Prabhudas Lilladher has given Hold recommendation for Shree Cement with a target price of Rs. 23,150 in its research report issued on May 23, 2022
Prabhudas Lilladher’s research report on Shree Cement
SRCM commanded meaningful differential in EBITDA margins over its peers on back of higher share of cheaper renewable power, indirect tax incentives and logistics advantage. However, the gap has contracted significantly over last one year due to optimisation of realisations and extensive work on rationalisation of freight cost done by the peers. We believe that gap would further narrow down with multi-fold increase in share of renewable power and further reduction in lead distance coupled with commissioning of new plants. Given the expensive valuations (EV/EBITDA at 14.2x FY24e) and high expectations on both margins (Rs1,350/t) and volume growth (CAGR of 12% over FY22-FY24e), we expect stock to extend its underperformance to peers and broader indices.
Outlook
We trim our assigned EV/EBITDA by 10% to 15x FY24e due to performance in-line with industry. Maintain Hold rating with revised TP of Rs23,150 (earlier Rs25,687).