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Target: ₹23,007
CMP: ₹24,171.25
Shree Cement’s Q3FY23 sales volume increased 8 per cent QoQ and 23 per cnet YoY to 8.03 MT, leading utilisation to touch a healthy 72 per cent (visavis 61 per cent in same quarter last year). Realisations remained flat at ₹5,067/t, coming 6 per cent lower than our expectations of ₹5419/t, due to excess supply of clinker causing downward pressure on realisation; however, demand was strong, which led to good offtake. Hence, revenues stood at about ₹4,070 crore, up by 8 per cent QoQ and up by 15 per cent YoY.
Management has shared an encouraging demand outlook. They cited several drivers such as corporate capex, union infrastructure budget allocation, state elections, and rapid urban housing development.
The company plans to work on increasing realisations by deploying a mix of several tools, including strengthening position in the existing brand portfolio, while introducing new brands where possible. It plans to further penetrate the premium product market and increase its revenue contribution to 15 per cent from current 7 per cent share.
Additionally, we expect the trend of higher green energy consumption to remain steady.
We ascribe a target price of ₹23,007 and maintain a Neutral rating
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