"Shree Cement reported a robust revenue growth of 55.3% YoY to INR 13230 mn aided by 40.1% growth in revenues from its core cement segment (90% of revenues). Strong presence in the high growing Northern region coupled with delayed monsoons (resulting in shorter period of seasonal decline in prices) enabled the company to register a sharp improvement in realisations to INR 3933/tn (+15.3% YoY, 5.6% QoQ). Volumes too improved by 21.5% YoY to 3.02 mt in the last quarter. Demand is expected to improve going forward with the commencement of construction activities post monsoon season."
"EBIDTA sharply grew by 91.7% YoY to INR 4230 mn on the back of 619 bps improvement in margins aided by significant expansion in EBIT margin of its cement division, which stood at 20.2% in Q1FY13 as against 14.5% in Q2FY12 on the back of firm cement prices in North India. Total cost/tn increased 17.5% YoY to INR 3080, leading to cement EBITDA/tn of INR 1198 (+46.9% YoY) and power EBIDTA/unit of INR 1.0 (+2x YoY). Shree Cement remains committed to increase its cement capacity from current 13.5 mtpa to 20 mtpa by FY17. Its plan of setting up 1.5 mt grinding unit in Bihar to gain a foothold in the eastern region remains on track and is all set to commence operations from Dec 2013. Additionally it is also adding 4 mtpa of clinker capacity (2 units each of 2 mtpa) in Rajasthan in June 2013 and June 2014 respectively. The company has also spent ~INR 3 bn on land acquisitions for setting up cement plants in the state of Karnataka and Chattisgarh."
"We remain positive on the cement sector and Shree Cement being one of the being one of the most efficient cement operators is well placed to benefit from the expected revival in the sector. Presence in high growth northern (70%) and central region (30%) in addition to capacity expansion plans lined up will drive its growth. We have changed our estimates to factor in lower depreciation expenses. Although the company has been performing well over the past few quarters, we believe that most of the positives are already factored in the current stock price. Lack of any long term contract for sale of power also exposes the company to fluctuations in merchant power rates. We maintain our sell rating on the stock with a revised target of INR 3034 (cement business valued at EV/tn of INR 4500)," says SPA Research report.
Public holding more than 90% in Indian cos
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