Buy Shree Cement; target Rs 4950: Firstcall Research

Firstcall Research is bullish on Shree Cements and has recommended buy rating on the stock with a target price of Rs 4950 in its April 30, 2013 research report.

"Shree Cement, established in 1985, is today among 5th largest cement manufacturers in India, with a capacity of 14 million tons in eight plants and four grinding units. During the quarter, the robust growth of Net Profit is increased by 139.85 percent to Rs. 2740.90 millions. Shree Cement Ltd has declared Interim Dividend @ Rs 8/- per Equity Share of Rs. 10 each for the financial year 2012-13. Profit before interest, depreciation and tax is Rs.4629.20 millions as against Rs.4475.67 millions in the corresponding period of the previous year. The Planning Commission has projected an investment of over Rs 45 lakh crore (about USD 1 trillion) during the 12th Plan (2012- 17) to the infrastructure space in cement industry. Net Sales and PAT of the company are expected to grow at a CAGR of 20 percent and 76 percent over 2011 to 2014E respectively.

The company's net profit jumps to Rs 2740.90 million against Rs 1142.76 million in the corresponding quarter ending of previous year, an increase of 139.85 percent. Revenue for the quarter declines 0.43 percent to Rs.14716.30 million from Rs.14780.16 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.78.67 a share during the quarter, registering 139.83 percent increase over previous year period. Profit before interest, depreciation and tax is Rs.4629.20 millions as against Rs.4475.67 millions in the corresponding period of the previous year.

Outlook and Conclusion: At the current market price of Rs 4500, the stock P/E ratio is at 15.49 x FY13E and 13.69 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.290.52 and Rs.328.78 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 20 percent and 76 percent over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 9.18 x for FY13E and 8.55 x for FY14E. Price to Book Value of the stock is expected to be at 4.42 x and 3.63 x respectively for FY13E and FY14E. We recommend buy in this particular scrip with a target price of Rs 4950 for Medium to Long term investment," says Firstcall Research report.

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