Shree Cements shares fall after Q1 profit dips 13%; CLSA retains sell

Shree Cements share price shed over 4 percent at open on August 11, a day after the company reported its June quarter numbers.

The cement maker reported a 13.5 percent fall in consolidated net profit at Rs 330.35 crore during the June quarter as against a profit of Rs 382 crore in the same period last year.

Revenue was down 24 percent at Rs 2,480 crore, as against Rs 3,302 crore during the last financial year. The company's total expenses fell by 25 percent at Rs 2,163 crore amid lower raw material costs.

“During the quarter ended June, 30, 2020, the company's Indian operations were partially affected due to lockdown announced on account of COVID-19 pandemic by state and central government. The company has taken into account the possible impact of COVID-19 in preparation of the financial results,” the company said in a statement on August 10.

The stock price was trading at Rs 21,379.10, down Rs 1,009.85, or 4.51 percent. It has touched an intraday high of Rs 22,000 and an intraday low of Rs 21,335.40.

Global research firm CLSA has reiterated a sell rating on the stock with a target at Rs 20,300 per share. It is of the view that Q1 operating results were in line adding that low depreciation has driven net profit beat. Results indicate that the company may have to forego pricing to maintain higher growth. It believes the company's better return profile is more than priced in, according to a CNBC-TV18 report.

Citi has a neutral rating on Shree Cement and feels that Q1 results were below expectations with no surprises on costs. It has a target at Rs 22,650 per share and has raised FY21-23 EBITDA estimates by 3-6 percent on higher realisations.

Jefferies has maintained an underperform rating with a target at Rs 18,700 per share. It is of the view that valuation remains a concern. Results were a bit different from peers as volumes were higher than forecasts. Strong volume growth was partially led by a favourable regional mix.

The brokerage firm believes the company managed to grow ahead of the market adding that efforts were visible as lead distance rose. It has upgraded EBITDA estimates by 5-6 percent.

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