Shree Cement - 4QFY2012 Result Update - Angel Broking

During 4QFY2012, Shree Cement (SRCM) posted 38.1% yoy and 73.9% yoy growth in its top-line and bottom line on account of a healthy operational performance. Cement volumes rose by 20.5% yoy to 3.47mn tonnes, while adjusted realization was up 9.4% yoy at Rs.3,611/tonne. (Adjustment pertains to the company's new method of accounting government grants, as a result of which Rs.65cr of grants received during 3QFY2012 relating to Uttarakhand Plant was deducted from sales and credited to capital reserve). During the quarter, SRCM's merchant sales volumes rose by 68% yoy to 431MU, while average realization stood at Rs.4.29/unit (Rs.4.6/unit in 4QFY2011). We remain Neutral on the stock.

Bottom-line up 73.9% on yoy basis aided by 39% yoy increase in EBITDA/tonne: SRCM's cement business posted EBITDA/tonne (adjusted) of Rs.1,183 for the quarter (up 39% on yoy basis). The improvement in EBITDA/tonne was aided by a 28.5% yoy decline in P&F costs/ tonne to Rs.579 due to lower pet coke prices. On the power front, EBITDA/unit of merchant power sold stood at Rs.0.6. The company's 4QFY2012 bottomline was boosted by Rs.37cr of provision write back relating to the previous years, which was included in its other income.

Outlook and valuation: At the CMP, SRCM's cement business is trading at EV/tonne of US$97 on current capacity (US$62 on FY2014E capacity), which, when considering its unfavorable plant locations, in our view offers inadequate margin of safety. Hence, we maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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