Hold Shree Cement: target of Rs 27085: ICICI Securities

ICICI Securities's research report on Shree Cement

Shree Cement’s (SRCM) Q4FY24 EBITDA/t, at INR 1,347, has yet again stood at the highest level among peers. EBITDA, at INR 13.3bn, stood 27% ahead of estimates (racing 49% YoY), riding the benefits of operating leverage (other expenses/t slipped >18% QoQ) and low variable cost. SRCM appeared confident of sustaining cost leadership with plans to increase green power mix to ~63% (vs ~56% currently) and improve rail freight mix to 20-25% (vs 10% currently) over the next 2-3 years. However, the underlying weakness in cement prices is leading to 10%/4% cut in our FY25/26E EBITDA, respectively. Further,

Outlook

We lower our EV/EBITDA multiple to 16x (vs 17x earlier) to bring it at par with industry leader UltraTech Cement given similar RoE (13-14%) and EBITDA growth profile. Maintain HOLD with a revised TP of INR 27,085 (vs INR 29,489 earlier).