Hold Shree Cement; target of Rs 22,710 KRChoksey

KRChoksey's research report on Shree Cement

Shree Cement’s 1QFY21 revenue declined 24.9% YoY (down 27.4% QoQ) to INR 2,480 Cr, as sales volume was muted on account of nationwide lockdown. EBITDA declined 27.4% YoY (down 34.9% QoQ) to INR 688 Cr. EBITDA margin contracted by 95bps YoY to 27.7% in 1QFY21 from 28.7% in corresponding quarter last year. On QoQ basis, EBITDA margin contracted 320 bps from 30.9% in 4QFY20. Net Profit for the quarter de-grew 13.2% YoY (down 38.5% QoQ) to INR 330 Cr while Net Profit margin for the quarter expanded 179 bps YoY to 13.3% (down 240 bps QoQ).

Outlook

We expect better demand recovery going forward and hence we have raised our target EV/EBITDA multiple to 19.5x (earlier 19.0x) on FY22E EBITDA of INR 4,123 Cr (previously 3,766 Cr) and arrive at a revised Target Price of INR 22,710 per share; an upside potential of 6.9% over CMP. Accordingly, we assign an “ACCUMULATE” rating on the shares of Shree Cement.

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