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Informist, Monday, Jul 29, 2024

 

By Rajesh Gajra

 

MUMBAI – Shree Cement Ltd would likely have faced the brunt of tepid volume growth and price cuts in the quarter ended June, resulting in weak revenue and net profit growth compared with the previous quarter. The Indian cement industry is dependent on domestic demand and, due to feeble demand, cement companies were unable to raise prices during the June quarter.

 

On an annual basis, however, Shree Cement would have fared better in volume growth and operating profit, but the net profit would likely be hit by higher depreciation, according to some analysts. Shree Cement is expected to report a net profit of 5.58 bln rupees in the June quarter, as per an average of estimates by 14 brokerages. This is nearly 4% lower than a year ago and 15.6% down over the previous quarter.

 

Net sales are seen at 50.34 bln rupees, up 0.7% on year but down 1.3% sequentially. The estimates peg the net profit between a low of 4.38 bln rupees and a high of 6.54 bln rupees, while estimates for net sales range from 48.33 bln rupees to 54.51 bln rupees. The EBITDA of the company is seen at 11.64 bln rupees, as per an average of estimates by 12 brokerages. The estimates peg it in a range of 9.57 bln rupees and 12.44 bln rupees.

 

Kotak Securities' Institutional Equities team expects Shree Cement to report a sequential decline in volume to 9.5 mln tn in Apr-Jun. It said that sales were likely muted in key markets due to elections. Brokerage Prabhudas Lilladher estimates flat volume growth on quarter. It said that the entire Indian cement industry witnessed tepid volume growth in the June quarter. Compared with the year-ago quarter, the company's volume is seen growing 6% as per Kotak Institutional Equities and 7% as per Prabhudas Lilladher and Motilal Oswal Financial Services.

 

Shree Cement's sales realisation in Apr-Jun is seen declining 2% sequentially by Prabhudas Lilladher "led by reduction in prices in East & North markets". As per Kotak Institutional Equities, it will decline 2.3% on quarter "on account of price cuts".

 

Compared with the year-ago quarter, cement prices were further lower in Apr-Jun. Shree Cement's sales realisation, therefore, is seen falling 5% on year as per Motilal Oswal Financial and 6.7% on year as per Kotak Institutional Equities.

 

Due to operating deleverage, the cost per tn of cement sales is likely to have gone up by 0.7% sequentially, Kotak Institutional Equities said. This, coupled with lower cement prices, would likely result in a 12.5% sequential fall in EBITDA per tn, according to the brokerage. Motilal Oswal Financial also expects an 11.1% sequential fall in Shree Cement's EBITDA per tn, while Prabhudas Lilladher sees a lower negative growth of 6.3%.

 

However, on an annual basis, Shree Cement's EBITDA per tn would have likely risen 18.5% on the back of an 11?ll in operating expenses per tn and 7% increase in volume, according to Motilal Oswal Financial. It is seen up 19% as per Kotak Institutional Equities, which attributes it to the nearly 13?ll in costs per tn and a 6% increase in volume.

 

Shree Cement's net profit growth will track the EBITDA growth but, according to Motilal Oswal Financial, the company will likely report a 69% rise in depreciation and, therefore, estimates the adjusted net profit to decline 6% on year.

 

The company will detail its earnings on Aug 6. At 0937 IST, its shares traded 0.2% lower at 27,520 rupees on the National Stock Exchange.

 

Following are the Apr-Jun earnings estimates of Shree Cement from 14 brokerage houses:

 

Broker name	Net Sales	Net Profit	EBITDA
	-------(In mln rupees)-------
Anand Rathi Share and Stock Brokers Ltd	49,505	5,281	--
Axis Securities Ltd	48,880	5,140	9,570
Emkay Global Financial Services Ltd	48,706	4,375	11,258
HDFC Securities Ltd	50,235	6,257	11,993
IDBI Capital Market Services Ltd	54,507	6,030	12,154
Incred Research Services Pvt Ltd	52,016	5,346	12,441
Kotak Institutional Equities	49,441	6,453	11,732
KR Choksey Research	51,661	5,848	11,985
Motilal Oswal Financial Services Ltd	50,687	5,441	11,833
Nirmal Bang Equities Pvt Ltd	48,329	4,655	11,390
Nomura Equity Research	49,985	6,541	11,250
Nuvama Wealth Management Ltd	50,396	6,422	11,637
Prabhudas Lilladher Pvt Ltd	50,540	5,026	12,435
Sharekhan Ltd	49,830	5,370	--
Average	50,337	5,585	11,640

 

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Namrata Rao

 

 

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