Shree Cement dips 4% as CLSA downgrades stock after Q1 numbers miss estimates

Shree Cement dips 4% as CLSA downgrades stock after Q1 numbers miss estimates

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Shares of Shree Cement declined 4 percent intraday on August 13 as most global brokerages remained bearish on the stock after June quarter earnings missed expectations.

The stock lost 8 percent in last one month. It was quoting at Rs 19,516.95, down Rs 731.35, or 3.61 percent on the BSE at 1242 hours IST.

Company’s consolidated profit in Q1 increased 36 percent to Rs 380 crore driven by strong operating income and revenue grew 7.6 percent to Rs 3,302.8 crore compared to year-ago.

At operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) increased 64.7 percent to Rs 947.52 crore YoY in Q1, driven by fall in freight and forwarding cost (down 20 percent) and other expenses (down 11 percent).

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CLSA downgraded Shree Cement to ‘underperform’ from ‘outperform’ with a target at Rs 20,800 per share at 17.5x one-year forward EBITDA.

The brokerage raised its realisation assumptions based on higher spot cement prices, which offset lower volume growth estimate. It raised EBITDA estimates by 1-2 percent.

While having a ‘reduce’ call on the stock with a target price at Rs 14,630 per share on rich valuations, HSBC said Shree Cement’s volumes underperformed peers and were lower than estimates.

Strong realisations and weak volumes indicate focus on margin over market share, it added.

Citi has a neutral call on the stock with a target price at Rs 21,000 per share as Q1 was slightly below estimate and there is limited valuation comfort.

The brokerage is constructive on cement in medium-term. It believes pricing and volume pullback is likely temporary. “We decrease EBITDA estimate by 0/3 percent for FY20-22 on lower volumes and assumed 7 percent price hike in FY20 against 6 percent earlier,” Citi said.

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