Shree Cements share price falls 4% after net profit slumps 67% in Q2

Standalone revenues rose 18 percent on-year to Rs 3,781 crore as compared to a revenue of Rs 3,206 crore registered in the year-ago quarter.

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Shree Cements share price fell 4 percent in the early trade on October 17 after the company reported its September quarter earnings.

Shree Cements Limited on October 14 reported a 67 percent plunge in standalone net profit of Rs 189 crore in the second quarter of FY23, as against a profit of Rs 578 crore recorded a year ago. On a sequential basis, the profit dropped 40 percent from Rs 316 crore earned in the last quarter.

Standalone revenues increased 18 percent on-year to Rs 3,781 crore as compared to a revenue of Rs 3,206 crore a year back. On a sequential basis, the revenue was 10 percent lower from Rs 4,203 crore in the June quarter.

The company was able to grow its volumes during the quarter compared to last year which coupled with better realisations aided the year-on-year growth in revenues. However, the usage of high-cost inventory of coal and pet-coke severely impacted the profitability.

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Here is what brokerages have to say about stock and the company post June quarter earnings

Nirmal Bang

With the recent capacity additions in the East and West markets and upcoming capacity in North and South regions, we expect SRCM to continue to deliver higher-than-industry volume growth, along with geographic diversification. Current utilisation level for SRCM is at 62-64 percent, which offers plenty of growth opportunities.

We maintain our ‘accumulate’ rating on Shree Cement with an unchanged target price of Rs 23,040.

Motilal Oswal

Shree Cement is expanding its domestic grinding capacity by 9.5mtpa to 55.9mtpa by FY25. Volume growth over FY20-22 has been lower than its peers. Its cost benefits v/s its peers is shrinking as other companies are increasing their green power usage, dependence on split grinding units.

We maintain our ‘neutral’ rating and value it at 16x September 2024 EV/EBITDA (v/s March 2024 earlier) to arrive at our target price of Rs 21,510.

Morgan Stanley

We kept ‘overweight’ rating on Shree Cements and cut the target to Rs 26,000 from Rs 28,000 per share.

The EBITDA is weaker than expected, led by lower realisations, and estimate lower EBITDA by 8 percent for FY23 and 3 percent for FY24.

Morgan Stanley expect company to do well in this cycle, on both volumes and realisations, reported CNBC-TV18.

CLSA

We maintained ‘underperform’ rating on the stock with a target at Rs 21,300 per share.

The profitability is lowest in more than a decade but volumes were robust. The blended EBITDA/tonne fell 36 percent QoQ to Rs 701.

CLSA expect profitability to improve with attempts at price hikes, reported CNBC-TV18.

At 9:19am, Shree Cements was quoting at Rs 20,357.30, down Rs 805.60, or 3.81 percent on the BSE.

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