Target: ₹25,440

CMP: ₹25949.75

Shree Cement’s reported volume grew by 10 per cent to 8.20 mtpa, driven by higher demand. Moreover, the company’s capacity expansion plan is progressing well and these capacities would commence operations in a phased manner over Q3-FY24-Q2-FY25. The said capacities coming on stream and ramp up of recently commissioned capacity in the East region (3 mtpa)would drive the company’s volume growth moving ahead.

We estimate Shree Cement to post volume growth of 11 per cent CAGR over FY23-FY25.

The company has announced the setting up of a 3.4 mtpa grinding unit at its existing facilities at Baloda Bazar at a cost of ₹550 crore, at $19/tonne which is very reasonable. The work on the capacity expansion program already announced by the company is running as per the schedule.

We believe these are positive moves and will allow the company to catch up with its larger peers and strengthen its footprint.

The company reported an inline set of numbers with an improvement in the margin profile. The stock is currently trading at EV/EBITDA multiple of 22x and 18x for

FY24E/FY25E which we believe is on the higher side and recent appreciation in the stock price leaves us with no upside potential.