Neutral Shree Cement; target of Rs 23,910 : Motilal Oswal

Motilal Oswal's research report on Shree Cement

Shree Cement (SRCM)’s 2QFY25 EBITDA was in line as lower-than-estimated realization/t was offset by lower-than-estimated opex/t. EBITDA declined ~32% YoY to INR5.9m (in line), and EBITDA/t declined 27% YoY to INR780 (est. INR815). OPM contracted 3pp YoY to 16%. PAT declined 81% YoY to INR931m (vs. est. of INR738m, due to lower tax provisioning). Management indicated that it is following a strategy of value over volume. The company’s disciplined pricing and focus on premium products helped it report flat sequential cement realization/t vs. a decline for the industry. Management anticipates SRCM’s volume growth to be in line with the industry in 2HFY25. Ongoing capacity expansions of 15.4mtpa include grinding capacity spread across the North, including western UP (9.0mtpa), East (3.4mtpa), and South (3.0mtpa), which are likely to be commissioned by 1QFY26. SRCM reiterated its capacity target of +80mtpa by FY28 vs. 56.4mtpa currently. We cut our EBITDA estimates by 5% for FY25 and 2-3% for FY26/27.

Outlook

Our EPS estimates reduce by ~17-20% for FY25/26 and ~11% for FY27 due to likely accelerated depreciation on account of commissioning of new capacities. The stock is currently trading at 19x/17x FY26E/FY27E EV/EBITDA. Reiterate Neutral with a revised TP of INR23,910 (earlier 26,580).

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