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...

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,...

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....

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...

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...

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...

Better realization in cement; Weak power performance 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 which...

During FY20E, SRCM vol growth will flatten after 8-yr of steady growth (industry leading 11% CAGR) as SRCM is focused on trade sales. This has also helped SRCM's strong margin expansion in FY20E (~Rs 470/MT YoY) to industry best of ~Rs 1,470/MT. In our view, while sales ramp-up from its east, south & west expansions should drive 9% vol CAGR in FY20-22E, volatile pricing in these markets should prevent further margin expansion (with downside risks on higher vol growth). Thus, we estimate its RoCE/RoE to marginally cool off by ~100-200bps in FY21/22E. Our EBITDA forecasts are in-line consensus nos. We value standalone cement biz at 15x EV/EBITDA (in-line industry leader UltraTech's target valuation) - for SRCM's industry leadership in cost & return ratios and strong capex management - leading to SOTP value of Rs 19,900. As the stock currently trades at an expensive 19.8/18.4x FY21/22E EBITDA, and at an EV of USD 280/MT, we downgrade our rating to SELL from Neutral. We downgrade Shree Cement (SRCM) to SELL with a TP of Rs 19,900 (SOTP based: Cement (India)/power biz at 15/5x Sep21E EBITDA, and UAE subsidiary at 1x BV). Our TP implies cement EV of USD 222/MT. In 3QFY20, SRCM reported strong results (Rev/EBITDA in-line our est).

Volume growth to resume in FY21; FY20 to end on flat note Shree Cement has historically delivered organic double digit volume growth. Owing to industry level aberrations, Shree is expected to end FY20 on a flat note in terms of cement volumes. With visibility of infrastructure projects improving led by the announcement of NIP and government efforts to address the economic issues, growth is expected to bounce back from FY21E with cement players witnessing traction from December and January. Shree is well placed to ride the growth momentum with an installed capacity...

Shree Cement (SRCM) EBITDA for 3QFY20 was 5% / 8% higher than our / consensus estimate. Key highlight for the quarter was volume growth of 5% YoY and improvement in cement EBIT/t to Rs499 (vs Rs290 YoY, Rs488 QoQ). Improvement in profitability for cement was driven by volume gr and weakness in opex, particularly fuel cost which was down to Rs791 vs Rs1,077 QoQ. We have modeled volume to increase by 10% pa over the next 2 years as SRCM is increasing capacity from 40mt to 46mt by FY21E. Given the recent run up in the stock (up 27% in the last 3 months), we downgrade the stock to Reduce. Our TP based on 17x FY21E EV/EBITDA is Rs22,150. Risk to our view is volume...

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...

Shree Cement reported strong Q2FY20 results surpassing ours as well as consensus estimates by wide margin. The key driver for this strong beat was better than expected pricing in its key North market. The company reported sales/EBITDA of Rs28bn/Rs8.4bn, up 8.5% and 11% above our estimates respectively. Sales volume at 5.7mn was up 1% YoY against our expectation of a 6% decline. Realisations were flat QoQ (despite having ~30% exposure to East where price correction was severe) against our 3% decline estimate. Total operating costs per tonne declined sharply by 2% QoQ and 7% YoY driven by lower RM costs and other expenses. Aggregate EBITDA/mt at...

We retain NEUTRAL rating with an SOTP based TP of Rs 20,000 (Standalone cement/power biz at 15/5x Sep-21E EBITDA and Gulf assets at 1x BV). The stock currently trades at 14.7/13.5x FY21/22E EBITDA and EV of USD 200/MT. Despite ascribing premium valuation to the cement biz for its industry leading growth andreturn ratios, the stock price offers a limited upside. We retain NEUTRAL on Shree Cement (SRCM) with TP of Rs 20,000. Our TP implies cement EV of USD 215/MT.