Shree Cement stock slumps as Q2 net profit plunges 81% YoY; brokerages cut targets

Over the past 12 months, Shree Cement stock has slumped 8%, while Nifty rose 23% during the same period

Shares of Shree Cement fell on November 12 as brokerages remained cautious on the stock after the company reported an 81% year-on-year decline in net profit at Rs 93.1 crore for the quarter ended September 30, 2024.

The Bangur family-promoted cement maker's earnings were hit by challenging demand conditions on account of the prolonged monsoon and softer prices faced by the industry.

Morgan Stanley has an "Underweight" rating on Shree Cement, with a target price of Rs 24,200 per share. The firm noted a shift in Shree Cement's strategy, where the focus has returned to maintaining higher prices rather than driving volume growth.

It expects the second half of FY25 to be favorable for Shree Cement, in line with trends for other large cement players. However, analysts at Morgan Stanley highlighted a lack of clarity around the company's capacity expansion and market share gains.

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Jefferies, on the other hand, maintained a 'buy rating on Shree Cement, though it has lowered its target price to Rs 28,400 per share. The company reported a slight EBITDA beat in Q2, attributing it to improved realizations. However, Jefferies pointed out that Shree Cement's strategy has become somewhat inconsistent, with a focus on volume in Q1 shifting to value in Q2.

Shree Cement's EBITDA dropped 32% YoY to Rs 592.6 crore in the second quarter of this fiscal. Due to headwinds in the cement industry, Jefferies has reduced its EBITDA estimates for Shree Cement by 9-15%.

CLSA reaffirmed a 'Hold' rating on Shree Cement, with a revised target price of Rs 25,600 per share. The brokerage highlighted that Shree Cement's Q2 EBITDA falling due to weak volumes. CLSA believes the company may have lost market share in key geographies, although flat average selling prices (ASP) helped Shree Cement achieve better-than-industry profitability.

According to analysts at Nuvama, Shree Cement’s capex plan shall help deliver sustained volume growth while cost efficiency measures would allow it to sustain cost leadership in the cement industry.

However, the weak pricing environment compelled the brokerage to slash FY25-27 EBITDA estimates. The broking firm retained 'Hold' rating on the counter with a revised target price of Rs 25,437, down from Rs 27,022 earlier.

As of 9:21 am, Shree Cement shares were trading 1.2%lower at Rs 24,123.80 on the National Stock Exchange (NSE). The stock has fallen approximately 15% so far this year, significantly underperforming Nifty's 10% gain. Over the past 12 months, the stock has slumped 8%, while Nifty rose 23% during the same period.

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