Shree Cement - 1QFY13 Results Update - Motilal Oswal

Shree Cement's 1QFY13 operating performance is above estimates, with EBITDA of INR3.93b (v/s estimate INR3.2b), driven by higher-than-estimated volumes and realizations in cement and merchant power business. While volume data for 1QFY13 has not been disclosed, our per/ton analysis are based on estimated volumes.

- SRCM's 1QFY13 revenues grew by 55.3% YoY (down 9.1% QoQ) to INR13.2b (v/s estimate of INR10.9b) and recurring PAT stood at INR2.3b. EBITDA grew by 96% YoY (down 18.3% QoQ) to INR3.93b, translating into EBITDA margins of 29.7% (v/s estimate 29.4%) - a decline of 336bp QoQ (+620bp YoY).

- Cement volumes estimated to have grown by 22.7% YoY (down 9.5% QoQ) to 3.05mt (v/s estimate of 2.85mt). Blended realizations improved by INR86/ton QoQ (+INR490/ton YoY) to INR3,891/ton (v/s estimate of INR3,685/ton). Cement EBITDA/ton at INR1,182/ton (v/s estimate of INR1,114/ton) was lower by INR142/ton QoQ (+INR379/ton YoY). QoQ cost uptick was attributable to higher energy cost and negative operating leverage.

- Merchant power volumes in 1QFY13 were at ~307m units, against ~390m units in 5QFY12 (v/s 14m units in 2QFY12) and revenues were INR1.36b (v/s INR1.7b in 5QFY12 and INR69m in 2QFY12). Merchant power business EBITDA was at ~INR326m (v/s estimate of INR40m). Realizations and EBITDA/unit of own generation were INR4.44/unit (v/s INR4.44 in 5QFY12) and INR1.1/unit (v/s INR0.9/unit in 5QFY12) respectively.

- We raise normal EPS estimates by ~13%/11% for FY13/FY14 to INR351/INR403, led by INR23/bag (v/s earlier estimate of INR13/bag) higher realizations in FY13 and INR10/bag (no change) increase in FY14. We assume cement volume growth of 10% in FY13 to 13.4mt and 9% in FY14 to 14.6mt. We raise EBITDA/unit estimate for the merchant power business to ~INR0.8/unit (v/s INR0.5/unit earlier). The stock trades at 10x FY14E EPS, 5.1x EV/EBITDA and USD109/ton (adj. for merchant power assets of ~400MW). Buy with a revised TP of INR4,694.

Source : Equity Bulls

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