ICICI Direct is bullish on Shree Cement has recommended buy rating on the stock with a target price of Rs 23,500 in its research report dated August 12, 2019.
ICICI Direct's research report on Shree Cement
Shree Cements reported strong results, driven primarily by a sharp increase in realisations (up 14.5% YoY) during the quarter leading to a beat in margins & profitability during the quarter. However, weak sales volumes led to a marginal dip in revenues during the quarter. Sales volume were down 13.3% YoY to 6.06 MT mainly due to labour shortages during the election phase and a slowdown in private capex. Power segment revenues were down 6.4% YoY on account of higher base of last year. Cement cost per tonne fell 1.7% YoY. This was aided by strong realisation growth, led the margin expansion by 1100 bps YoY to 29.7% (vs. I-direct estimate of 27.2%). Hence, EBITDA grew 56.8% YoY to Rs 902.2 crore (vs. I-direct estimate of Rs 796.5 crore). While PBT growth (up 57.1% YoY) remained healthy, higher tax provisioning restricted PAT growth to 30% YoY in the quarter.
Hence, we remain positive on the business and upgrade our rating to BUY with a revised target price of Rs 23,500share (i.e. @ 19.0xFY21E EV/EBITDA).
For all recommendations report, click here
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