Buy Shree Cement; target of Rs 25,000: ICICI Direct

ICICI Direct is bullish on Shree Cement has recommended buy rating on the stock with a target price of Rs 25,000 in its research report dated August 12, 2020.

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August 13, 2020 / 14:57 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Shree Cement

Shree Cement’s operational performance in Q1FY21 broadly remained in line with our estimates while beating our estimates at the PAT level due to higher other income. On the operational front, volumes fell 18.6% YoY to 4.9 MT (vs. I-direct estimate of 4.8 MT) as volume sales were affected from end of March to April 2020 due to lockdown. Blended realisations also remained weak, declining 5.8% YoY to Rs 4,718/t (vs. I-direct estimate of Rs 4,782/t). EBITDA for the quarter fell 22.3% YoY to Rs 700.7 crore, driven by lower sales volumes and realisations. However, it remained above our estimated EBITDA of Rs 652 crore. Blended EBITDA/t for Q1FY21 was at Rs 1,421/t, down 4.5% YoY (vs. I-direct estimate of Rs 1,361/t). Other income was up 143% to Rs 124 crore led by interest income from recent fund raising through QIP (Rs 2400 crore) that has not been deployed towards any capex yet. This, along with a sharp fall in depreciation charge (down 32.6% YoY to Rs 271 crore) led the company to report better than estimated net profit of Rs 370.8 crore (up 2.1% YoY) vs. I-direct estimated PAT of Rs 155.6 crore.

Outlook

Shree Cement has added capacities by entering non-core regions without jeopardising its profitability and return ratios. We expect the company to continue its leadership in costs. This would, in turn, help it to consistently gain the market share with improved profitability and return matrix. Thus, it remains a long term structural play. Hence, we maintain our BUY rating on the stock with a revised TP of Rs 25,000/share (21.5x FY22E EV/EBITDA).

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