YES Securities' research report on Shree Cement
Shree Cement (SRCM) reported in-line revenue/EBITDA performance of Rs41/9bn, While the reported PAT beat YSEC est. by 19% to Rs6.4bn, due to tax reversal in Q4FY22. SRCM reported sequential strong volume growth (+15%) whereas muted NSR (-5%) & Opex (-4%) uphold the EBITDA/te at Rs1134 (-9%) v/s YSEC est. Rs1194 in Q4FY22. For FY22, SRCM posted a volume/NSR growth of +3/13% y/y resulting in +14% revenue growth. Surge in Opex/te by +20% y/y translate in EBITDA decline by 8% y/y took margin to 25.5% in FY22 v/s 31.4% in FY21. SRCM’s CFO stood at Rs27.2bn in FY22 v/s Rs40.9bn FY21, due to rise in working capital requirement. While FCF stood at Rs7.5bn in FY22 v/s Rs31bn in FY21 due to higher capex (Rs19.6bn in FY22 v/s Rs9bn in FY21) and lower CFO generation. Looking at a strong demand outlook and incremental capacity addition we modelled +11/12% volume growth in FY23/24E. However, due to the inflated cost scenarios we trimmed our EBITDA/PAT est. by 13/27% for FY23E, while we believe SCRM’s EBITDA/te to get bottom down (Rs1250) in FY23E and rebound to Rs1450 levels in FY24E envisaging on cost normalcy.
Outlook
We expect SRCM to generate operating cash flow of Rs73bn which would help to fund its ongoing expansion (Rs32.5bn) internally over FY23-24E. Thus, we retain our BUY recommendation with a TP of Rs30,110 (earlier Rs32,000), valuing the stock at 21.2x EV/EBITDA on the FY24 estimates.
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