Accumulate Shree Cement target of Rs 25,815: Prabhudas Lilladher

Prabhudas Lilladher's research report on Shree Cement

SRCM Q2FY25 operating performance was weaker than PLe on weaker volumes. Volume declined 7.3% YoY as mgmt. adopted value over volume strategy during tepid demand scenario. Blended realization declined 2% QoQ due to weak pricing across regions. Delayed spending of governmental budgetary allocation led to lower capacity utilization (~56%). SRCM delivered better EBITDA/t vs peers in challenging quarter on the back of higher trade share. As govt orders were missing; higher trade volumes and mgmt. focus on selling premium products led to premium volumes reaching ~15% of total sales (9% in Q1FY25). As per Mgmt. November pricing is marginally better than Q2FY25 average and expected to improve as demand improves. Ongoing capacity commissioning is delayed by one quarter to Q1FY26 as demand scenario is tepid. We cut our FY26/27E EBITDA by ~7% each on account of weak FY25 volumes. We expect SRCM to focus on cost efficiencies viz. improving green power share to 60% by Q1FY26, decrease in logistics costs, commissioning of rail sidings etc. Key things to watch out for: 1) Demand and pricing movement in H2FY25 2) GoI spends on infrastructure, and 3) mgmt. strategy to drive profitable growth in challenging times.

Outlook

The stock is trading at EV of 17.3x/14.9x FY26E/FY27E EBITDA. Maintain ‘Accumulate’ rating with revised TP of Rs 25,815 (earlier Rs27,481) valuing at 17x EV of Sep’26E EBITDA.

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