Shree Cement rating – ‘Buy’: Robust second quarter for the company

Shree Cement rating – ‘Buy’: Robust second quarter for the company
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Shree Cement rating – ‘Buy’: Robust second quarter for the company

Shree Cement score – ‘Purchase’: Strong second quarter for the corporate

shree1200Increase Ebitda/earnings and goal worth to Rs 27,500; improve to Purchase

SRCM’s Standalone EBITDA at Rs 9.9 bn (+17% y-o-y, +41% q-o-q) got here in 10%/ 20% above our forecast/ Bloomberg consensus estimate, pushed by greater quantity (+14% y-o-y vs our estimate of +12% y-o-y) and 1% greater blended realisations at Rs 231/bag (vs estimate of Rs 229/bag). General per unit prices at Rs 3,114 (-9% y-o-y, -6% q-o-q) had been additionally 2% under estimates. With greater realisation and decrease opex, blended Ebitda at Rs 1,513/t (+3% y-o-y, +6% q-q) was 8% above estimate of Rs 1,403/t.

Rural and semi city housing demand stays sturdy whereas infra demand has picked up. We anticipate demand restoration to speed up additional put up festive interval. We enhance our FY21F/22F/23F cement quantity assumptions by 14%/11%/8% and now assume 3% y-y development in FY21F, adopted by 17%/12% y-y development in FY22-23F. We anticipate greater realisations to offset price inflation and record-high Ebitda margins to maintain.

shree cement 660

New capacities to drive above {industry} development
SRCM has been gaining market share pushed by ramp-up of newer capacities. In comparison with ~6-12% y-o-y decline for giant cap friends over previous 12 months, SRCM’s volumes had been up 1% y-o-y regardless of COVID-19 lockdowns. Now, with the commissioning of recent 6mt capability by Dec-20, we anticipate additional market share positive factors for SRCM.

Not too long ago introduced clinker line-3 at Raipur ought to present additional headroom for development in fast-growing East India. Additional, administration highlighted plans to extend grinding capability from ~40mt to ~57mt over subsequent three years and subsequently to ~80mt over the subsequent 6-7 years.

Increase Ebitda/earnings and goal worth to Rs 27,500; improve to Purchase

Pushed by greater cement volumes and decrease prices, we elevate our FY21F/22F/23F core Ebitda by 16%/ 12%/9%, whereas earnings enhance by sharp 36% in FY21F on account of decrease depreciation and by 13-15% for FY22-23F. We now anticipate 35% y-o-y EPS development in FY21F adopted by 20%/26% y-o-y development in FY22-23F, for a 27% FY20-23F EPS CAGR. With above-industry development charges and profitability, we now worth SRCM on 17x Dec-22F EV/Ebitda (earlier 16x Sep-22F EV/Ebitda).

Pushed by our Ebitda/a number of will increase and roll-forward of valuations, we elevate our TP to Rs 27,500 (from Rs 22,000), implying 17% upside. With an improved outlook and up to date underperformance vs friends, we improve SRCM to Purchase (from Impartial). The inventory at the moment trades at 17.6x FY22F EV/Ebitda.

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