Buy Shree Cements; target of Rs 5000: PLilladher

Prabhudas Lilladher is bullish on Shree Cements and has recommended buy rating on the stock with a target of Rs 5000 in its January 21, 2013 research report.

“Shree Cements, higher-than-expected growth in volumes (+5% YoY), cement revenue grew ahead of our expectation at Rs11.2bn (PLe: Rs11.0bn), up 3.2% YoY, despite weaker-than-expected realisations. Realisations fell 2% YoY (Rs73/t) and 4.6% QoQ (Rs180/t) at Rs3,723 (PLe: Rs3,755). Despite higher freight and raw material cost, Cost/t rose marginally by 1% at Rs2,707 (PLe: Rs2,716) owing to lower pet coke cost. Impacted by weaker realisations, EBITDA/t fell 9% YoY (Rs100/t) and 14% QoQ (Rs166/t) to Rs1,017 (PLe: Rs1,038). Cement EBITDA fell 4.4% YoY at Rs3.05bn, in line with our expectation on the back of higher-than-expected volumes.”

“Benefitted by severe shortage of power in the Northern region due to restrictions on inter-regional movement of power post grid failure, SRCM’s power volumes grew 3x YoY (2.6x QoQ) to 786m (PLe: 575m) units. Realisations dropped 6.6% YoY (8.1% QoQ) at Rs3.97 (PLe: Rs4.3)/unit. Thanks to stronger-than-expected volumes, EBITDA grew 5x YoY (2x) at Rs668m (PLe: Rs600m) with an EBITDA/unit of Rs0.85 (PLe: 1.04) against Rs0.52 YoY and 1.06 QoQ.”

“Shree Cement (SRCM) reported Q2FY13 earnings in line with our expectation. We maintain our positive outlook driven by strong earnings quality, consistent capacity addition (2.5mtpa till FY17), comfort on valuations and presence in better regions. We value the stock at Rs5,000, EV/EBITDA of 5.5x FY15,” says Prabhudas Lilladher research report. 

Public holding more than 90% in Indian cos

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