Motilal Oswal is bullish on Shree Cement has recommended buy rating on the stock with a target price of Rs 23,400 in its research report dated May 20, 2019.
Motilal Oswal's research report on Shree Cement
4QFY19 volumes (including clinker) increased ~13.3% YoY to 7.3mt (our est. 7.04mt). Realizations increased ~1.6% YoY to INR4,225, while revenue grew 17% YoY to INR32.8b (our est. INR33.1b). Cement revenue grew 15% YoY to INR30.8b, while Power revenue was up 52% YoY to INR2.0b. Easing cost pressures drive margins: Total cost/t declined 2% YoY. Power EBITDA at INR430m, resulted in cement EBITDA/t growing 15% YoY to INR1,103/t). Thus, EBITDA was up 35% at INR8.5b (in-line). Overall, margins were up 3.4pp YoY at 25.8%. Tax rate stood at 20% in 4QFY19 v/s 13% in 4QFY18, thus, reported PAT declined 20% YoY to INR3.2b (our est. INR3.5b).
We increase our PAT estimate by 2% for FY20 and by 4% for FY21, led by 2% increase in EBITDA estimate due to higher realization assumption and cost savings. We value SRCM at 15.5x June'21 EV/EBITDA and arrive at a Target Price of INR23,400. Buy.
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