Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Interesting Articles

| More

WHRS - A key cog in the flywheel - Thematic Report on Cement Sector - HDFC Securities

Posted On: 2020-04-08 12:44:47

In this thematic, we analyse the Indian cement industry's environment friendly and structural cost reduction effort - Waste Heat Recovery System (WHRS). A WHRS part recycles kiln's exhaust heat to generate electricity at negligible op cost (hence attractive payback). This reduces fossil fuel consumption intensity and thus CO2 emissions! The Indian cement industry scaled up WHRS additions by 4x during FY13-20 to 652MW and another 40% addition by FY23 is underway. This helps the Indian cement industry to sustain its global leadership on energy efficiency and to lower its carbon footprint while boosting op margins. Companies in the north-central region are the major gainers as most of them have ~15% of their electricity needs being met through WHRS.

Indian cement industry - a global leader on energy efficiency map: Indian Cement industry currently has one of the lowest fuel and electricity consumption intensity globally. Even in terms of CO2 emission reduction, this industry met its energy intensive target for 2020 (5% reduction) in 2017 only. The industry achieved this through reduction in fuel /electricity consumption intensity, reduction in clinker consumption factor and increased replacement of clinker with waste products like fly-ash/slag.

Surge in WHRS installations in India: To further reduce fossil fuel consumption and CO2 emissions, under the government initiatives of Perform, Achieve and Trade (PAT) scheme, cement industry lapped on to Waste Heat Recovery System (WHRS) technology to generate electricity from waste heat from the kiln. During three PAT cycles starting FY13, WHRS capacity in India surged 4x to 652MW in FY20, thereby contributing to reduction in industry's fuel consumption intensity and CO2 emissions.

Margin booster and attractive pay-back period: This technology has a very attractive payback period of ~3 years, owing to large cost savings versus grid power. As against grid power cost of Rs 6-7/kWh, WHRS power costs ~Rs 0.7/kWh. An integrated WHRS can meet up to ~30-40% of the cement plant's power needs, and reduce opex by up to Rs 150/MT. Thus, WHRS installation boosts both operating margin and also bolsters overall return ratios. This drove industry wide surge in WHRS additions. WHRS capacity can potentially meet ~13% of industry's total power currently vs 3% until FY14. With another ~40% rise in WHRS addition over next three years, WHRS share in electricity requirement will increase to ~15% by FY23E.

North central regions are major beneficiaries: As per our detailed plantwise WHRS mapping for the industry, clinker plants in Rajasthan and MP account for ~50% of total WHRS capacities in India. Limestone in these regions has low moisture content, boosting WHRS' productivity. Shree Cement (29%), UltraTech (16%) and Penna (7%) together account for half of all WHRS capacity in India. Barring a few, all cement companies have some WHRS installed or are setting up one over next three years. Most of the companies in the north-central regions have WHRS accounting for ~15% of their electricity requirement thus bolstering their profitability and return ratios. As these regions also enjoy healthy pricing trends (high clinker utilisation), companies in these regions should continue to deliver industry leading margins (Refer our earlier note dated 5th March - Structural Tailwinds).

Source: Equity Bulls

Click here to send ur comments or to

Other Headlines:

JM Financial Yield Enhancer (Distressed Opportunity) Fund I raises Rs.160 crore in its first close

Samco Securities launches BTPT - Buy Today, Pay In Two days for Investors Buying Stocks

No data breach of BHIM app: Report

India's sovereign rating downgrade by Moody's - Acuité Ratings & Research

Banking Sector Credit Trends - Unusual trends - HDFC Securities

Rollover Report for May - June 2020: Angel Broking

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Q4 GDP

Mr. Dhiraj Relli views on GDP Numbers - HDFC Securities

Banking Sector Update - NIM compression on the cards - HDFC Securities

May series ends with a bang: Angel Broking

May 2020 F&O Series Expiry - Mr. Nandish Shah, Technical Research Analyst, HDFC Securities

Views on Impact of Locusts Attack on Agriculture - Acuité Ratings & Research

ICAI establishes Center for Audit Quality

Bharti Telecom raised over Rs. 8433 crores through Accelerated Book-build offering of equity shares of Bharti Airtel

SATYA MicroCapital raises INR 105 crore equity funding from Japan-based Gojo & Company Inc.

Mr. Rajnish Kumar, Chairman, SBI & IBA on the announcements made by RBI today

Views of Mr. Umesh Revankar, MD and CEO, Shriram Transport Finance on RBI announcement

Views of Mr. George Alexander Muthoot, MD, Muthoot Finance on RBI announcement today

Views of Ms. Anagha Deodhar - Economist, ICICI Securities on the RBI announcement today

Views on RBI Policy announcement today - Federal Bank

RBI Monetary Policy (May 2020) by Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

Religare Finvest Ltd. on today's monetary policy by RBI

RBI monetary policy announcement - Mr. Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd

RBI's proactive measure will help revive economy: Dr.Niranjan Hiranandani

Mr. Dhiraj Relli views on today's announcement made by RBI

Views of Mr. R K Gurumurthy, Head - Treasury, Lakshmi Vilas Bank on the RBI announcement today

Suvodeep Rakshit, Vice President & Sr. Economist, Kotak Institutional Equities on RBI announcement

Suman Chowdhury, Chief Analytical Officer at Acuité Ratings & Research, on today's RBI announcement

General Insurance Sector Update - GDPI continues to decline due to Lockdown - HDFC Securities

Stress in Banking Sector to Continue: Geojit Financial Services

Banking Sector Update - What have banks said - HDFC Securities

Satyam Shivam Sundaram, EY India on measures announced by Finance Minister today

HDFC Securities: Mr. Dhiraj Relli views on Fourth Set of Economic Measures announced by Finance Minister

Structural intervention to spur investments - Ramesh Nair, CEO and Country Head (India) JLL

MNCs & their unlisted subsidiaries - A case of misplaced premium & forgotten risk

India Equity Strategy - FM's package: Addressing liquidity concerns - HDFC Securities

Mr. Umesh Revankar, MD and CEO, Shriram Transport Finance on package announced by FM

Mr. Rajnish Kumar, Chairman, SBI on FM's announcement

Central Government's Atmanirbhar Bharat Initiative - Tata Projects Ltd

FM Stimulus View: Mr. Shachindra Nath, Executive Chairman at Ugro Capital

Views on Finance Minister's Announcement - Acuité Ratings & Research Limited

Fiscal interventions set to do the heavy lifting

Views of Mr. R.K.Gurumurthy, Head - Treasury, Lakshmi Vilas Bank on the FM announcement today

Finance Ministry's announcement - Mr. Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd

Mr. Dhiraj Relli views on Economic Package announced by Finance Minister - HDFC Securities

PM's announcement to impact stock market - Angel Broking

Views on Financial Relief Package announced - Acuité Ratings & Research Limited

View on IIP and CPI data - Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on the March IIP and April CPI

Prime Minister's Economic Package - Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019