Motilal Oswal has given Neutral recommendation for Shree Cement with a target price of Rs. 28,220 in its research report issued on Oct 30, 2021

Motilal Oswal’s research report on Shree Cement

SRCM’s 2QFY22 result beat our estimate on account of: a) higher Power sales, which offset the impact of weaker Cement realization and 4% miss on volumes, and b) lower freight costs. Blended EBITDA/t declined by 4% QoQ to INR1,421/t v/s our estimate of INR1,236/t. We broadly maintain our FY22E/FY23E/FY24E EBITDA estimate, but raise our EPS estimate by 15%/1%/11% to factor in higher other income and lower depreciation cost (in line with its 1HFY22 run-rate). We maintain our Neutral rating as the valuation (21.9x FY23E EV/EBITDA) prices in earnings growth.

Outlook

SRCM trades at 21.9x/18.4x FY23E/FY24E EV/EBITDA. The stock has traded at an average EV/EBITDA of 20x for the last seven years. We value SRCM at 19x Sep’23E EV/EBITDA to arrive at our TP of INR28,220 and maintain our Neutral rating on the stock.

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