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Informist, Monday, Jan. 27, 2025

 

By Rajesh Gajra

 

NEW DELHI – With a recovery in sales volume leading to a strong sequential performance of the top line but net profit still substantially worse off on a year-on-year basis, the December quarter will likely have been a mixed one for Shree Cement Ltd. The company's sales volume growth will likely be around 21% on quarter and 3% on year, but realisations will likely be weak, as per analysts' estimates.

 

Realisations would be impacted by industry-wide subdued prices during much of the December quarter. The cement industry's all-India average selling price of INR 360 per bag in Oct-Dec "remained below the five-year average of INR 370 per bag", KR Choksey Research said in its preview report. Other brokerage firms pegged the all-India prices even lower at INR 330-350 per bag.

 

For Oct-Dec, Shree Cement will likely report a revenue from operations of INR 45.88 billion, according to the average of estimates by 14 brokerage firms. This is 6.4% down on year, but 23% higher sequentially. The estimates ranged from a low of INR 41.27 billion by IDBI Capital Market Services to a high of INR 54.84 billion by KR Choksey. The expected on-year decline of 6.4% in revenue is an improvement over the 18% on-year fall in the September quarter, but worse than the 2.7?cline in the June quarter. The decline in revenue in the June quarter came after at least 13 consecutive quarters of an increase in revenue. However, sequentially, the 23% likely rise would be the highest in at least 17 quarters.

 

As per the average of estimates by 14 brokerage firms, the company's net profit would be INR 2.54 billion, down 65% on year, but up 2.7 times on quarter. The likely 65% on-year fall in net profit would be lower than the 81?ll in the previous quarter. However, the expected sequential rise by 2.7 times would be the best net profit growth in at least 19 quarters. Among the net profit estimates, the highest was given by IDBI Capital at INR 3.72 billion, while the lowest was given by Nomura Equity Research at INR 1.64 billion.

 

In the September quarter, Shree Cement had reported a revenue from operations of INR 37.27 billion, down 18% on year and 23% sequentially. During that quarter, the company's net profit fell 81% on year and 71% on quarter to INR 931 million.

 

Axis Securities expects Shree Cement's "volume growth to be subdued owing to higher competitive intensity YoY (year on year)" in the December quarter. Kotak Securities' institutional equities team expects the company's volume to decrease 2.1% on year but rise 15% on year, and "blended realizations" to fall 9.3% on year but increase 1.9% sequentially "due to price hikes during the quarter". Nomura Equity Research sees Shree Cement's realisations inching up 1% sequentially "due to higher exposure to better priced North market." Nomura also expects the company's volume to increase 3% on year to 9.2 million tonnes. 

 

In its preview report, Prabhudas Lilladher said Shree Cement's "realization is expected to increase around 3% led by increase in prices in East & North markets."

 

The EBITDA margin of Shree Cements is seen contracting year-on-year by Axis Securities due to lower realisation. Kotak estimates the EBITDA per tonne of the company to fall 32% on year but rise 22% on quarter in Oct-Dec.

 

The bottom line of the company is seen tracking EBITDA and revenue growth performance. Depreciation is another metric, affecting net profit, which may be adverse for the company. According to Motilal Oswal Financial Services, Shree Cement's "depreciation is estimated to increase 93% YoY due to the commissioning of new capacities in 2HFY24 (Apr-Sept)" and the adjusted net profit is estimated to dip 68% on year.

 

The company will report its December quarter financial results Thursday. Post the announcement, investors will track the company's realisations in the December quarter and the outlook on cement prices going forward. They will also watch out for the company's outlook on input costs. At 0942 IST, shares of Shree Cement traded 1.8% lower at INR 25,306 on the NSE.

 

Following are the Oct-Dec standalone earnings estimates for Shree Cement based on reports from 14 brokerage firms in descending order of estimate of net profit:

 

Brokerage firm	Net Sales	Net Profit	EBITDA
	(In INR million)
IDBI Capital Market Services Ltd	41,267	3,723	6,771
YES Securities (India) Ltd	49,025	3,524	9,858
KR Choksey Research	54,843	3,282	11,576
Anand Rathi Share and Stock Brokers Ltd	47,793	2,924	----
Elara Securities (India) Pvt Ltd	44,026	2,640	8,821
Prabhudas Lilladher Pvt Ltd	44,402	2,494	8,865
Sharekhan Ltd	46,560	2,420	----
Motilal Oswal Financial Services Ltd	46,092	2,363	9,035
Nuvama Wealth Management Ltd	43,526	2,353	8,509
Kotak Institutional Equities	43,481	2,217	8,250
Axis Securities Ltd	46,120	2,100	8,380
Systematix Shares and Stocks (India) Ltd	46,000	2,100	8,400
Nirmal Bang Equities Pvt Ltd	43,807	1,821	7,981
Nomura Equity Research	45,333	1,644	8,085
Average	45,877	2,543	8,711

 

End

 

Edited by Namrata Rao

 

 

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