Brokerage houses remained positive on the stock, advising a buy after June quarter earnings performance.
Shree Cement share price rallied as much as 6 percent in the morning on Tuesday despite fall in profits, as revenue and volume performance remained strong in June quarter.
Net profit in Q1 fell 36.5 percent year-on-year to Rs 279.5 crore, dragged by dismal operational performance.
The cement maker said revenue during the quarter increased 19.1 percent to Rs 3,070 crore compared to same period last year while sales volume grew by 19 percent to 6.99 million tonne against 5.89 million tonne in year-ago.
EBITDA (earnings before interest, tax, depreciation and amortisation) dropped 19.5 percent year-on-year to Rs 574 crore and margin contracted by 897 basis points to 18.7 percent in Q1FY19, dented by higher fuel cost (up 55 percent), freight cost (35 percent) and other expenses (29 percent).
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At 10:32 hours IST, the stock price was quoting at Rs 17,550.00, up Rs 375.05, or 2.18 percent on the BSE.
Brokerage houses remained positive on the stock, advising a buy after June quarter earnings performance.
Brokerage: Nomura | Rating: Buy | Target: Rs 22,900 | Return: 33%
Global brokerage house Nomura has maintained its Buy call on the stock with a target price at Rs 22,900 per share as cement sector is on the cusp of an upturn.
UltraTech & Shree Cement are its preferred plays and their volume growth will likely get better.
Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 19,550 | Return: 14%
Deutsche Bank also maintained Buy call on the stock with a target price at Rs 19,550 per share as the stock trades at 13.2x FY20e EV/EBITDA versus 3-year average of 20x.
On a standalone basis, the research house expects 16 percent CAGR in volumes and sees 24 percent CAGR in EBITDA & 27 percent CAGR in EPS in FY18-20.
Brokerage: Motilal Oswal | Rating: Buy | Target: 19,804 | Return: 15%
Shree Cement is likely to deliver EBITDA CAGR of 27 percent over FY18-20, led by healthy volume growth (driven by rapid capacity addition) and pricing improvement (driven by higher realisations in the underlying markets in the north).
The cement company - with its superior return ratios and strong earnings growth - deserves to trade at premium valuations. It, thus, values the stock at 15.5x (around 10 percent premium to Ultratech) FY20E EV/EBITDA to arrive at a target price of Rs 19,804.
Brokerage: Macquarie | Rating: Outperform | Target: Rs 21,500 | Return: 25%
Macquarie also maintained its Outperform rating but slashed target price to Rs 21,500 from Rs 24,080 per share as it sees costs peaking out for the cement industry.
June quarter adjusted EBITDA was in-line with consensus estimates and strong volume growth was offset by cost headwinds.
Better prices & strong volume growth should drive margin expansion from Q2FY19 and the company should continue to grow at 2x the industry in FY19-20.
However, it lowered EPS estimate by 23-16 percent for FY19-20.
At 10:25 hours IST, the stock price was quoting at Rs 17,589.20, up Rs 414.25, or 2.41 percent on the BSE.