Shree Cements Ltd. share price target

Healthy Q4 revenue gains driven by both volumes (+10% YoY) and realisations (+6%)

The Union ministry of commerce is in talks with regulators and other departments to put in place systems that will level the field between exports through e-commerce and traditional channels, when it comes to tax refunds.

Recommendation: We revise our rating from BUY to HOLD owing to the recent appreciation in stock price.

Shree Cement’s (SRCM) Q4FY23 EBITDA (in line) dipped 2% YoY despite 10% volume surge. Similarly, for FY23, EBITDA was down 19% YoY despite 15% volume jump. Cement industry’s inability to pass on the impact of fuel cost surge (due to high competitive intensity) to consumers takes the blame for the same.

Pricing power is crucial in the commodity business and the Indian cement sector is certainly losing the plot on that front. Elevated competitive intensity across regions, has prevented margin-accretive price hikes, despite: a) robust demand (Q4FY23E prices slipped ~1% QoQ notwithstanding peak season volume surge of ~10% YoY)

We recently interacted with the management of Shree Cement (SRCM) for an update on their business strategy and general industry outlook. Following are the key takeaways: (1) SRCM has formed a Technical Services team (also comprising civil engineers) which will not only provide expertise to construction activities but also improve sales by close interaction with customers.

Volume-led (+23%) revenue growth of 15% YoY in Q3 as realisations fell due to weak pricing in key regions