Buy This Bluechip Cement Stock, Plans Rs. 73bn Capex Growth, Volume Rose 10% YoY: Emkay Global

Top brokerage firm Emkay Global recommends investors to buy the stocks of Shree Cements. The company's share price has gained by 7.45% in the past one month. Shree has planned Capex growth of Rs. 73bn over the next three years, which will be mainly for ongoing projects such as 3.5mt/3mt integrated cement plants at Rajasthan/Andhra Pradesh, 3mt grinding unit at West Bengal, and a 106MW solar power plant.

Stock To Buy: Target Price, Current Market Price & Financial Result

The Current Market Price (CMP) of Shree Cements is Rs. 20415. Emkay Global has estimated a Target Price for the stock at Rs. 23550. This stock has the potential to give a 15.40% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 73,958 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 20415
Target Price	Rs. 23550
Potential 1 year return	15.40%
52 week high share price	Rs. 31,469.95
52 week low share price	Rs. 17,865.20

Shree Cement Limited's volumes increased by 10% YoY, but declined 7% QoQ to 7.5mt, while blended realization increased 10-11% YoY and QoQ to Rs. 5,604, due to better-than-expected price hike in its key markets, higher trade mix, and reduction in price gap between non-trade and trade sales. Total cost/ton has increased by 27% YoY/14% QoQ to Rs. 4,511. The company's UAE subsidiary reported EBITDA loss of Rs. 180mn vs. EBITDA of Rs. 95mn and Rs. 82mn in Q1FY22/Q4FY22, respectively. Other income stood at negative Rs. 216mn owing to fair value loss of Rs. 960mn on investment. Accordingly, PAT declined 52% YoY/51% QoQ to Rs. 3.2bn in Q1FY23.

Emkay Global: Why Should You Buy This Stock?

"Shree Cement Limited's (Shree) standalone Q1FY23 EBITDA declined 19% YoY/10% QoQ to Rs8.2bn, in-line with our and consensus estimates, as better-than-expected realisation balanced out higher-than-expected cost inflation. Blended EBITDA/ton declined 26% YoY/~4% QoQ to Rs. 1,091. Besides, Shree has reiterated its guidance for installed capacity of 80mt (7% CAGR) by FY30 by adding capacities in favorable markets and exploring new geographies through both organic and inorganic routes. We have broadly maintained our FY23E-25E estimates. However, we have revised our TP to Rs. 23,550 (from Rs. 22,400) on a quarterly roll-over to Sep'23. Management reiterates to achieve 80mt capacity target by FY30 (7% CAGR) by adding capacities in favorable markets and exploring newer geographies with no/low cannibalization with the existing plant," Emkay Global stated maintaining a buy rating.

Company portfolio

Shree Cement has a consolidated Cement Production Capacity of 47.4 Million tonnes per annum (including overseas) and a Power Generation Capacity of 752 Megawatts. Our operations span across India and the UAE with 4 integrated plants in India, 1 in UAE and 9 Grinding Units. Shree Cement was also among the industry pioneers for the use of alternate fuel resources in the production of cement and now they have the highest installed capacity of Waste Heat Recover Power plants in the world, second only to China. The company is among the top 3 cement groups in India. After completion of the ongoing projects, the company's domestic capacity will reach 56mt by Dec'24 vs. 46.4mt currently.

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.