Shree Cement - Quarterly Result Update - Motilal Oswal

Shree Cement (SRCM) posted better than expected results for 5QFY12. EBITDA was INR4.8b, higher than our estimate of INR3.9b, driven by strong cement realizations. Lower depreciation and tax further boosted reported PAT to INR3.5b v/s our estimate of INR1.9b. The company has not disclosed the volume data for 5QFY12; all our per-ton analysis is based on estimated volumes.

- Revenue grew 42.9% YoY (2% QoQ) to INR14.6b v/s our estimate of INR14.9b. Based on estimated volumes of 3.37m tons (up 25.1% YoY), blended realizations improved 6.9% QoQ (11.8% YoY) to INR3,805/ton v/s our estimate of INR3,611/ton.

- Merchant power volumes were ~390m units (excluding traded power) against ~431m units in 4QFY12 and 259m units in 4QFY11. Revenue was INR1.7b against INR1.9b in 4QFY12 and INR1b in 1QFY12. Realizations were INR4.44/unit against INR4.35/unit in 4QFY12 and INR4.3/unit in 1QFY12.

- Cement EBITDA/ton was INR1,324 (v/s our estimate of INR1,093), higher by ~INR184/ton QoQ and INR444/ton YoY. EBITDA of merchant power business was ~INR350m (v/s our estimate of INR294m), led by higher than expected EBITDA/unit at INR0.9/unit (v/s INR0.6 in 4QFY12).

- The company announced a final dividend of INR8/share. Including interim dividend of INR12/share, total dividend for the 15-month FY12 works out to INR20/share.

Valuation and view: We are upgrading our normalized EPS by ~17%/16.4% for FY13/FY14 to INR300.7/INR345.2, led by higher cement realizations. The stock trades at 9.8x FY14E EPS, and at an EV of 4.8x FY14E EBITDA and USD98/ton (adjusting for Merchant Power assets of ~400MW). Maintain Buy, with revised SOTP-based target price of INR4,193.

Source : Equity Bulls

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