Shree Cement Q3 Results Review: Most Analysts Cut Targets On Higher Costs, Volume Miss
Here’s what analysts have to say about Shree Cement’s Q3 FY22 results…
Most analysts cut target price for Shree Cement Ltd. after its operating profit missed estimates as costs surged and volumes fell more than peers’ in the third quarter.
The cement maker saw its net profit decline 22% over the year earlier in the three months through December. Its operating income fell 24.2%. Volumes declined 8.5% year-on-year during the period.
Power and fuel expenses as a percentage of net sales rose to 22.7% from 17.2% a year earlier. The share of other expenses, too, increased to 16.2% from 14.8%. These, however, were partly offset by a decline in freight costs.
Of the 46 analysts tracking Shree Cement, 18 rate a ‘buy’, 20 recommend a ‘hold’ and eight suggest a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 12.8%.
Here’s what analysts have to say about Shree Cement’s Q3 FY22 results…
Jefferies
Maintains ‘hold’, cuts target price to Rs 26,600 apiece from Rs 27,600.
Another weak result in the cements pack.
Shree Cement’s Ebitda miss was led by a sharp increase in costs and weaker volumes.
Increase in cost is an industry-wide phenomenon.
Volume decline is higher than peers.
Blended realization was higher driven by the power segment improvement.
CLSA
Maintains ‘outperform’; cuts target price from Rs 30,050 from Rs 28,875 apiece.
Shree’s Q3 Ebitda largely in line.
Profitability decline largely in line; costs likely peaked.
Capacity expansion on track.
Demand recovery in Q4 key for the sector.
Cuts FY22-24 Ebitda estimates by 4% on lower volumes and a slower price uptick.
Against a high base of Q4 FY21, any growth will be perceived positively.
Emkay Global
Maintains ‘buy’; cuts target price to Rs 28650 from Rs 32,250 a share.
Shree Cement's Ebitda missed estimates owing to higher-than-expected cost inflation.
Shree plans to increase clinker capacity by 3.8 million tonnes and grinding capacity by 6.5 MT to 53 MT by March 2024E.
These expansion projects are a part of the company’s aim to achieve 80 MT capacity by FY30E.
Cuts FY22-24 Ebitda estimates by 8- 13% factoring in higher input cost inflation.
Reduces fair value EV/Ebitda multiple to 17x from 18x, based on marginally higher weighted average cost of capital.
Investec Securities
Downgrades to ‘hold’ from ‘buy’; hikes target price to Rs 20,820 from Rs 19,827.
Shree Cement remains the most expensive cement mill.
The company has outperformed peers even on a year-to-date basis.
Its focus on operating metrics and ESG is evident via its performance.
The management’s focus on cost/ product launches with profitability at its core is commendable.
Capital allocation in overseas assets and rationale for QIP still baffles us.
Goldman Sachs
Maintains ‘neutral’, raises target price to Rs 27,850 from Rs 26,250.
Volume miss, but better profitability and improving outlook.
Volumes underperformed peers—UltraTech Cement -4% YoY, Dalmia Bharat -2% YoY.
Volume miss driven by weak demand trends and supply-chain disruptions in the east.
Investors are likely to take some comfort in Shree’s outperformance on profitability in Ebitda per tonne.
Expects Shree’s profitability to improve in line with peers.
Expects Shree to deliver better-than-industry volume growth for FY23-24.
