Heidelberg Cement India Ltd.- With all boxes ticking, can it deliver?

FY23Q3 Con Call Transcript Notes

• 33% increase in green power

• 100% blended cement – commitment

  • R: reducing CO2

• Volume YDN

  • R: warehousing problem

• cost YUP: 9% – partially offset by price increase

  • price increase – long way to go

• EBITDA: 339 (DN)

  • R: higher power and fuel costs

• -ve working capital

• Net cash: 150Cr

  • making two interest-free loan payments to UP gov

• acq additional mines adjoining to their existing one

  • extend plant’s life

  • open up opportunities for expansion

  • go-ahead to do work on Line #3

    • placed order for equipment
    • plan to bring it on stream next year

• road & rail volumes are almost the same

• focus on premium products

• new product launch: Mycem Primo

• coal+petcoke ratio → lowest possible fuel cost

• trade:non-trade: 75:25 / Plan: will focus on trade in future

• Jhansi Plant received Apex India Safety Award

• cement industry: +ve outlook 2023

  • R: gov projects and allocations
  • R: good Rabi crop & softening fuel prices → better rural demand
  • R: possibility of reduction in GST

• MD stepping down; current COO → MD

• decline in volume, trade and premium shares

• decline in trade share

  • R: accounting change → L: overestimation in previous Qs

• decline in volume → L: working with advisors and consultants on market issues

  • R: warehousing issues
  • R: increase in competition ← R: aggressive pricing by competitors

• Kcal cost: 2.85/-

• Gujarat expansion

  • started data collection
  • get ToR by CY23/02

• debottlenecking

  • add 2L T clinker capacity
    • 24M to complete

• clinker capacity (current)

  • Karnataka 3.5M T
  • Central India: 3.1M T

• potential for calcined clay LC3 cement

  • not an easy task
    • R: limited availability & heterogeneity of clay in India

• merger of Heidelberg and Zuari in India

  • working on merging two units → achieve financial fungibility
    • 18M to complete

• rationale for new limestone base

  • L: increase life of mines for existing operations
  • K: opportunities to expand clinker and cement capacity

• logistics issues

  • 2-3% volume loss for about 10 days in some high volume areas during Q

• Kiln plant shutdown

  • incurred mntc cost

• Capacity addition

  • 0.3M T cement + 0.2M T clinker

• brand positioning – premium product Mycem Power

  • 20-60 higer than nomal brand / 30-35 higher than UltraTech normal brans

• Fuel cost 9M YUP 40%

  • (now) price has softened
  • reduction of up to 8% NQ

• petcoke landed cost: 20-21K/T (now) | (Q3) 22-23.5K/T

• Weak demand in Central India

  • R: lack of gov spending
  • Ft: Good Rabi crop → pick-up in rural demand
  • Ft: FY23 demand growth in central India : 7%

• cement prices DN

  • R: pressure from increased competition
  • R: addition of new capacities in the market

• confident of retaining brand equity and channel partners

• GST incentive expiry: 40/T – 2/Bag by CY23/02

• Gujarat projects

  • may consider scrapping old line and building new one in central india region
  • current mine limestone reserve: 25Y
  • using rejects and sweetener to extend life of mines

• CAPEX: FY23 & FY24 (both): 40Cr + (FY24) 15Cr clinker debottlenecking

  • Q3: 5-7Cr

• lead distance: 350

• Price

  • South India: UP 125-130/T
  • Central India: Flat

• Ft: CAGR N3-5Y Rev 10%

  • R: market growth & inflation

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