Motilal Oswal is bullish on Shree Cements and has recommended buy rating on the stock with a target of Rs 6227 in its January 22, 2013 research report.
“Shree Cement's 2QFY13 operating performance met estimates, with EBITDA of INR3.7b (v/s est INR3.7b). 2QFY13 revenues grew by 19.4% YoY (+7.9% QoQ) to INR14.3b (v/s est INR14.7b). EBITDA grew by 12% YoY (down 5.4% QoQ) to INR3.7b, translating into EBITDA margins of 26% (v/s est 25.4%) - a decline of 3.7pp QoQ (-1.8pp YoY). Moderated depreciation, lower tax resulted in adj. PAT of INR2.3b (v/s est IN2b).”
“Cement volumes grew 5.2% YoY to 3mt, while blended realizations deteriorated INR9/bag QoQ (+INR146/ton YoY) to INR3,724/ton (v/s est INR3,731/ton). Cement EBITDA/ton was at INR1,017/ton (v/s est INR1,010/ ton) and lower by INR168/ton QoQ (-INR98/ton YoY). Though the decline in realizations was marginally moderated by lower energy cost caused by a decline in pet coke prices by ~11% QoQ, the benefit was diluted by higher other expenses (on account of maintenance shutdown). Merchant power volumes in 2QFY13 was at ~786m units, against ~307m units in 1QFY13 (v/s 586m unit in 3QFY12), with revenues of INR3.1b (v/s INR1.4b in 1QFY13 and INR1.8b in 3QFY12) and EBITDA of ~INR670m. Merchant power realizations were INR3.97/unit (v/s INR4.44 in 1QFY13), with in line EBITDA/ unit at INR0.85/unit (v/s INR1.1 in 1QFY13) respectively.”
“We raise normalized EPS estimates (for accelerated depreciation) by ~7%/ 3%/2% for FY13E/FY14E/FY15E to INR327/INR386/INR469 respectively, led by lower tax rate. Management has reduced its depreciation guidance for FY13 to ~INR4b (v/s INR5.4b earlier). The stock trades at 11.7x/9.6x FY14E/FY15E EPS, 6.2x/4.7x EV/EBITDA and USD114/ton FY15E (adjusting for merchant power assets of ~400MW). Maintain Buy with a revised target price of INR6,227 (SOTP-based),” says Motilal Oswal research report.
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