Hold Shree Cement; target of Rs 30,001: Prabhudas Lilladher

Prabhudas Lilladher's research report on Shree Cement

SRCM reported a weak operating standalone performance in Q1FY26, impacted by a 7% YoY decline in volumes impacted by geopolitical issues in May’25. Blended NSR rose 3.8% QoQ, supported by significant price hikes in the East and South regions post Mar’25. Power and fuel costs continued to decline, aided by a higher share of renewable energy, helping SRCM achieve an EBITDA of Rs1,373/t, though other expenses remained elevated. As cement pricing across regions remain sticky aided by relatively better demand, we expect SRCM to deliver strong Q2 on a weak base. With its focus on value over volume, we expect stronger profitability in current market environment. SRCM is on track to achieve 80mtpa capacity by 2028 with planned capacity addition at Rajasthan and Karnataka. However, to outperform the industry volume growth, SRCM may need to recalibrate its value over volume approach by driving volumes and capitalizing on the current pricing stickiness. Over last few quarters, SRCM has lost market share to its peers which remains as a cause of concern. We raise our FY26/27E EBITDA estimates by 8.4%/1.3% on account of better pricing assumptions in near term.

Outlook

The stock is trading at EV of 19.8x/17.1x FY26/FY27E EBITDA, which appears full. We upgrade our rating to ‘Hold’ with revised TP of Rs30,001 (earlier Reduce with TP Rs29,516) valuing at 17x EV of Mar’27E EBITDA.