Shree Cements Ltd - BUY - TP Rs.21913 - Result Update - Kotak

- Company's revenues for Q2FY18 reported an improvement of 6% YoY, marginally lower than our estimates. Growth in revenues was mainly led by 7% YoY improvement in cement volumes and 5% YoY jump in cement realizations but impacted by sharp fall in power segment sales.

- Operating margins stood strong at 26.2% for the quarter, though impacted by higher costs such as pet coke and diesel on yearly basis. Though margins stood ahead of our estimates but higher tax expense led to net profits coming below our estimates.

- At current market price of Rs 18629, stock is trading at 21.8x and 18.1x P/CEPS and 20.4x and 16.1x EV/EBITDA on FY18/FY19 estimates respectively. We believe that Shree Cement is adequately positioned with its expanded capacities to capture the upswing in demand and prices in northern India and we remain positive on the company. We tweak our estimates to factor in lower margins for power segment and arrive at a revised price target of Rs 21913 based on 18x EV/EBITDA and adding valuations of power business (Rs 22436 estimated earlier). We believe that stock will continue to trade at higher valuations owing to its capability to add capacities at lower costs as well as higher than industry margins. Maintain BUY.

Shares of SHREE CEMENT LTD. was last trading in BSE at Rs.18015.05 as compared to the previous close of Rs. 18028.85. The total number of shares traded during the day was 106 in over 38 trades.

The stock hit an intraday high of Rs. 18249 and intraday low of 18015.05. The net turnover during the day was Rs. 1923492.

Source : Equity Bulls

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