Shree Cement has been comparatively slower than its peers in terms of capacity expansion in one of its core markets in the north region, which led to market share loss for Shree Cement and also risks its pricing strategy over the medium term. The company’s capacity share in the north region declined to ~22% in FY25 from the peak of ~24% in FY19, and it is further estimated to decline to ~19% by FY28E, given aggressive expansion by peers.
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Motilal Oswal Report
We estimate Shree Cement Ltd. to report a CAGR of ~8%/12%/13% in revenue/Ebitda/PAT over FY26-28. We estimate Ebitda/tonne at Rs 1,320/Rs 1,385 in FY27/FY28 vs Rs 1,250 in FY26 (average Ebitda/tonne at Rs 1,205 over FY21-25).
We estimate the company’s cumulative operating cash flow at Rs 143 billion over FY26-28 vs Rs 111 billion over FY23-25. Cumulative free cash flow is estimated at Rs 53 billion over FY26-28 vs Rs 20 billion over FY23-25.
The company’s net cash balance is estimated to increase to ~Rs 81 billion by FY28 vs Rs 54 billion in FY25. However, ROE/ROCE at ~10% (each) in FY28E would be lower than the long-term historical average in mid-teens (~15%/14% ROE/ROCE over FY17-22).
Shree Cement is trading at 17x/15x FY27E/FY28E EV/Ebitda (vs its long-term average of 20x). On EV/t, it trades at $136/$127 (at a discount to its long-term average of $200).
We continue to believe that low-capacity utilization and limited regional diversification into new capacity addition constrain any capacity-led re-rating in the stock.
We reiterate our Neutral rating and value Shree Cement at 18x Sep’27E EV/Ebitda to arrive at a target price of Rs 30,030.
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