Nomura has upgraded Shree Cement Ltd.'s stock rating to 'buy' from 'neutral' and raised its target price to Rs 34,000, marking a 21% increase from the previous target of Rs 28,000.
The upgrade reflects the company's strong recovery in its core markets, especially in North and East India, which account for over 80% of Shree Cement's sales. These markets have shown resilience in pricing, significantly boosting the company's profitability and market position.
Both regions have experienced pricing increases of 4% quarter-on-quarter, compared to just 2% across India, the brokerage said in its report on Friday. These markets are expected to drive higher utilisation rates, contributing to market share gains and enhanced revenue.
Shree Cement is expected to benefit from better cement realisations in its core markets. Nomura has increased its Ebitda estimates for financial year 2026 and fiscal 2027 by 9% and 15%, respectively, driven by strong cement prices and efficient cost management. As a result, Shree Cement is anticipated to remain the highest unitary Ebitda player in the industry, further cementing its position as a leader in profitability.
Nomura's forecast for Shree Cement includes a 10% volume compound annual growth rate over financial year 2025-2027, ahead of the industry's expected 7% growth. The company's strategy of asset sweating, particularly in the North and East, is expected to lead the volume growth, supported by ongoing capacity expansion in these key regions, according to the brokerage.
In the fourth quarter of this financial year, Nomura expects Shree Cement's Ebitda to exceed Rs 1,300 per tonne, boosted by better realisations and favourable fuel cost management. The brokerage has projected a 5% year-on-year volume growth, supported by a positive earnings outlook, added the brokerage.
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