Marco Huarache Tadeo

UNIVERSIDAD ESAN
FACULTAD DE CIENCIAS ECONÓMICAS Y
ADMINISTRATIVAS

Curso: Análisis De Inversiones

Profesor: Guillermo Dávila

Tema: Cementos Pacasmayo S.A.

Alumnos: Marco Huarache

Lima, julio 2016

Cementos Pacasmayo S.A. | 1

 Marco Huarache Tadeo

Contenido
1. Summary of Business Case .................................................................................................... 3
2. General aspects of the company........................................................................................... 3
3. Business Description ............................................................................................................. 4
4. Shareholders ......................................................................................................................... 5
5. Industry Overview and Competitive Positioning................................................................... 5
6. Competitors........................................................................................................................... 8
7. Investment Summary ............................................................................................................ 8
8. Valuation: .............................................................................................................................. 9
9. Financial Analysis................................................................................................................. 10
10. Conclusion and recommendation ................................................................................... 11
11. Annexes: .......................................................................................................................... 12

Cementos Pacasmayo S.A. | 2

 Marco Huarache Tadeo

1. Summary of Business Case

This valuation work takes as reference to the Peruvian company Cementos

Pacasmayo S.A. where a series of sector analysis and market in which it
operates will be held. To this study considers the historical information from the
past nine years, projecting the financial statements for the period between 2016
and 2020.

2. General aspects of the company

Cementos Pacasmayo S.A. It manufactures and sells cement and cement-

related distributes, such as concrete blocks and ready-mix concrete materials.
Its products are used mainly in construction. It also produces and sells lime for
use in mining operations. Pacasmayo is the second largest cement company in
Peru. The company has a modern plant of cement in Pacasmayo and other in
Rioja and plants of premixed of concrete in Chimbote, Trujillo, Pacasmayo,
Chiclayo, Piura and Cajamarca.

Source: Bloomberg
Cementos Pacasmayo S.A. is a Peruvian company with a current price 5.78
PEN per stock, which reached its maximum price of S/ 6.10 on this may 5 , and
its minimum price was S/ 3.57 last January 10. Its current market capitalization
is 2343.1 million of soles. Furthermore, its current market capitalization is 5485
million soles, divided into more than 531.5 common shares and 251.8 million
floating. The company has a current beta of 0.91.

Cementos Pacasmayo S.A. | Summary of Business Case 3

 Marco Huarache Tadeo

Cementos Pacasmayo S.A. obtained an average EBITDA of 126.8 million of

soles taking the last 3 periods. Additionally, it has revenues of 386.8 million of
soles the last period.

3. Business Description

Cementos Pacasmayo S.A.A. has more than 55 years of experience in the

market; it has several production plants construction materials in northern Peru.
Today the have two cement plants, eight precast concrete plants, seven ready-
mix concrete plants, plant diatomite bricks, a lime plant and three floors of
aggregates
The location of the plants, strategically located between the main cities of
northern Peru, allows us to have more direct contact with all our market and
provide better customer service.

Cement plants Precast plants

Ready-mix concrete plants Brick plant

Lime plant Aggregate plants

Source: Cementos Pacasmayo web page

Pacasmayo develops different products according to customer needs and the

demands of the Peruvian market. So Cementos Pacasmayo strive to
manufacture products that are of excellent quality thought in the welfare of the
works and their consumers.

Cementos Pacasmayo S.A. | Business Description 4

 Marco Huarache Tadeo

4. Shareholders

Cementos Pacasmayo S.A. is constituted by the participation of 7 companies

where Inversiones Pacasmayo S.A. has more than 50% of participation.

2.39%
Shareholder Structure
2.83%
1.33%
7.09% INVERSIONES
PACASMAYO S.A.
INVERSIONES ASPI S.A.

10.29%
JPMORGAN CHASE & CO
52.83%
23.24% AFP PRIMA S.A.

AFP INTEGRA S.A.

Source: Bloomberg

5. Industry Overview and Competitive Positioning

Related to the economic growth as you can see the evolution of the GDP of the
manufacturing and construction sectors both have a decrease of 1.67% and
5.87% respectively over the last period.

GDP Evolution
110,000

90,000
31,353 31,956
24,848 28,779 30,081
70,000 23,993
19,061 20,360
16,317
13,994
50,000

65,265 68,508 66,041 64,938

30,000
52,807 57,354 53,502 59,255 64,330
47,766
10,000

-10,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Manufacture Construction

Source: BCR, Own elaboration

Cementos Pacasmayo S.A. | Shareholders 5

 Marco Huarache Tadeo

The manufacture sector represents 13.46% of the total GDP equivalent to 1,103
million of soles and the construction sector represents 6.23% from 1,876 million
of soles, of a total of 482,627 million of soles, the second and third biggest
sectors after other services with 49.21%

GDP Evolution
20% 17.84%
15.82%
15%
10.75%
10% 8.56% 8.94%
8.45%
6.45% 4.97%
5% 3.56% 5.95% 5.85%
1.45% 1.93% 3.26%
2.38%
0%
-1.67%
-5% -3.60%
-5.87%
-10%
2010 2011 2012 2013 2014 2015

Manufacture Construction Real GDP

Source: BCR, Own elaboration

GDP Partitipation 2015

5.29% 0.42%

Agricultural
12.35% Fishing
Mining and Hydrocarbons
49.21% Manufacture
13.46%
Construction
Commerce
6.23%
Electricity and Water
11.23% Other services

1.80%

Source: BCR, Own elaboration

Cementos Pacasmayo S.A. | Industry Overview and Competitive Positioning 6

 Marco Huarache Tadeo

To extend the life cycle of the company has decided to diversify its stake in the
Peruvian market, developing a series of products to meet market demand that
is increasingly demanding. Today Cementos Pacasmayo have two cement
plants, eight precast concrete plants, seven ready-mix concrete plants, plant
diatomite bricks, a lime plant and three floors of aggregates, as we can see
next:

Cement Ready mixed concrete

Mortar Quicklime

Precast concrete Diatomite bricks SOLTEK

Aggregates Joist system Bovedilla SOLTEK

Source: Cementos Pacasmayo web page

Cementos Pacasmayo S.A. | Industry Overview and Competitive Positioning 7

 Marco Huarache Tadeo

6. Competitors

Source: Conference call 2015

As we can see Cementos Pacasmayo S..A.A. has as direct competitors to

UNACEM, Caliza Inca and Imports in the central of the country with 57.4% and
at the south has Grupo yura as a principal competitor with 21.9% of the market.

7. Investment Summary

Source: Cementos Pacasmayo web page.

Cementos Pacasmayo S.A. | Competitors 8

 Marco Huarache Tadeo

8. Valuation:

For evaluation relevant information from the financial statements of the

company was obtained, an analysis for the calculation of cost of equity of the
company and subsequently was obtained the weighted average cost of capital.

Assuming a risk-free rate of 5.5% of bond US Treasury 10-year to long term.

Also, a spread of 1.52%, a beta of capital of 0.91 and finally a premium of
8.43%, obtained from the website of the Aswath Damodaran. Over the course
could be performed calculating the cost of capital, obtaining 11.56%.

Also assumed a cost of debt of 4.36% future which is the average of the last 3
years. the current tax rate is 30% was considered as it is established that this
will remain on the horizon of 5 years. obtaining a weighted average cost of
capital of 8.28%.

To find the present value of the company, we will use the discounted cash
method in a horizon of 5 years, considering the periods between 2016 and

Cementos Pacasmayo S.A. | Valuation: 9

 Marco Huarache Tadeo

2020. The flows were brought to present value using a discount rate it was
calculated from the last period.To do this, we must make a set of assumptions.

The expected growth of EBIT will be 62.64%. The terminal value based on a
growth rate of 3.5%. We assume that Depreciation and Amortization, Capex
and Working Capital will remain at 10% per year. Finally, we will use 8.28% as
a WACC.

FREE CASH FLOW FROM 2015 TO 2020

2015 2016 2017 2018 2019 2020
EBIT 100.2 162.4 263.0 426.2 690.5 1,118.7
EBIT*(1-30%) 70.1 113.7 184.1 298.3 483.3 783.1
Depreciation and Amortization 23.8 26.2 31.7 42.2 61.7 99.4
Capital Expenditures 148.1 162.9 179.2 197.1 216.8 238.5
Var. Working Capital -171.8 16.9 18.6 20.4 22.5 24.7
Free Cash Flow 117.7 -39.9 18.1 123.0 305.8 619.3
Terminal Value 13,408.07
Free Cash Flow Discounted 117.7 - 36.9 15.4 96.9 222.4 9,423.8
Value of the Firm 9,839.3

After adding the discounted cash flows currently worth company was obtained
9,839.3 Million of soles as the current value of the company.

9. Financial Analysis

Revenues in the years after valuation show that there is a growing trend in the
market as construction and manufacturing sectors are booming. It is expected
to continue next year dynamism in the construction sector as there is demand
for multifamily housing and premium buildings.

Revenues evolution
500.0 459.2
443.7 437.8
450.0
386.8
400.0 361.4
350.0 318.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Cementos Pacasmayo S.A. | Financial Analysis 10

 Marco Huarache Tadeo

10. Conclusion and recommendation

In the process of making cement limestone is calcined, releasing carbon dioxide

into the atmosphere adversely affecting air quality and the environment. As this
process is inevitable, you can perform a number of actions to reduce pollutant
emissions, developing new products with less clinker and controlling the
emission of residual dust and reforestation. Due to the sharp increase in sales,
the operational need of funds has been a growing trend.
The company produces effluents that if they are not treated properly, can
adversely affect the environment affecting the brand and revenues. The
company currently has two unions: Pacasmayo Plant and Quarry Tembladera.
The current share price is S / 5.78 and according to this valuation it must be of
S / 4.40. It is advisable at this time to sell and have a margin of 23.8%.

Cementos Pacasmayo S.A. | Conclusion and recommendation 11

 Cementos Pacasmayo S.A.A.
Statement Income
FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
11. Annexes:

Activos
+ Efectivo y equivalentes 60.1 111.7 7.1 38.7 55.1 135.0 27.4 349.3 194.8 46.3
+ Inversiones a corto plazo 0.0 0.0 0.0 0.0 0.0 0.0 158.3 0.0 0.0 0.0
+ Cuentas y pagarés por cobrar 12.2 8.5 7.3 10.3 11.3 15.5 16.1 18.4 37.2 32.5
+ Inventarios 42.4 36.9 38.6 44.1 57.1 76.6 109.0 119.6 108.7 90.1
+ Otros activos corrientes 7.6 9.9 4.3 7.7 5.7 18.2 23.6 20.2 6.5 15.3
Activos totales actuales 122.3 166.9 57.4 100.8 129.2 245.4 334.3 507.5 347.2 184.2
+ Inversiones LP 5.2 8.5 4.5 6.3 29.1 19.0 13.7 12.9 22.5 55.5
+ Activos fijos netos 205.9 204.3 200.0 233.8 392.7 445.1 546.5 549.6 691.5 729.9
+ Activos fijos brutos 564.3 577.7 — 657.1 450.3 557.1 683.2 694.1 848.5 887.6
- Depreciación acumulada 358.4 373.5 — 423.3 57.7 112.0 136.8 144.5 157.0 157.7
+ Otros activos a largo plazo 56.1 29.2 44.1 51.1 14.5 28.4 39.3 43.6 26.2 30.8
Activos totales LP 267.2 242.0 248.6 291.3 436.3 492.5 599.4 606.1 740.2 816.2
Activos totales 389.5 408.9 306.0 392.1 565.5 737.8 933.7 1,113.6 1,087.4 1,000.4

Pasivo y capital social

+ Cuentas por pagar 14.8 17.4 15.5 15.8 16.9 31.6 31.4 22.4 45.0 48.8
+ Préstamos a corto plazo 16.9 24.6 25.1 30.8 43.3 51.7 9.0 0.0 0.0 0.0
+ Otro pasivo a corto plazo 20.7 20.7 25.6 23.3 32.4 31.6 30.0 34.0 22.1 10.8
Pasivos totales corrientes 52.4 62.7 66.2 69.8 92.6 114.9 70.4 56.4 67.1 59.6
+ Préstamos a largo plazo 75.6 68.3 48.8 79.2 66.2 167.8 75.4 294.6 296.4 296.7
Marco Huarache Tadeo

+ Otros pasivos a largo plazo 32.4 31.3 20.5 23.8 52.8 56.1 45.8 44.1 29.0 44.5
Pasivo total a largo plazo 108.0 99.7 69.3 103.0 119.0 223.9 121.2 338.8 325.5 341.1
Pasivos totales 160.4 162.4 135.5 172.8 211.6 338.8 191.7 395.1 392.6 400.8
+ Capital preferente total 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
+ Interés minoritario 12.4 10.3 0.4 0.3 0.3 12.3 23.8 28.1 26.2 30.2
+ Capital en acciones y APIC 146.9 156.6 149.3 162.2 166.9 174.1 446.8 407.0 381.1 332.7
+ Beneficios retenidos y otro capital 69.7 79.6 20.7 56.7 186.8 212.7 271.4 283.4 287.5 236.7

Cementos Pacasmayo S.A. | Annexes:

Patrimonio total 229.1 246.5 170.4 219.2 354.0 399.0 742.1 718.5 694.7 599.6
Pasivo y capital totales 389.5 408.9 306.0 392.1 565.5 737.8 933.7 1,113.6 1,087.4 1,000.4

12
 Cementos Pacasmayo S.A.A.
Statement Income
In millions of USD 2009 2010 2011 2012 2013 2014 2015
Ingreso 257.5 318.0 361.4 443.7 459.2 437.8 386.8
- Coste de ingresos 142.4 169.6 206.9 270.4 265.3 255.2 218.6
Beneficio bruto 115.1 148.4 154.5 173.2 193.9 182.7 168.2
+ Otros ingresos operacionales 9.1 32.8 3.4 2.9 3.1 3.7 1.2
- Gastos operativos 59.8 62.0 114.7 88.7 88.4 80.5 69.2
Ingresos o pérdidas operacionales 64.4 119.1 43.2 87.4 108.5 105.9 100.2
- Gastos de intereses 5.8 5.3 7.0 8.7 12.7 9.4 2.5
- Pérdida cambiaria -2.7 -0.9 -0.5 0.3 17.9 5.2 -3.9
- Pérdida neta no operacional 0.3 -1.2 -1.0 -8.5 -9.0 -2.5 7.9
Ingreso antes de impuestos 61.1 115.9 37.7 87.0 86.9 93.8 93.6
- Gasto de impuestos al ingreso (beneficio) 20.1 36.9 13.9 28.0 30.5 27.3 27.1
- Beneficio/pérdida en la posición monetaria — — — — — — —
Marco Huarache Tadeo

Ingreso antes de PE 41.0 79.0 23.8 59.0 56.4 66.5 66.5

- Pérdida extraordinaria neta antes de impuestos 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Interés minoritario/no controlador (créditos) 0.1 0.0 -0.8 -1.3 -1.2 -1.4 -1.2
Beneficio neto/Margen neto (pérdidas) 40.9 79.0 24.6 60.3 57.7 67.9 67.7
- Efectivo dividendos preferentes 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Otros ajustes — — — — — 0.0 0.0

Cementos Pacasmayo S.A. | Annexes:

Ingreso neto disponible a accionistas comunes 40.9 79.0 24.6 60.3 57.7 67.9 67.7

13
 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agricultural 8.93% 3.31% 8.00% 1.33% 4.28% 4.10% 5.88% 1.55% 1.85% 2.83%
Fishing 3.69% 9.29% 3.05% -3.45% -19.60% 52.93% -32.23% 24.75% -27.94% 15.87%
Mining and Hydrocarbons 1.90% 4.16% 8.08% 0.96% 1.27% 0.65% 2.80% 4.88% -0.87% 9.27%
Manufacture 7.27% 10.55% 8.61% -6.72% 10.75% 8.56% 1.45% 4.97% -3.60% -1.67%
Construction 15.01% 16.60% 16.82% 6.81% 17.84% 3.56% 15.82% 8.94% 1.93% -5.87%
Commerce 11.88% 10.29% 10.97% -0.47% 12.48% 8.94% 7.23% 5.86% 4.42% 3.88%
Electricity and Water 7.58% 9.23% 8.08% 1.06% 8.12% 7.58% 5.82% 5.54% 4.89% 6.20%
Other services 7.80% 8.67% 8.69% 3.58% 8.79% 6.98% 7.32% 6.29% 5.01% 4.23%
Real GDP 7.53% 8.48% 9.14% 1.05% 8.45% 6.45% 5.95% 5.85% 2.38% 3.26%

x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agricultural 18,462 19,074 20,600 20,873 21,766 22,658 23,991 24,362 24,814 25,518
Fishing 2,163 2,364 2,436 2,352 1,891 2,892 1,960 2,445 1,762 2,042
Marco Huarache Tadeo

Mining and Hydrocarbons 44,058 45,892 49,599 50,076 50,714 51,043 52,473 55,035 54,554 59,612
Manufacture 47,766 52,807 57,354 53,502 59,255 64,330 65,265 68,508 66,041 64,938
Construction 13,994 16,317 19,061 20,360 23,993 24,848 28,779 31,353 31,956 30,081
Commerce 29,500 32,537 36,105 35,936 40,420 44,034 47,218 49,984 52,193 54,217
Electricity and Water 5,040 5,505 5,950 6,013 6,501 6,994 7,401 7,811 8,193 8,701
Other services 133,615 145,197 157,818 163,472 177,840 190,253 204,186 217,022 227,890 237,520

Cementos Pacasmayo S.A. | Annexes:

Real GDP 294,598 319,693 348,923 352,584 382,380 407,052 431,273 456,520 467,404 482,627

14
 Cementos Pacasmayo S.A.A - Rentabilidad
En Millones de USD excepto por acción FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Renta
Retorno sobre el capital común 14.66 3.31 11.76 21.10 27.48 6.66 11.07 8.27 9.83 10.95
Retorno en activos 7.92 1.87 6.68 11.76 16.42 3.79 7.28 5.66 6.07 6.48
Retorno de capital: 11.25 2.78 9.82 15.71 20.74 5.23 9.07 7.06 7.17 7.23
Retorno de capital invertido 8.51 10.93 11.49 14.58 18.93 4.69 7.91 7.43 7.16 7.32

Márgenes
Margen bruto 50.95 51.39 44.33 44.70 46.66 42.76 39.04 42.22 41.72 43.48
Margen EBITDA 34.16 35.95 30.23 33.38 41.40 15.84 23.81 28.14 29.40 31.66
Margen operacional 26.12 27.09 20.93 25.03 37.46 11.95 19.71 23.63 24.19 25.90
Margen operacional gradual — 31.89 — 465.82 114.78 — 63.85 89.40 260.84 —
Margen antes de impuestos 25.24 26.48 18.16 23.71 36.44 10.44 19.61 18.93 21.43 24.20
Margen ingreso antes de PE 16.80 18.06 12.15 15.92 24.84 6.58 13.30 12.28 15.19 17.19
Margen beneficio neto 18.27 3.60 9.52 15.89 24.86 6.80 13.59 12.55 15.52 17.51
Beneficio neto a margen común 18.27 3.60 9.52 15.89 24.86 6.80 13.59 12.55 15.52 17.51

Adicional
Tasa impositiva efectiva 33.47 31.79 33.08 32.85 31.82 36.96 32.15 35.11 29.10 28.95
Dvd Payout Ratio — — — 20.28 32.65 134.43 32.57 37.39 60.36 75.60
Marco Huarache Tadeo

Tasa de crecimiento sostenible — — — 16.82 18.51 -2.29 7.46 5.18 3.90 2.67

Cementos Pacasmayo S.A. | Annexes:

15
 Marco Huarache Tadeo

Cementos Pacasmayo SAA - Por segmento

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Cement,Concrete and Blocks
Ingreso — — — — — — 1.6 408.2 382.4 342.3
Activos — — — — — — — 928.5 924.8 840.4
Depreciación y amortización — — — — — — — — 20.7 21.1
Pasivo — — — — — — — 376.0 379.1 388.8
Ingreso neto — — — — — — — 62.0 71.0 69.3
Beneficio bruto — — — — — — — 190.7 178.5 162.6
Ingreso antes de impuestos — — — — — — — 95.6 100.2 97.5
Impuestos al ingreso — — — — — — — -33.6 29.2 28.2
Gasto de interés — — — — — — — — 10.2 —
Ingreso de interés — — — — — — — — -3.7 —
Hardware and Others
Ingreso 6.5 7.8 12.6 16.1 20.4 — 54.7 38.3 33.6 23.7
Activos — — — — — — — 7.8 9.5 8.1
Pasivo — — — — — — — 16.4 11.0 8.8
Ingreso neto — — — — — — — 0.0 -0.1 0.0
Beneficio bruto — — — — — — — 1.2 1.0 0.8
Ingreso antes de impuestos — — — — — — — 0.0 -0.1 -0.1
Impuestos al ingreso — — — — — — — 0.0 0.0 0.0
Ingreso de interés — — — — — — — — 0.0 —
Limestone
Ingreso 9.7 6.3 9.7 10.6 20.4 16.7 20.0 11.8 21.5 20.2
Activos — — — — — — — 48.2 43.4 36.8
Depreciación y amortización — — — — — — — — 1.6 0.7
Ingreso neto — — — — — — — -0.8 -1.1 0.4
Beneficio bruto — — — — — — — 1.9 3.2 4.8
Ingreso antes de impuestos — — — — — — — -1.2 -1.5 0.6
Impuestos al ingreso — — — — — — — 0.4 -0.4 0.2
Gasto de interés — — — — — — — — 0.8 —
Ingreso de interés — — — — — — — — -0.3 —
Other Concrete Products
Ingreso — — — — — — — 0.9 0.3 0.7
Activos — — — — — — — 129.1 109.7 115.1
Depreciación y amortización — — — — — — — — 0.5 0.4
Pasivo — — — — — — — 2.7 2.5 3.2
Ingreso neto — — — — — — — -4.9 -3.4 -3.1
Beneficio bruto — — — — — — — 0.1 0.0 0.1
Ingreso antes de impuestos — — — — — — — -7.5 -4.8 -4.4
Impuestos al ingreso — — — — — — — 2.6 -1.4 -1.3
Gasto de interés — — — — — — — — 0.0 —
Ingreso de interés — — — — — — — — -0.2 —
Minority Interest
Ingreso neto — — — — — — — 1.2 1.4 1.2
Ingreso — — — — — — -1.9 — — —
Cement
Ingreso 110.0 139.2 165.3 172.4 212.0 291.6 369.3 — — —
Concrete
Ingreso 5.7 12.2 14.9 19.4 28.0 52.1 — — — —
Zinc Oxide
Ingreso — 2.1 12.5 13.9 5.6 1.0 — — — —
Corrugated Iron
Ingreso 21.5 27.1 39.0 22.5 29.1 — — — — —
Concrete Blocks
Ingreso 4.2 4.4 2.3 2.6 2.4 — — — — —

Cementos Pacasmayo S.A. | Annexes: 16

Marco Huarache Tadeo

Cementos Pacasmayo S.A. | Annexes: 17