Accumulate Shree Cement; target of Rs 27,524: Prabhudas Lilladher

Prabhudas Lilladher's research report on Shree Cement

We cut our FY25E/26E EBITDA by 8%/7% on account of near term weak pricing and cut in volume growth assumptions for FY26E. Shree Cement’s (SRCM) 1QFY25 operating performance was much weaker than PLe on account of lower realization as the company sold higher volumes in East, where prices are much lower than North. Volumes grew 8.3% YoY led by market share gain in East. As near-term demand outlook remains muted, mgmt. expects to grow at industry growth rate in FY25 vs earlier guidance of 12-13% affected by stiff competition in core North region. We maintain our 8% FY25E volume growth assumption and cut FY26E volume growth to 12% (from 14% earlier) along with lower FY25E pricing assumptions. Mgmt.’s focus on cost efficiencies to remain with planned railway sidings at each unit and addition of green power capacities across planned locations. Green power share stood at 54%,which is amongst the best in the industry however intensifying competition in cement space is expected to weaken near term earnings outlook. We expect SRCM to deliver revenue/ EBITDA/ PAT CAGR of 8%/13%/12% over FY24-26E.

Outlook

The stock is trading at EV of 17.7x/15.1x FY25E/FY26E EBITDA. Maintain ‘Accumulate’ rating with revised TP of Rs27,524 (earlier Rs29,225) valuing at 17x EV of Mar’26E EBITDA.