Accumulate Shree Cement - Kotak

- Company's revenues during Q4FY12 reported a growth of 38% YoY led by improvement in cement dispatches as well as cement prices.

- Operating margin performance was in line with our estimates. Despite decline in cement realizations on sequential basis, EBITDA margins for cement remained strong led by decline in pet coke prices.

- Net profit growth for Q4FY12 was boosted by higher other income which includes Rs 370 mn of provisions made earlier years which are no longer required.

- Company has changed its financial year end to June and thus FY12 financial would be for 15 months. We have thus revised our estimates for FY12 (15 months) and FY13 (12 months).

- Stock has corrected by nearly 10% since our last update. At current market price of Rs2657, stock is trading at 8.2x P/CEPS and 6.4x EV/EBITDA for FY13. Our revised price target stands at Rs 2886 (Rs 2746 earlier). Pet coke prices have come down and company expects power sale to jump significantly going forward. We thus change our recommendation to ACCUMULATE on the company from REDUCE earlier.

Source : Equity Bulls

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