KR Choksey's research report on Shree Cement
In Q2FY23, Shree Cement’s revenue grew 19.7% YoY to INR 40,380 mn, beating our estimate of INR 38,012 mn. However, on sequential basis revenue declined by 8.5% QoQ. The company reported strong volume growth of 19% YoY/0.7% QoQ at 7.5 MT for the quarter ahead of our estimate of 6.8 MT. EBITDA has seen a decline of 41.7% YoY/32.2% QoQ to INR 5,428 mn. The drop in EBITDA was due to steep rise in power and fuel costs, which grew by 89.6% YoY to INR 13,778 mn. Freight & forwarding costs also saw a jump of 21.6% YoY, which further dented the EBITDA. EBITDA margin suffered contraction to the tune of 1386 bps YoY and 470 bps QoQ to 13.4%. Reported PAT has seen a decline of 67.4% YoY/34.4% QoQ to INR 1,834 mn. PAT margin contracted by 1214 bps YoY/179 bps QoQ to 4.5%. Utilisation level stood at 64% for the quarter.
Outlook
At CMP of INR 20,831, the stock is trading at FY23E/FY24E EV/EBITDA of 17.1x/14.4x. We continue to value the stock at EV/EBITDA multiple of 14.5x on FY24 estimates, which yields a target price of INR 22,888 (unchanged), giving an upside potential of 9.9% from the CMP. Accordingly, we maintain our “ACCUMULATE” rating on the shares of Shree Cement.
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