Shree Cement Q4FY21 Results Review Report - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

Shree Cement (SRCM) reported healthy volume growth (+15/19% QoQ/YoY) in 4QFY21. However, sharp increase in fixed costs moderated the gains. Unitary cement EBITDA fell 7/10% YoY/QoQ to INR 1,400/MT. During 4Q, Shree's net sales/EBITDA/APAT grew 19/8/23% QoQ (22/9/31% YoY) to INR 39.3/11.8/7.7bn respectively. SRCM continues to deliver industry-leading operating performance and return ratios, owing to its robust cost controls and strong focus on trade sales. On account of its expensive valuations, we retain REDUCE rating. Our revised target price of INR 26,500/share is SOTP based - standalone at 16.5x Mar'23 E EBITDA and its UAE subsidiary at 1x BV.

4QFY21 performance: Sales volume grew 15/19% QoQ/YoY to 8.2mn MT on healthy demand during the quarter. NSR firmed up 3% QoQ (in our view - benefitting from higher price increase in non-trade segment) though still down 1% YoY. Unitary opex surged 9% QoQ (led by both input cost inflation and surge in fixed costs), leading to YoY inflation to 4%. Employee cost jumped ~44% QoQ/YoY on account of salary increments for FY21 factored in 4Q. Thus, unitary EBITDA fell 7/10% QoQ/YoY to INR 1,400/MT.

FY21 highlights and outlook: Sales rebound in 2H, driving up FY21 sales by 8% YoY. NSR cooled off 2% YoY in FY21. Opex fell 3%, mainly due to significant saving in power and fuel cost. These resulted in a flattish unitary EBITDA of INR 1,459/MT. Thus, EBITDA grew 8% YoY to INR 39.5bn in-line volume growth. OCF rose 9% YoY to INR 41bn on strong profit and working capital reduction. Slower Capex further accelerated FCF to INR 31bn (+26% YoY), driving net cash surge by 58% YoY to INR 52bn. We expect Capex to accelerate FY22E onwards, as SRCM has large expansion pipeline. We have marginally revised estimates, factoring in 4QFY21.

Shares of SHREE CEMENT LTD. was last trading in BSE at Rs.26900.65 as compared to the previous close of Rs. 27608.95. The total number of shares traded during the day was 3241 in over 1463 trades.

The stock hit an intraday high of Rs. 27790 and intraday low of 26757.6. The net turnover during the day was Rs. 87383955.

Source : Equity Bulls

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