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Sustainable re-rating ahead?

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Cement stocks have seen their valuations rerate at an unprecedented pace in the past 6 months or so, driven by heightened expectations of demand growth.

Large caps are trading at multiple year high valuations, with several mid-caps closing in the gap too. Most importantly, valuation hierarchy has flipped with a cost leader (Shree Cement) now at the top of the band. Given an increasing proportion of non-trade sales, higher RMC penetration and bulk (i.e., not bag) cement sales, the premium pricing of brand leaders will erode gradually. Historically, the erosion of pricing premium has coincided with periods of fast demand growth (implying sudden utilisation surges). Given the low entry barriers in to the cement industry and relatively slow expansion plans of pan-India companies (Holcim/Lafarge mainly), market share for erstwhile dominant players is shrinking.

Given this scenario, single/two region cost leaders with better logistics will trump multi-region cost-laggards (op-ex and capex). Sharper growth in cement consumption will suit nimbler companies (faster execution and turnaround) better than slower ones, and will also make them better equipped to navigate periods of weak demand. These companies will see their valuations rerate substantially. The future belongs to the companies with proven operational cost leaders, who can compete with pan India players on costs. Here is a review on two of the market leaders at the moment.

Orient Cement
Orient Cement (Orient) is catching up with the industry leaders in South. It already runs one of the most efficient operations in the country (LTM operating costs at Rs 2,945/t vs Rs 3,400-3,800 for peers ex-Shree). From its current base in Devapur (Telangana, 3 mTPA) and Jalgaon (Maharashtra 2 mTPA), the company is expanding by adding 3 mTPA cement capacity at Gulbarga (Karnataka). At a total project cost of ~Rs 17bn (~US$95/t) and a guided commissioning by 1QFY16 (within 24 months from ordering), the upcoming plant is expected to set a new benchmark in greenfield project execution.

The next key challenge before the company is to replicate its best-in-class current operations at the new plant. Two solid advantages: low landed cost of coal (due to proximity to the Singareni Collieries) and fly ash (from Ramagundam TPP) are not replicable. However, savings may accrue due to newer, more efficient equipment (new kiln, VRMs instead of ball mill-roller press combination). Further, the catchment area of new plant would include higher priced markets of Karnataka. As a result, the new plant may be able to generate similar EBITDA/t as the existing operations. At 8 mTPA capacity, operations in two regions and established cost leadership, the valuations at US$81/t are still below peers like Ramco, which trades at US$140/t.

Gulbarga booster
With the Devapur operations nearly maxed out at current volumes, Gulbarga will drive the next phase of volume growth (FY14-17 CAGR: 13 per cent). While blended profitability will be dragged down to some extent due to non-replication of current advantages, we reckon EBITDA/t to be a healthy Rs 1,100/t in FY17. EBITDA/PAT can grow by a healthy 44 to 40 per cent CAGR over the same period. Debt/EBITDA will be a healthy 2.7x upon commissioning of the Gulbarga.

Key investment arguments

  • Orient Cement?s current operations out Devapur (AP) and Jalgaon (Maharashtra) are best-in-class, with industry leading costs (LTM operating costs at Rs 2,945/t).
  • Current profitability is driven by low energy cost (LTM Rs 940/t), which is in part driven by linkage coal available in close proximity of the plant (Singareni Collieries). Orient has linkages for its clinker lines from Singareni collieries (0.67 mT coal or ~78 per cent of consumption in FY14, including power plant requirement).
  • Freight costs remain extremely competitive (Rs 745/t, ex inter unit clinker transfer) as its primary target markets in Telangana and Maharashtra are at a very low lead distance (< 350 km). Including IUCL, the freight costs (~Rs1,000/t) are in line with other cement makers.
  • Ramagundam super TPP (2600 MW) is at a 60 km distance from Devapur, while Bhusaval power plant is situated at a distance of 20 km from Jalgaon GU. This ensures availability of fly ash with a low lead distance too.
  • The Chittapur (Gulbarga) 3 mTPA capacity (2 mTPA clinker) is being added for a capital cost of ~Rs 17.0bn, of which ~12bn will be funded through debt and remainder via internal accruals.
  • The new plant is expected to be more efficient vs the current operations due to single kiln operation (vs 3 at Devapur currently) and newer equipment. However, the advantages of low cost fuel (linkage coal at Devapur) and fly ash (Ramagundam TPP) will not be available and the company will have to ferry these ~400 km (from current sources to Gulbarga).
  • A mine life of 93 years based in ~300 mTPA reserves also allows the company further scope to expand the capacity at a later stage.
  • Sometime in FY16, Orient will be an 8 mTPA entity with operations in South, but with key target markets in the lucrative regions of Maharashtra.
  • Orient will have a net Debt/Equity of ~1.2x and net Debt/EBITDA (FY16E) of ~2.8x upon plant commissioning in June -15. This compares well with other cement companies undertaking a ~50 per cent expansion currently.

Sanghi Industries
Sanghi Industries (SNGI) operates a 3 mTPA clinker capacity (2.6 mTPA grinding) in Kutch, Gujarat. It has access to soft marine limestone spread over ~1,500 hectares (containing ~1 bnt of proven reserves). The operations are fully integrated with captive power (63 MW) and have the ability to use lignite in both kiln and CPP and a captive jetty within 1 km of the cement grinding plant. Its port terminals at Navlakhi (Rajkot) and Dharamtar (Maharashtra) are used to access their respective markets. The company also exports clinker from Kutch, opportunistically tapping the cement markets in Middle East and Africa.

SNGI?s profitability is driven by low cost raw material, essentially surface mined limestone. Proximity to lignite mines of GMDC, ability to import coal at its captive jetty and excess captive power allow it low energy costs. On the flipside, low blending (C:C ratio at 1.1 in FY14) and a very high proportion of road transport (given no option of railway) eat away large chunks of profitability. As a result, the company reports some of the highest P&F and selling costs in the industry.

The road forward
SNGI is investing in additional cement capacity (1 mTPA grinding unit) at the existing location, likely to be commissioned in FY16. Given the ample availability of fly ash in the vicinity and a gradual shift towards PPC, P&F costs can trend lower. Further, increasing focus on low cost coastal freight should lower freight, while accessing newer markets. In addition to existing terminals, SNGI is looking at setting up distribution capacity on the western coast and is acquiring vessels for transportation.

Key investment arguments

  • Installed clinker capacity (~3 mTPA) is enough to support volumes of up to 4.3 mTPA, theoretically. (Implied C:C ratio of 1.43).
  • However, given limited grinding capacity, SNGI has remained constrained in its volume output with a maximum cement production of 2.5 mTPA in FY08.
  • To address this mismatch, SNGI is adding a 1 mTPA GU at a cost of Rs 1bn (~US$ 17/t). The GU is being added at existing site, which is close to the captive jetty. Likely to be commissioned in FY16, the cement grinding capacity will provide SNGI with additional volumes at a low cost.
  • SNGI has not been able to capitalise on its coastal location and captive jetty, for domestic volumes.
  • The nearest railhead, Bhuj, is ~140 km from the plant, rendering rail transport infeasible.
  • The company is planning to purchase vessels for cement transport, and has earmarked a capex of Rs 1.0bn for the same. Vessels are expected to be delivered by 2HFY15 and will likely result in substantial freight cost savings.
  • SNGI sells primarily OPC, given low grinding/blending capacity and brand positioning. Of late the company has attempted to foray in to PPC manufacturing.

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Economy & Market

Power Build’s Core Gear Series

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A deep dive into Core Gear Series of products M, C, F and K, by Power Build, and how they represent precision in motion.

At the heart of every high-performance industrial system lies the need for robust, reliable, and efficient power transmission. Power Build answers this need with its flagship geared motor series: M, C, F and K. Each series is meticulously engineered to serve specific operational demands while maintaining the universal promise of durability, efficiency, and performance.

Series M – Helical Inline Geared Motors
Compact and powerful, the Series M delivers exceptional drive solutions for a broad range of applications. With power handling up to 160kW and torque capacity reaching 20,000 Nm, it is the trusted solution for industries requiring quiet operation, high efficiency, and space-saving design. Series M is available with multiple mounting and motor options, making it a versatile choice for manufacturers and OEMs globally.

Series C – Right Angled Heli-Worm Geared Motors
Combining the benefits of helical and worm gearing, the Series C is designed for right-angled power transmission. With gear ratios of up to 16,000:1 and torque capacities of up to 10,000 Nm, this series is optimal for applications demanding precision in compact spaces. Industries looking for a smooth, low-noise operation with maximum torque efficiency rely on Series C for dependable performance.

Series F – Parallel Shaft Mounted Geared Motors
Built for endurance in the most demanding environments, Series F is widely adopted in steel plants, hoists, cranes and heavy-duty conveyors. Offering torque up to 10,000 Nm and high gear ratios up to 20,000:1, this product features an integral torque arm and diverse output configurations to meet industry-specific challenges head-on.

Series K – Right Angle Helical Bevel Geared Motors
For industries seeking high efficiency and torque-heavy performance, Series K is the answer. This right-angled geared motor series delivers torque up to 50,000 Nm, making it a preferred choice in core infrastructure sectors such as cement, power, mining and material handling. Its flexibility in mounting and broad motor options offer engineers the freedom in design and reliability in execution.
Together, these four series reflect Power Build’s commitment to excellence in mechanical power transmission. From compact inline designs to robust right-angle drives, each geared motor is a result of decades of engineering innovation, customer-focused design and field-tested reliability. Whether the requirement is speed control, torque multiplication or space efficiency, Radicon’s Series M, C, F and K stand as trusted powerhouses for global industries.

http://www.powerbuild.in
Call: +919727719344

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Economy & Market

Conveyor belts are a vital link in the supply chain

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Kamlesh Jain, Managing Director, Elastocon, discusses how the brand delivers high-performance, customised conveyor belt solutions for demanding industries like cement, mining, and logistics, while embracing innovation, automation, and sustainability.

In today’s rapidly evolving industrial landscape, efficient material handling isn’t just a necessity—it’s a competitive advantage. As industries such as mining, cement, steel and logistics push for higher productivity, automation, and sustainability, the humble conveyor belt has taken on a mission-critical role. In this exclusive interview, Kamlesh Jain, Managing Director, Elastocon, discusses how the company is innovating for tougher terrains, smarter systems and a greener tomorrow.

Brief us about your company – in terms of its offerings, manufacturing facilities, and the key end-user industries it serves.
Elastocon, a flagship brand of the Royal Group, is a trusted name in the conveyor belt manufacturing industry. Under the brand name ELASTOCON, the company produces both open-end and endless belts, offering tailor-made solutions to some of the most demanding sectors such as cement, steel, power, mining, fertiliser, and logistics. Every belt is meticulously engineered—from fabric selection to material composition—to ensure optimal performance in tough working conditions. With advanced manufacturing facilities and strict quality protocols, Elastocon continues to deliver high-performance conveyor solutions designed for durability, safety, and efficiency.

How is the group addressing the needs for efficient material handling?
Efficient material handling is the backbone of any industrial operation. At Elastocon, our engineering philosophy revolves around creating belts that deliver consistent performance, long operational life, and minimal maintenance. We focus on key performance parameters such as tensile strength, abrasion resistance, tear strength, and low elongation at working tension. Our belts are designed to offer superior bonding between plies and covers, which directly impacts their life and reliability. We also support clients
with maintenance manuals and technical advice, helping them improve their system’s productivity and reduce downtime.

How critical are conveyor belts in ensuring seamless material handling?
Conveyor belts are a vital link in the supply chain across industries. In sectors like mining, cement, steel, and logistics, they facilitate the efficient movement of materials and help maintain uninterrupted production flows. At Elastocon, we recognise the crucial role of belts in minimising breakdowns and increasing plant uptime. Our belts are built to endure abrasive, high-temperature, or high-load environments. We also advocate proper system maintenance, including correct belt storage, jointing, roller alignment, and idler checks, to ensure smooth and centered belt movement, reducing operational interruptions.

What are the key market and demand drivers for the conveyor belt industry?
The growth of the conveyor belt industry is closely tied to infrastructure development, increased automation, and the push for higher operational efficiency. As industries strive to reduce labor dependency and improve productivity, there is a growing demand for advanced material handling systems. Customers today seek not just reliability, but also cost-effectiveness and technical superiority in the belts they choose. Enhanced product aesthetics and innovation in design are also becoming significant differentiators. These trends are pushing manufacturers to evolve continuously, and Elastocon is leading the way with customer-centric product development.

How does Elastocon address the diverse and evolving requirements of these sectors?
Our strength lies in offering a broad and technically advanced product portfolio that serves various industries. For general-purpose applications, our M24 and DINX/W grade belts offer excellent abrasion resistance, especially for RMHS and cement plants. For high-temperature operations, we provide HR and SHR T2 grade belts, as well as our flagship PYROCON and PYROKING belts, which can withstand extreme heat—up to 250°C continuous and even 400°C peak—thanks to advanced EPM polymers.
We also cater to sectors with specialised needs. For fire-prone environments like underground mining, we offer fire-resistant belts certified to IS 1891 Part V, ISO 340, and MSHA standards. Our OR-grade belts are designed for oil and chemical resistance, making them ideal for fertiliser and chemical industries. In high-moisture applications like food and agriculture, our MR-grade belts ensure optimal performance. This diverse range enables us to meet customer-specific challenges with precision and efficiency.

What core advantages does Elastocon offer that differentiate it from competitors?
Elastocon stands out due to its deep commitment to quality, innovation, and customer satisfaction. Every belt is customised to the client’s requirements, supported by a strong R&D foundation that keeps us aligned with global standards and trends. Our customer support doesn’t end at product delivery—we provide ongoing technical assistance and after-sales service that help clients maximise the value of their investments. Moreover, our focus on compliance and certifications ensures our belts meet stringent national and international safety and performance standards, giving customers added confidence.

How is Elastocon gearing up to meet its customers’ evolving needs?
We are conscious of the shift towards greener and smarter manufacturing practices. Elastocon is embracing sustainability by incorporating eco-friendly materials and energy-efficient manufacturing techniques. In parallel, we are developing belts that seamlessly integrate with automated systems and smart industrial platforms. Our vision is to make our products not just high-performing but also future-ready—aligned with global sustainability goals and compatible with emerging technologies in industrial automation and predictive maintenance.

What trends do you foresee shaping the future of the conveyor belt industry?
The conveyor belt industry is undergoing a significant transformation. As Industry 4.0 principles gain traction, we expect to see widespread adoption of smart belts equipped with sensors for real-time monitoring, diagnostics, and predictive maintenance. The demand for recyclable materials and sustainable designs will continue to grow. Furthermore, industry-specific customisation will increasingly replace standardisation, and belts will be expected to do more than just transport material—they will be integrated into intelligent production systems. Elastocon is already investing in these future-focused areas to stay ahead of the curve.

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Economy & Market

Impactful Branding

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Advertising or branding is never about driving sales. It’s about creating brand awareness and recall. It’s about conveying the core values of your brand to your consumers. In this context, why is branding important for cement companies? As far as the customers are concerned cement is simply cement. It is precisely for this reason that branding, marketing and advertising of cement becomes crucial. Since the customer is unable to differentiate between the shades of grey, the onus of creating this awareness is carried by the brands. That explains the heavy marketing budgets, celebrity-centric commercials, emotion-invoking taglines and campaigns enunciating the many benefits of their offerings.
Marketing strategies of cement companies have undergone gradual transformation owing to the change in consumer behaviour. While TV commercials are high on humour and emotions to establish a fast connect with the customer, social media campaigns are focussed more on capturing the consumer’s attention in an over-crowded virtual world. Branding for cement companies has become a holistic growth strategy with quantifiable results. This has made brands opt for a mix package of traditional and new-age tools, such as social media. However, the hero of every marketing communication is the message, which encapsulates the unique selling points of the product. That after all is crux of the matter here.
While cement companies are effectively using marketing tools to reach out to the consumers, they need to strengthen the four Cs of the branding process – Consumer, Cost, Communication and Convenience. Putting up the right message, at the right time and at the right place for the right kind of customer demographic is of utmost importance in the long run. It is precisely for this reason that regional players are likely to have an upper hand as they rely on local language and cultural references to drive home the point. But modern marketing and branding domain is exponentially growing and it would be an interesting exercise to tabulate and analyse its impact on branding for cement.

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