Shree Cement Q1 Preview | Higher volume, realization to drive revenue growth as operating costs hit profitability

Shree Cement

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Shree Cement Ltd is expected to report a year-on-year decline of 26 percent in its standalone net profit tomorrow for the quarter ended June 2022. On a sequential basis, the bottomline is seen lower by 24.4 percent.

However, the revenues are expected to improve 15 percent on-year but decline marginally by 3 percent compared to the previous quarter.

According to a poll of brokerages conducted by Moneycontrol.com, the cement major is expected to report a post-tax profit of Rs 488 crore while registering revenues of Rs 3,976 crore for the June quarter.

The Rajasthan-based company had recorded a standalone PAT of Rs 662 crore a year back when it had clocked revenues of Rs 3,450 crore.

During the January–March quarter, the company had registered a PAT of Rs 645 crore and the revenues came in at Rs 4,099 crore. It had received a tax credit of Rs 100 crore without which its PAT in the previous quarter would have been Rs 545 crore.

Experts expect the company to achieve a sales volume 7.5–7.6 MT (million tonnes) at an on-year growth of 10-11 percent and blended realisations of Rs 5,300 per tonne with a sequential growth of 4–4.5 percent.

“We estimate a volume of 7.5 MT (+9.6 percent YoY, -6.6 percent QoQ) in Q1FY23 factoring demand moderation on a QoQ basis, led by higher prices of steel and cement, however, low base of Q1FY22 keeps YoY growth strong,” said a report from Kotak Institutional Equities. It estimates blended realizations to increase 4.5 percent QoQ (+5.8 percent YoY) led by sharp price hikes taken in the key markets during the quarter.

On the other hand, the brokerage firm Phillip Capital forecasts a volume growth at 13 percent YoY and a sequential decline of 5 percent. It sees the blended realisations improving by 3 percent YoY and by 2 on quarter.

The rise in power and fuel cost is expected to be 10-15 percent on quarter and was led by higher pet coke/thermal coal prices in the past six months. The freight costs are likely to increase 5-7 percent QoQ, resulting in a 7 percent QoQ increase in costs per tonne for the quarter.

“We estimate cement EBITDA (earnings before interest, tax, depreciation and amortization) per tonne to decline to Rs1,087 (-4 percent QoQ, -26 percent YoY) led by higher variable costs, partially offset by higher realizations,” said a report from Kotak Institutional Equities.

As a result of higher operating costs, the EBITDA margins are likely to skid 800 bps on year and 100 bps on quarter and are likely to be in the region of 21 percent for the quarter.

At 1:20 pm, Shree Cement was trading 1.84 percent higher at Rs 21,032.9 on July 27 at the National Stock Exchange. The stock is trading lower by 24.5 percent over the past one year but has gained 10 percent over the past one month.

Disclaimer: The views and investment tips of investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.