Broker's call: Shree Cement (Reduce)

| Updated on August 12, 2020

IDBI Capital

Shree Cement (Reduce)

Target: ₹19,903

CMP: ₹21,388.85

Shree Cement Q1-FY21 EBITDA was higher than our estimate. Beat in the number is driven by lower a) volume decline at 22 per cent vs our estimates of 35 per cent and b) other expenses at ₹350 crore n vs estimates of ₹440 crore.

But vis-à-vis the industry, which has witnessed q-o-q increase in the profitability (EBITDA/t), it reported decline in EBITDA/t at ₹1,460 (down 10 per cent q-o-q).

We have factored better than estimated number of Q1-FY21 in full year estimate and revised EBITDA up by 12 per cent and 11 per cent for FY21/22 respectively. The target price is revised to ₹19,903 (earlier ₹16,418). But retain reduce rating on the stock, as we understand Shree Cement premium valuation to revert to mean.

Shree Cement plans to incur capex of ₹1,000 crore in FY21. In the medium term, the company is planning to increase its capacity by adding 3 mtpa each at Cuttack and Pune Grinding units. It plans to commission this in the next 12 months. And over long period, it plans increase capacity at 12 per cent CAGR to 80 mt by FY26.

Published on August 13, 2020

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