2026-03-23 03:35:32
Latest Post
Kiaasa Retail Ltd opens 4 retail outlets
NIS Facility Management Services Ltd receives order worth Rs. 56.01 lakhs
IndiQube Signs 1140 Seats Workspace Leasing Deal with Major GCC Client in Pune
Thomas Cook India Ltd announces the demerger of its Resorts and Resort Management business into Sterling Holiday Resorts Ltd
Vikram Solar appoints Sameer Nagpal as CEO to Lead Next Phase of Strategic Growth
Research
Shree Cement - Margins surprise; upgrade to Buy - Centrum
Posted On : 2012-08-24 23:17:34( TIMEZONE : IST )
Shree Cement's Q5FY12 result was significantly above our and Bloomberg's consensus estimates with EBITDA at Rs4.8bn (vs. est. Rs3.7bn) and EBITDA margin at 33.1% (vs. est. 25.7%). Higher operating profit of the company was primarily due to higher sales volume of 3.37mt (vs. est. 3.11mt) and realization of Rs3,805/tonne (vs. est. Rs3,727/tonne). Higher EBITDA coupled with lower depreciation (Rs818mn vs. est. Rs1,737mn) and tax rate (8.3% vs. est. 20%) resulted in profits of Rs3.5bn, significantly above our estimate of Rs1.4bn. We believe that better realization in its key markets would result in improvement in profits going forward and hence, we have revised our profit estimates upwards by 29.1%/32.5% to Rs187.2/Rs264.3 for FY13E/FY14E respectively. RoE and RoCE of the company are expected to be at 26.4% and 18.5% in FY14E against 13.5% and 4.2% in FY11 respectively. We expect the company to generate free cash flow of Rs36.9bn over FY11-FY15E and net D/E is expected to improve to -0.55x in FY14E against 0.18x in FY11. The company will also benefit from its capacity expansion of 1.8mt in Ras, Rajasthan and grinding unit of 1.5mt in Bihar (this will provide better access to East markets). We have revised our rating on the stock to Buy (from Neutral) with a price target of Rs4,049 (earlier: Rs2,924), upside of 20.1% from its CMP.
- Cement division's improved performance leads to better results and help to beat our estimates: Revenue of the company increased 40.7% YoY to Rs14.6bn (est. Rs14.3bn) led by 39.8% YoY growth of cement segments' revenues. EBITDA of the company increased 85.7% YoY to Rs4.8bn (est. Rs3.7bn) led by 88.7% improvement in cement segment's EBITDA. EBITDA margin improved 8pp YoY to 33.1% and PAT increased 481% YoY to Rs3.5bn (est. Rs1.4bn).
- Higher realization, sales volume and lower costs led to improved performance of cement division: Higher cement realization (up 11.8% YoY) and sales volume (up 25.7% YoY) led to 39.8% YoY growth in cement segment's revenue to Rs12.8bn. Operating cost/tonne for the cement division declined 1.8% YoY to Rs2,479/tonne led by decline in energy, freight and raw material costs. Higher revenue and cost efficiencies led to 88.7% increase in cement segment's operating profit to Rs4.5bn and EBITDA margin improved 9pp YoY to 34.8%. EBITDA/tonne of the cement division improved 50.8% YoY (and 12% QoQ) to Rs1,326/tonne.
- Improvement in op. profit of power segment led by higher volume and realization: EBITDA from the power segment increased 56.8% YoY to Rs345mn led by higher realization of Rs4.44/unit (up 4% YoY) and sales of 390mn units (up 63.6% YoY). EBITDA/unit of power was at 0.88/unit against 0.92/unit in Q1FY12.
- Earnings estimates revised upwards: We have revised our realization assumptions for cement by 2.8%/3% and sales volume assumption by 4%/5% for FY13E/FY14E. Consequently our EPS estimates stand revised upwards by 29.1%/32.5% to Rs187.2/264/3 for FY13E/FY14E.
- Upgrade to Buy: At the CMP, the stock trades at 12.8x FY14E EPS, 5.7x EV/EBITDA, 2.7x P/BV and EV/tonne of US$139.3 (considering cement business only). We upgrade our rating on the stock to Buy (earlier: Neutral) with a revised price target of Rs4,049 (earlier Rs2,924), upside of 20.1% from CMP.
