity Return on assets Book value per share 2007 1,500 335 22% 2008 1,200 748 62% 2009E 1,200 900 75% 2010E 1,200 990 83% 2011E 1,200 1,089 91% 2012E 1,200 1,198 100%
1,150 550 90% 23% 542% 40% 34% 15% 12,570.5 276% 30%
1,150 490 98% 10% 29% 40% 34% 17% 10,080.1 167% 30%
1,150 424 98% 10% 20% 41% 34% 19% 8,579.1 110% 30%
1,150 351 98% 11% 17% 41% 34% 20% 6,426.0 65% 30%