Shares of Shree Cement fell 4% in early trading on October 17 after the company reported its September quarter earnings.

Shree Cements Limited reported on October 14 that standalone net profit for the second quarter of fiscal 2023 plunged 67% to Rs 189 crore, compared with a profit of Rs 578 crore a year ago. On a sequential basis, the yield fell 40% from Rs 316 crore in the previous quarter.

Standalone revenue rose 18% year-on-year to Rs 3,781 crore compared to Rs 3,206 crore a year ago. On a sequential basis, revenue was 10% lower than the June quarter’s Rs 4,203 crore.

The company saw an increase in sales in the quarter compared to last year, while better fulfilment contributed to the year-over-year increase in revenue. However, the use of high-cost coal and petroleum coke inventories has severely impacted profitability.

With recent capacity additions in the Eastern and Western markets and upcoming capacity in the Northern and Southern regions, Nirmal Bang expects SRCM to continue delivering above-industry volume growth and geographic diversification. The current SRCM usage rate is 62-64%, providing a lot of growth opportunities.

Nirmal Bang maintained an “Accumulate” rating on Shree Cement with an unchanged target price of Rs 23,040.
Shree Cement is expanding its domestic grinding capacity from 9.5 t/yr to 55.9 t/yr in FY25. Sales volume growth in FY20-22 was lower than that of peers. As other companies are increasing their use of green energy and reliance on split grinding units, they are becoming less cost-effective than their peers.

Motilal Oswal maintained a “Neutral” rating on Shree Cement and valued it at 16x September 2024 EV/EBITDA (vs before March 2024) to reach our target price of Rs 21,510.

Morgan Stanley’s “Overweight” rating on Shree Cements lowered its target to Rs 26,000 per share from Rs 28,000. EBITDA was weaker than expected due to lower realisations, and EBITDA is expected to decline by 8% in FY23 and 3% in FY24.

CLSA has an “underperform” rating on the stock, with a target of Rs 21,300 per share. Profitability is the lowest in more than a decade, but sales volumes are strong. Mixed EBITDA/t fell 36% MoM to Rs 701. CLSA expects profitability to improve as prices attempt to rise, CNBC-TV18 reported.

Shree Cement was quoted at Rs 20,357.30 at 9:19 am, down Rs 805.60, or 3.81% on the BSE.