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Shree Cement Shares Slip After Q1 Earnings; Brokerages Maintain Ratings

Here’s what analysts have to say about Shree Cement’s first-quarter FY22 results...

A shovel sits in a tub of freshly mixed cement at a residential construction site. (Photographer: Angel Navarrete/Bloomberg)
A shovel sits in a tub of freshly mixed cement at a residential construction site. (Photographer: Angel Navarrete/Bloomberg)

Shree Cement Ltd.’s shares fell as it lagged peers in the quarter ended June, though it met analyst estimates.

The cement maker saw its profit fall sequentially, dragged by a rise in power and fuel costs. Its revenue and operating income, too, declined over the preceding three months in the April-June period.

Its power and fuel costs stood at 18.9% of net sales compared with 16.1% in the three months to March. Employee benefits expenses were at 6% of net sales.

While the company’s standalone volumes fell sequentially, its realisations — or what cement makers earn on every tonne of the product — rose during the period.

Shares of Shree Cement declined as much as 3.8% as of 12:10 p.m. on Tuesday. Of the 44 analysts tracking the company, 14 have a ‘buy’ rating, 18 recommend a ‘hold’, and 12 suggest a ‘sell’, according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 2%.

Opinion
Shree Cement Q1 Results: Profit Falls But Beats Estimates

Here’s what analysts have to say about Shree Cement’s first-quarter FY22 results...

Jefferies

  • Maintains ‘hold’; hikes target price from Rs 25,000 apiece to Rs 27,000.

  • Shree’s reported realisations were ahead of estimates.

  • Strong realisation in the east should have helped.

  • Earnings impacted by energy price inflation and other costs.

  • Shree’s volumes grew 40% YoY on a low-base to 6.8 million tonnes.

  • Tweaks FY22-23 Ebitda estimates by 2-3% as higher realisations to be offset by higher fuel costs.

CLSA

  • Maintains ‘underperform’ rating, with a target price of Rs 28,300 apiece.

  • Q1 Ebitda in line with expectations; valuations demanding.

  • Volume fell 17% QoQ and was slightly better than pan-India peers.

  • Two-year volume CAGR of 6% was better than industry.

  • Lower freight and other expenses partly offset power cost inflation.

  • Power costs have likely been impacted by higher petcoke/coal costs.

  • Cuts FY22-24 Ebitda estimates by 3-5% to incorporate recent trends.

Goldman Sachs

  • Maintains ‘neutral’ rating, with a target price of Rs 29,100 apiece.

  • Volume growth and realisations lagged larger peers; but base was stronger.

  • Power and fuel costs (+27% QoQ) and other expenses (+8% QoQ) well above expectations and peers; higher costs driven by minimal low-cost pet coke inventory during the quarter.