Motilal Oswal: Shree Cement Q1 Disappoints On Weaker Margins
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Motilal Oswal Report
Shree Cement Ltd.’s Q1 FY21 result was relatively weaker than large-cap peers (Ultratech Cement Ltd., Ambuja Cement Ltd.) as Ebitda per tonne declined to Rs 1421 per tonne versus sharp expansion reported by peers.
Revenue/Ebitda/Profit after tax came in at down 23%/22%/up 2% YoY to Rs 23.2 billion/Rs 7.0 billion/Rs 3.7 billion, and down 3%/up 1%/up 57% versus our estimate.
Volumes declined 19% YoY to 4.93 million tonne (estimate 4.97 million tonne), lower than industry decline of approximately 35% YoY, largely due to a low base (down 13% YoY in Q1 FY20 versus up 1% for the industry).
While we keep our estimates largely unchanged, we see challenges related to near-term margins for Shree Cement.These pertain to the hike in cost, but decline in price in its operating regions.
The balance sheet should, however, strengthen further (approximately Rs 33 billion net cash) on limited capex under execution.
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