Analysts remained cautious on Shree Cement Ltd. due to its expensive valuations and poor operational performance than peers in the quarter ended June, a period marred by the coronavirus pandemic, making the stock the biggest loser on the Nifty index.
The company's Ebitda per tonne fell 5.6% year-on-year to Rs 1,462 in the April-June period, according to an exchange filing. Shree Cement is the only company to have reported a year-on-year decline in Ebitda per tonne, underperforming larger peers like ACC Ltd., Ambuja Cements Ltd. and UltraTech Cement Ltd.
While Shree Cement still managed to report a rise in its net profit, aided by lower than expected depreciation, analysts maintained their ‘Sell' ratings.
Of the 42 analysts tracking the stock, 14 have a ‘Buy' rating. That's closely followed by 13 ‘Sell' recommendations. The rest suggests a ‘Hold'. The average of Bloomberg consensus 12-month target prices implies a downside of 8%. Shares of Shree Cement were trading 4% lower on Tuesday compared with a 0.71% gain in the benchmark Nifty 50 Index.
Also Read: Shree Cement Q1 Results: Profit Rises 2.1%, Revenue Dips By A Quarter
Here's what brokerages said about Shree Cement's first-quarter performance:
CLSA
- Maintains ‘Sell' with target price unchanged at Rs 20,300 apiece
- Decline in Ebitda per tonne is in sharp contrast to cement marker with historic high profitability
- Power costs surprised positively but were offset by high freight expenses
- Revised FY21-23 Ebitda estimates by -1% to 3%
- Stock trading at 70% premium to other cement makers and 80% to its replacement cost
JPMorgan
- Maintains ‘Neutral' but raised target price to Rs 19,250 from Rs 18,000 apiece
- Expects Ebitda per tonne to remain range-bound over prevailing levels in FY20-22
- Scope to cut costs meaningfully from current levels limited
- Struggles to find upside at current demanding valuations
HSBC
- Maintains ‘Reduce' with target price unchanged at Rs 14,800 apiece
- First quarter Ebitda misses estimates due to lower-than-expected realisations
- Only major cement producer to report year-on-year decline in Ebitda per tonne
- Profit after tax beat was on account of lower-than-expected depreciation
- Finds expensive valuation unjustified
Prabhudas Lilladher
- Downgrades to ‘Reduce' from ‘Hold' but raises target price to Rs 19,100 from Rs 19,000 apiece
- Shree Cement lags peers with flat blended year-on-year Ebitda per tonne
- Peaked out margins, slowing growth and stretched valuations a concern
- Constrained capacity addition pipeline
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
