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Target: ₹23,775
CMP: ₹20,817.40
Shree Cement’s EBITDA was lower than our estimates, due to higher-than-expected input costs while volumes were higher than our expectations. Sales volume was up 18 per cent y-o-y (down 0.6 per cent q-o-q) to 7.5 million tonnes and was 2.2 per cent higher than our estimate of 7.3 million tonnes. It’s average realisation increased by 1 per cent y-o-y (down 10 per cent q-o-q) to ₹5,070/tonne, about 7 per cent lower than our estimate of ₹5,421.
Higher raw material prices contributed to the overall cost inflation as RM cost rose 59 per cent y-o-y (3 per cent lower q-o-q). This steep increase is due to higher coal and pet coke prices, thus leading to higher thanexpected overall cost. Consequently, adjusted net profit fell 67 per cent y-o-y and 40 per cent q-o-q to ₹190 crore, against our estimate of ₹290 crore.
We reduce our EBITDA estimates by 7 per cent for FY23, mainly factoring input costs inflation.
However, considering its cash positive balance sheet and expanding capacity which will enable it to record a 11 per cent Volume CAGR over FY22-FY24 and generate healthy ROCE. We maintain our Buy rating on Shree Cement, with a revised SOTP-based 12-month Target Price of ₹23,775 (from ₹23,500 earlier).
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