Angel Broking neutral on Shree Cements

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Angel Broking neutral on Shree Cements

Angel Broking has maintained neutral rating on Shree Cements, in its January 31, 2011 research report.

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Angel Broking has maintained neutral rating on Shree Cements , in its January 31, 2011 research report.

"During 3QFY2012, Shree Cement (SRCM) posted 115.3% yoy growth in its bottom line to Rs59cr. Bottom-line growth was mainly driven by the cement business, which posted substantially higher realizations and reasonable 8.8% growth in volumes. PAT growth could have been higher, but it was restricted to a large extent by the sharp increase in depreciation cost (78.9% yoy) on account of capitalization of 150MW of new power capacity. We remain Neutral on the stock."

"SRCM's total operating income grew by 61.4% yoy to Rs1,259cr, primarily on account of higher cement realization. The company's cement realization improved by 33.2% yoy to Rs3,794/tonne (up 11.4% qoq) on account of higher cement prices and higher cement sales as a proportion of total cement and clinker sales (98% in 3QFY2012 vs. 88% in 3QFY2011, as it had 1.5mtpa of incremental grinding capacity operational). Revenue of the power business also grew by 429% yoy to Rs177cr due to a 244% increase in sale volumes to 256.4MUs. This revenue included Rs66cr from power trading operations. The company's overall EBITDA margin expanded by 697bp yoy, as higher cement realization negated the cost pressures witnessed in freight cost and other expenses."

"We expect SRCM to post a strong 23.8% CAGR in its top line over FY2011-13E, aided by an 8.9% CAGR in dispatches over the period. At the CMP, SRCM's cement business is trading at EV/tonne of US$84 on current capacity (US$59 on FY2013E capacity), which, when considering its unfavorable plant locations, in our view offers inadequate margin of safety. Hence, we maintain our Neutral recommendation on the stock," says Angel Broking research report. 

Public holding more than 90% in Indian cos

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To read the full report click on the attachment