Neutral Shree Cement; target of Rs 22,410: Motilal Oswal

Motilal Oswal's research report on Shree Cement

Shree Cement (SRCM)’s 3QFY23 performance was below our estimates led by lower realization (up 1% QoQ v/s est. 3% growth). EBITDA was at INR7.1b v/s est. INR7.5b and EBITDA/t was at INR881 (v/s est. INR940). Profit stood at INR2.8b v/s est. INR3.6b, on higher depreciation and ETR. The management’s key focus areas will be on ESG, brand building, new investments and initiatives as well as digitization. The target is to achieve a capacity of 80mtpa (9.5mtpa under execution) by 2030 v/s 46.4mtpa now.

Outlook

We reduce our FY23E EPS by 7.5% on weak 3QFY23 performance, while keeping our FY24/FY25 estimates intact. We expect SRCM’s cost benefits over peers to narrow gradually. The stock’s valuation at 20.4x FY24E EV/EBITDA appears rich and hence, we maintain our Neutral rating.