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This cement stock hits 52 week low, stock is down over 2% in 5 trading days

Shree Cement has an annual cement production capacity of 47.4 million tonnes and a power generation capacity of 752 megawatts.Premium
Shree Cement has an annual cement production capacity of 47.4 million tonnes and a power generation capacity of 752 megawatts.

Shree Cement's stock reached a 52-week low of 21,303.60 in intra-day trading on the BSE on Wednesday at around 1:34 PM (IST). The BSE Sensex was down 237 points at 53,815, while the NSE Nifty 50 fell below the 16,100 barrier in afternoon trade.

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Shree Cement has an annual cement production capacity of 47.4 million tonnes and a power generation capacity of 752 megawatts. The company's operations span India and the UAE, with four integrated facilities in India, one in the UAE, and nine grinding units, and it is one of India's top three cement firms. Shree Cement's stock reached a 52-week low of 21,303.60 in intra-day trading on the BSE on Wednesday at around 1:34 PM (IST). The BSE Sensex was down 237 points at 53,815, while the NSE Nifty 50 fell below the 16,100 barrier in afternoon trade. The stock has been losing over the previous 5 days, falling 2.86 per cent in that time. Concerns over a drop in EBITDA owing to the high rise in power and fuel prices have also weighed on the stock.

The stock has dropped 18.71 per cent in the last month, and it has dropped 20.12 per cent in the last six months. So far in 2022, the stock has lost 21.78 per cent YTD, and it has lost 21.19 per cent in the previous year. Shree Cement is now trading below its 5-, 20-, 50-, 100-, and 200-day moving averages. On the 24th of May, the delivery volume of 13.77 k fell by -17.58 per cent compared to the 5-day average delivery volume. Its latest trading price on the BSE was 21,292.95 down 1.5 per cent. The stock Shree Cement's last traded price on the NSE was 21,300.0, down 1.6 per cent. Shree Cement's share price has dropped 17.1% in the previous 30 days, and the company's current market capitalization is 76,826.56 crore.

Shree Cement's revenue increased 3.1 per cent YoY and 20 per cent QoQ to INR 43,642 million in Q4FY22, while revenue increased 10.7 per cent YoY to INR 150,096 million in FY22. EBITDA decreased by 26.3 per cent YoY to INR 9,188 million in Q4FY22, however, it increased by 8.7 per cent QoQ. EBITDA margin fell 837 basis points year over year and 219 basis points quarter over quarter to 21.1 per cent. EBITDA fell 9.1% year-on-year to INR 37,079 million in FY22, while EBITDA margins fell 538 basis points to 24.7 per cent. The PAT for Q4FY22 increased 36.4 per cent QoQ to INR 6,572 million, despite a 17.7 per cent fall on a year-over-year basis. PAT margin increased by 181 basis points year over year to 15.1 per cent. PAT increased by 2% YoY to INR 23,319 Mn in FY22, but PAT margins shrank by 132 basis points to 15.5 per cent.

The brokerage firm KRChoksey has said that “In Q4FY22, Shree Cement commissioned its 3 mtpa grinding unit at Pune, taking its overall capacity to 46.4 mtpa. The company’s current utilization level stands at ~60% giving ample room for future growth by increasing its utilization level in subsequent quarters. The company is on track to achieve its target of 57 mtpa of capacity in next three years time. During Q4FY22, Shree Cement’s sales volume stood at 8 MT, a growth of 22.1% on QoQ basis. However, on YoY basis it was a modest decline of 2.4%."

“In light of the input cost inflation, we have lowered our EBITDA margin assumption for FY23E/FY24E from 29.6%/30% earlier to 26.3%/27.6%. However, we believe with increase in utilization level, economies of scale will kick in, which will help the company to withstand the margin pressure. Since our last result update, the stock price has corrected by 11.4% in line with overall market correction," said the brokerage.

We continue to value the stock at 16x its FY24E EV/EBITDA, which yields a target price of INR 25,085 (previous TP of INR 27,978), giving an upside potential of 14.3% from the current market price. Accordingly, we maintain our “ACCUMULATE" rating due to the correction in stock price, further added the brokerage.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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