Shree Cement Limited (Shree Cement) has corrected ~13% over trailing fortnight. As per the DPIIT, cement production declined by 38% y-o-y and 13.5% y-o-y during Q1FY2021 and July 2020 led by impact of Covid-19 and the onset of monsoons respectively. However, our interaction with the management of Shree Cement suggest that it has witnessed volume growth of 7% y-o-y and 6% y-o-y during July 2020 and August 2020 while cement offtake has been good during September 2020 till date. Hence, we believe Shree Cement should continue its industry outperformance during Q2FY2021 as was seen during Q1FY2021 (where Shree Cement reported 19% y-o-y decline in...

Decline in volumes for 1QFY21 was higher than 4QFY20 because of only few COVID-19 affected weeks in 4QFY20. Sales volume for the current quarter declined 18.6% YoY (down 28.7% QoQ) to 4.9MT, attributed to COVID-19 related slowdown. Cement sales realization on consolidated basis was down 7.7% YoY at INR 5,031/t but improved...

Shree Cement Q1 Results, marginal rise in profit, revenue dips by nearly a quarter The cement makers net profit rose 2.1% year-on-year to Rs 329.30 crore in the three months ended June as against Rs. 379.67 crore during the corresponding quarter last year. During the quarter ended 30th June, 2020, company's Indian operations were partially affected due to lockdown announced on account of Covid -19 pandemic by state and central...

Shree Cement Limited (Shree Cement) reported lower-than-expected operational performance for Q1FY2021,even as net profit beat estimates led by higher other income and lower depreciation. Standalone net revenues declined 23.4% y-o-y to Rs. 2,326 crore led by 18.6% y-o-y decline in volumes (including clinker) affected by COVID-19 lockdown in April 2020. Blended realisation lagged estimates at Rs. 4,718/tonne(-5.8% y-o-y, +1.3% q-o-q) likely on account of regional sales mix and lower merchant power revenue. EBITDA/tonne at Rs. 1,421 (-4.5% y-o-y, -9.0% q-o-q) came in lower than estimate due to weak realization. Its Opex/tonne was...

Shree Cement has a strong presence in the north, eastern markets. Historically, every time sales dip in a particular year, it has bounced back strongly and delivered robust volume growth in coming years despite a setback. This is also been reflected in the company's current quarter performance where volume decline has stayed lowest (down 18.6% YoY vs. industry (down ~33% YoY). While current scenario poses near term headwinds, we expect the company to rebound in a strong manner. Expectations of normal monsoons would provide some respite to the...

SRCM reported Q1FY21 earnings marginally below our expectation due to higher costs. Company depicted strong maturity over last one and half year with tight discipline on volumes and prices in its North market. This is reflected in highest ever margins since FY09. However, we believe that margins have peaked-out as we see stiff competition from new capacities, weak demand outlook and increased likelihood of leakage on volumes...

Shree Cements Ltd (SRCM) has reported decent set of numbers for 1QFY21. EBITDA at Rs7bn was 3.4% higher than our estimate but various operating parameters were lower than expectations. Revenue at Rs23.25bn declined by 23% YoY as volume declined by 18.6% YoY (much better than our expectation) whereas realization declined by 5.9% YoY (much lower than our expectation). Sharp YoY decline in power & fuel costs resulted in 6.4% YoY decline in operating costs/mt. As a result, EBITDA/mt came in at Rs1,421 against our expectation of Rs1,598. We believe that the company has tried to maximize volume growth in the quarter to absorb the fixed costs in a better way. This has resulted...

Shree Cement (SCRM)s 1QFY21 result was relatively weaker than large-cap peers (UTCEM, Ambuja) as EBITDA/t declined to INR1421/t v/s sharp While we keep our estimates largely unchanged, we see challenges related to near-term margins for SRCM. Depreciation expense declined 33% YoY to INR2.7b, driving the beat on PAT While SRCMs home market of northern India remains better placed (due to consolidated market structure and lower capacity additions), its increasing exposure to the eastern region is expected to result in blended margin decline. A strong balance sheet (~INR33b net cash at FY20-end) and limited capex provide comfort in the current uncertain demand environment on account We value SCRM at 16x FY22E EV/EBITDA and add the value of the UAE operations at USD70/t to arrive at TP of INR21,500. market of northern India continues to be better placed (owing to a consolidated market structure and lower capacity additions), its increasing exposure to the eastern region would likely result in decline in blended margin.

Near term outlook: Sales contraction is expected to continue in June, too, driven by continued sharp decline in non-trade segment. Demand is coming mainly from on-going projects. In our view, cement prices have peaked out in Apr/May and should cool off in subsequent months as demand picks up. Robust pricing so far and lower input costs YoY should moderate earnings decline on account of volume loss in 1HFY21. The Indian cement industry fared better than expected in May 2020. While Covid lockdown hit April sales hard (down 80% YoY), May sales appears to be down only 20% YoY, as per our channel checks. Demand from the rural/semi-urban regions drove trade sales in May to fall at lower pace YoY. Labour and capital shortage hit non-trade sales harder. Better than expected trade demand kept cement prices buoyant across markets. YTD-1QFY21 prices are up 4-31% YoY! Falling petcoke/coal/diesel prices will continue to cushion margins amid weak demand.

Shree Cement's top-line de-grew by 2% Y-o-Y to `32,175 mn primarily on account of drop in sales volume partially impacted by Covid-19 pandemic, however robust pricing in its key markets (northern and central markets) controlled the top-line damage to certain extent. EBITDA in Q4FY20 stood at `10,789mn up ~27.3%Y-o-Y on the back of falling energy costs and lower raw material costs. Energy costs and Raw material costs plunged 19% YoY and 27% YoY to `6,217mn and `1,816mn respectively in the mentioned period. Company's EBITDA margins were up at 33.5% from 25.8% in Q4FY19 and 29.8% in Q3FY20. Company's PAT rose 83.3% Y-o-Y to `5882mn in Q4FY20 on account of higher other...

Shree Cement Limited provides building materials. The company manufactures and sells cement and cement products in India. The company currently operates with a total cement capacity of 44.4mpta of...

Shree Cement (SRCM) EBITDA for Q4FY20 was 15% / 8% higher than our / consensus estimate. Beat is led by a) higher subsidy income, and b) lower opex/t. SRCM has booked subsidy income of Rs1.2bn in 4Q vs Rs1bn subsidy booked over 9MFY20. Opex/t was flat QoQ, and was led by lower raw material cost and other expenses. SRCM has resumed production starting 20th April but we expect it to witness volume growth only post monsoon. We have modeled volume to decline by 14% YoY and EBITDA/t to reduce to Rs1,398 vs Rs1,487 YoY in FY21E. We maintain estimate and retain TP of Rs16,418 (valued at 15x FY22E EBITDA). Stock trades at a premium...

Shree Cements Ltd (SRCM) has reported extremely good set of numbers for 4QFY20, reporting highest EBITDA/mt in over a decade at Rs1,562/mt. Better than expected pricing and volume resulted in this outperformance. EBITDA at Rs10.8bn was 9% above consensus and 20% above our estimate. Despite loss of production days in March20, volume decline was restricted to 5.4% only at 6.9mn mt (including clinker). Pricing growth was extremely good, improving by 2.1% QoQ (6.8% YoY) against our expectation of a 3% decline. Higher exposure to Northern region resulted in better-than-expected pricing growth. Total operating cost at Rs3,097/mt was marginally lower than our...

decline in total income from operation to Rs 3,415.14 crore for third quarter ended December 2020. The profit was aided by an improved operational performance. Operating Margin (OPM) increased by 530 bps to 30.9%. Thus, operating profit (OP) rose 18% to Rs 1,056.73 crore....

SRCM's volume growth outperformed industry, hinting towards undercutting depicted strong maturity over last one year with tight discipline on volumes and prices in its Northern operations. This is reflected in highest ever margins since FY09 and best ever absolute bottom line. However, we see material downside risk to SRCM's margins due to competition from new capacities,...

Maintain REDUCE: We retain Reduce rating on Shree Cement with SOTP based TP of Rs 17,900 (SOTP based: Cement/power businesses at 15/5x FY22E EBITDA, and its UAE subsidiary at 1x BV). Despite ascribing premium valuation, for its superior cost leadership and profitability margin and strong capex management, the stock price offers no upside. We maintain Reduce rating on Shree Cement with TP of Rs 17,900, as valuations remain expensive. We expect Shrees FY21E vol to decline 19% in FY21, as Covid-led lockdown will drive ~45% YoY sales decline in 1H. However, falling energy cost and healthy pricing in the north/central markets should drive margin expansion thus moderating FY21 EBITDA decline. In 4QFY20, while Shrees vol fell 5% YoY, strong pricing and falling energy costs bolstered unitary EBITDA to Rs 1,562/MT (industry best!).

Stronghold in operating markets to lead to strong bounce back Shree Cement has a strong presence in the north and eastern markets. Historically, every time, the company's sales dip in a particular year, it has bounced back strongly and delivered robust volume growth in the coming years, despite a setback. While the current scenario poses near term headwinds, we expect Shree Cement to rebound strongly. Expectations of normal monsoons would provide some respite to the industry as it would boost rural demand, which forms 30-35% total cement consumption. We...

Shree Cement Limited (Shree Cement) reported better-than-expected standalone operational performance, which was driven by better realisation and lower cost of production. The company's standalone revenue declined by 2% y-o-y to Rs. 3,217.5 crore on account of lower cement volume (down 5.4% y-o-y). The company has stopped providing power division's operational numbers from Q4FY2020, as most power is consumed for cement operations. Lower volume during Q4FY2020 was on account of COVID-19-led lockdown, which affected 10 days during Q4FY2020. Blended realisation improved by 3.5% y-o-y, led by higher cement prices in Northern...

8 May 2020 Shree Cements (SRCM) 4QFY20 results reflect the benefit of improved pricing as EBITDA/t has improved sharply as expected with decline in costs. A strong balance sheet (~INR45b net cash) and limited capex provides comfort in the current environment of weak demand due to COVID-19. We, however, believe this is factored in at the current valuation (15x FY22E rating. SRCMs 4QFY20 volumes declined 5.4% YoY to 6.9mt. This was much lower than the 10-12% YoY decline reported by peers ACC and Ambuja. power) was up ~3.5% YoY (+2% QoQ) to INR4,659/t (5% lower than est. INR4,881/t), which could be due to external sale of power (not disclosed from this quarter). Total revenue declined 2% YoY to INR32.2b (4% lower than est.). Blended cost/t declined 7% YoY (-3% QoQ) to INR3,097/t.

Strong Operating Performance despite Dismal Show by Power Division Shree Cement (SRCM) has reported a strong operating performance in 3QFY20 albeit missing our estimates. EBITDA grew by 20% YoY to Rs8.5bn (vs. our estimate of Rs9bn), while EBITDA/ tonne remained strong at Rs1,365/tonne vs. Rs1,067 in 3QFY19 and Rs1,451 in 2QFY19. Sales volume grew by 5.3% YoY to 6.25mnT, while average realisation stood at Rs4,512/tonne (+4.6% YoY and -3% QoQ) slightly below our estimate of Rs4,540. Operating cost/tonne for cement declined by 3% YoY and 1.7% QoQ to Rs3,147 (-3% YoY and -1.7% QoQ) mainly led by steep decline in input cost/tonne entailed by reduction in fuel cost. However, its power division has...