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Home >Markets >Stock Markets >Shree Cement's stock falls 5% on weak Q1 performance

Mumbai : Shares of Shree Cement Ltd fell as much as 4.71% after it reported a 13.5% drop in consolidated net profit at 330.35 crore during the June quarter of FY21 as against a profit of 382 crore in the same period last year.

At 10:20 am, Shree Cement was trading at 21,421.95 down 4.32% from its previous close, while the benchmark index, Sensex gained 0.76% to 38,471.45.

The company’s revenue fell around 24% at 2,480 crore, as against 3,302 crore during the last financial year. Total expenses too came down by 25% at 2,163 crore, mainly on the back of lower raw material costs.

Shree Cement reported 22% YoY drop in earnings before interest, tax, depreciation and amortization (EBITDA) to around 700 crore, while EBITDA per tonne stood at 1,422 in the June quarter of FY21.

Analysts at Motilal Oswal in a result note said, "Shree Cement's 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 3,300 crore net cash at FY2020-end and limited capex provide comfort in the current uncertain demand environment on account of covid-19. We value the stock at 16 times FY2022E Enterprise Value on Earnings before interest, tax, depreciation and ammortisation and add the value of the UAE operations at $70 per tonne to arrive at target price of 21,500." The brokerage has a neutral rating on the stock.

Shree Cement was able to offset some of the hit due to lower raw material costs. Petcoke prices, a key raw material used to produce cement, were 40% lower during the quarter. Cement prices had also started increasing from May as construction activities restarted.

Emkay Global Financial Services in a result note to clients said, "Cement demand recovery has been much better than our estimates and have increased sales volume assumptions by 14.7%/6.6%/5.5% for FY2021/2022/2023. Historically, Shree Cement has been ahead of most of its peers in capacity expansions, which has helped it to gain market share. The company has aggressive growth plans of doubling its capacities in six years, though there has been some delay due to covid-19-led demand disruption. Capex per ton for Shree Cement is much lower than industry peers and believe that the stock will continue to command premium valuations." The brokerage has a hold rating on the stock.

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