Emkay Global Financial has given Buy recommendation for Shree Cements with a target price of Rs. 31,200 in its research report issued on Sep 15, 2021

Emkay Global Financial’s report on Shree Cements

Shree Cement’s board has approved expansion plans to increase the company’s clinker capacity by 3.8mt and cement grinding capacity by 6.5mt. The board has also approved a proposal to set up 106MW solar capacity at a total capex of Rs48bn and it is likely to be commissioned by Mar’24. The expansion will increase the company’s domestic grinding capacity to 53mt from 43.4mt and is a part of its aim to achieve 80mt capacity by FY30 (7% CAGR). Our current forecasts imply a 9% capacity CAGR over FY21-26E and 6.5% thereafter.

Outlook

We build in consolidated volume and EBITDA CAGRs of 12% and 14%, respectively, over FY21-24E. We have a Buy rating on the stock with a DCF-derived TP of Rs31,200 (Sep’22E), implying 18x 1-year forward EV/E.

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