Shree Cement - March 2013 Results Preview - Motilal Oswal

- We expect cement volumes to decline 2.7% YoY (+12.9% QoQ) to 3.38mt (including clinker) and realizations are expected to increase by 5.4% QoQ (+10.2% YoY) to INR3,924/ton.

- Merchant power sale is estimated at 750m units (v/s 783m units YoY and 786m QoQ) at ~INR4.35/unit (v/s INR3.97 QoQ and INR2.39 YoY).

- Realizations growth will partially be negated by cost push, including negative operating leverage. Cement business' profitability is estimated at INR1,252/ton (+INR112/ton YoY and INR235/ton QoQ).

- However, higher power volumes will dilute impact on EBITDA, with power's EBITDA contribution estimated at INR638m (v/s INR670m QoQ/INR249m YoY). Adjusted PAT seen at INR3.2b (v/s INR1.5b YoY v/s INR2.3b QoQ).

- We downgrade adjusted EPS estimates for FY13E/FY14E/15E by 3.4%/5.1%/3.3% to INR316/INR366/INR454.

- Valuations are at 9x FY15E EPS, 4.3x FY15E EBITDA and USD84/ton. Maintain Buy with a target price of INR6,044 (FY15E SOTP-based).

Source : Equity Bulls

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