Shree Cements Ltd. share price target

SRCM's 4QFY18volumes including clinker increased ~8.7% YoY (+21% QoQ) to 6.44mt, led by healthy growth in east markets as also higher clinker sales. Realizations increased ~7.4% YoY (+0.6% QoQ) to INR 4,157 vs est. of INR 4,058 due to better pricing in Eastern markets. Revenue stood at INR28.1b, +15% YoY (estINR25.95b). Cement revenue was at INR26.8b (+17% YoY) while power revenues at INR1, 026m (-8%YoY) due to weak merchant power rates.

Shree Cement ( SRCM) is increasing its domestic capacity by ~32% over FY17-19 at an estimated capital cost of USD60/t. Acquisition of the asset in the UAE at USD76/t has also been at a significant discount and in line with the company's long-term strategy. SRCM's relatively low cost of production compared to peers has resulted in healthy margins and return ratios. As a result, it warrants premium valuations, in our view. We expect SRCM to deliver a better performance than industry due to 1) capacity ramp-up over FY17-19 and 2) a favorable market mix, with higher exposure to the north markets ( >70%), where prices are expected to be the highest

Indraprastha Gas: Key beneficiary of anti-pollution drives in Delhi & NCR, PNGRB's auction for new regions provides new opportunities; Shree Cement: Leading cement player in North India and among the top five cement manufacturing groups in the country with a total capacity of 29.3 MTPA

Q3FY18 EBITDA at Rs 5.7 bn was up 21% YoY, in line with our and consensus estimates, mainly due to low volume base due to demonetization in Nov 2016. Volume grew 8% YoY at 5.3 mnt.

We remain cautious, only for valuations (16.6/13.1x FY19/20 EV/EBITDA) and maintain NEUTRAL with a TP of 17,195 (13.5x Dec-19 EV/EBITDA) as more details from the merger emerge. Shree Cement (SRCM) reported an EBITDA of Rs 1,004/t (vs estimate of Rs 1,099/t, 2.9/-10% YoY/QoQ). Costs surprised on the downside, with P&F; (Rs 746/t, 39.9/% YoY/QoQ) and freight costs (Rs 1,117/t, 30.5/3.7% YoY/QoQ) drawing earnings down. SRCM also announced an acquisition of UAE-based Union Cement (3.3/4.0 MTPA clinker/cement capacity). The acquisition marks SRCMs first steps into the global market. The company has been valued at an EV of USD 305.24mn (EV/t of USD 76), and the acquisition will be completed in 1HFY19.

The steady-state RoCE of UCC, SRCM's latest target, is unclear. While SRCM's domestic continues to meet our expectations, capital allocation is an area of grey. Moreover, defying the pan-India trend, realizations have been flat. Yet volumes of 5.3mt fail to impress us, given a lower base. With rising pet-coke prices and environmental regulations, the operating profit per ton could be under pressure. Though EBITDA has moved up by a fifth to Rs5.7bn in Q3FY18. We assume the deal goes through. And UCC contributes higher RoCE by FY19. Even then, at the current valuations, assuming de-bottlenecking and inorganic...

ICICI Securities Ltd | Retail Equity Research Shree Cement's results were below our estimates. Revenues registered an increase of 23.1% YoY to | 2,296.2 crore (vs. I-direct estimate of | 2302.0 crore) mainly led by 19.4% YoY increase in cement revenues to | 2,193.6 crore and 277.3% YoY increase in power revenues to | 102.6 crore The increase in cement revenues was due to 8.4% YoY increase in volumes to 5.3 MT and 10.1% YoY increase in cement realisations...

Despite cost pressure, Shree Cement (SCL) continued to report healthy operational performance in 3QFY18 with its EBITDA growing by a stellar 22% YoY to Rs5.7bn (vs. our estimate of Rs5.4bn). Though Power & Fuel cost/tonne substantially surged by 40% YoY and 15% QoQ led by soaring fuel prices and ban on petcoke usage in Rajasthan, higher-than-expected average realisation and reversal of Rs403mn pertaining to DMF provisioning aided EBITDA growth. Operating cost/ tonne for cement stood at Rs3,039 (+12% YoY and flat on QoQ). Cement EBITDA/tonne came in at Rs1,080 compared to Rs975 and Rs1,133 in 3QFY17 and in 2QFY18, respectively. Sales volume (including clinker) grew by ~8.5% YoY to 5.33mnT. Net profit stood at Rs3.3bn (+42%...

Company's revenues for Q3FY18 reported an improvement of 25% YoY, in line with our estimates. Growth in revenues was led by 8.4% YoY improvement in cement volumes and 11.4% YoY jump in cement realizations. Power segment sales have also witnessed drastic improvement on YoY basis. Operating margins stood strong at 24.8% for the quarter and impacted by sharp jump in power and fuel cost and freight cost on YoY basis. Better than...

Shree Cement's (SRCM) EBITDA recovered 8% YoY in Q3FY18, driven by 8% YoY cement volume growth while power segment delivered EBITDA loss. Rising fuel and freight costs dragged down profits across both the segments. We expect low base effect to turn favourable on YoY basis, in subsequent quarters. While the 4mn MT inorganic acquisition of Union Cement in UAE is at low cost of USD75/MT, weak demand in the GCC region has kept its revenue/EBITDA flat over the past four years and hence we do not see any major positives here. SRCM's valuation remains extremely expensive at 25x/21x/17x its FY18/19/20E EBITDA. We re-iterate SELL with a revised TP of Rs15,650....