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Informist, Monday, Apr. 21, 2025

 

By Rajesh Gajra

 

NEW DELHI – A mix of operating and non-operating factors may result in Shree Cement Ltd. reporting a year-on-year decline in net profit in the quarter ended March. Operationally, lower realisations will offset a mid-single digit volume growth that some analysts are expecting, and result in the revenue declining year-on-year for the fourth quarter in a row.

 

Making matters worse for the company, despite softening in input costs, Shree Cement's profitability is seen declining in the March quarter compared to a year ago due to competitive pressure on pricing. The cement prices in the country in the March quarter were higher compared to the December quarter, but were lower than a year ago.

 

The bottom line will likely mirror the weak operating profit. Other parameters, such as depreciation and tax outgo, may spring a negative surprise for the on-year net profit performance. In the first nine months of 2024-25 (Apr-Dec), Shree Cement's depreciation and amortisation charge had more than doubled, and made up for 16.4% of total expenses in Apr-Dec.

 

There is also the overhang of a significant tax matter for Shree Cement. In June 2023, the Income Tax Department had raided the company's premises at multiple locations for suspected tax evasion techniques deployed for many years. After the raids, the tax authority had reopened Shree Cement's tax assessments for previous years, and the matter is currently sub-judice. The tax evasion amount was reported to be around INR 230 billion.

 

Shree Cement will likely report a net profit of INR 5.17 billion in the March quarter, down 22% on year and up 2.3 times sequentially, according to an average of estimates by 15 brokerage firms. Excluding an outlier net profit estimate of INR 2.88 billion by Nuvama Wealth Management, the lowest among all the estimates, the average net profit is seen at INR 5.34 billion, down 19% on year. Leaving out the Nuvama's estimate, the lowest estimate for net profit is INR 3.79 billion by Equirus Securities, and the highest estimate is INR 7.30 billion by Systematix Shares and Stocks.

 

The company's revenue from operations is seen down 0.6% on year and up 19% sequentially to INR 50.43 billion. The revenue estimates range from INR 46.49 billion by YES Securities to INR 53.74 billion by Incred Research Services. Further, the company's earnings before interest, tax, depreciation, and amortisation for the March quarter is seen at INR 13.07 billion, according to the average of estimates by 14 brokerages.

 

In the December quarter, the company's revenue from operations fell 13% on year to INR 42.35 billion, while the net profit fell 69% on year to INR 2.29 billion.

 

Most of the analysts expect Shree Cement to report an on-year increase in volume for the March quarter. Nuvama sees the company's volume up by 1% on year, while Prabhudas Lilladher expects the growth at 4%. Motilal Oswal Financial Services and Kotak Securities' institutional equities expect a 5% volume growth.

 

But revenue expectations among analysts are either muted or negative. Kotak said in its report that the company will likely see a 6.2% decline on year in blended realisation, but on a sequential basis, it will increase 3.9% due to cement price hikes in the north and eastern regions, the key markets for the company. Motilal Oswal estimates Shree Cement's blended realisation to dip 7% on year.

 

Operating costs will be lower for the company in the March quarter from a year ago. But most analysts expect the EBITDA to decline on a year-on-year basis. Nuvama said Shree Cement's margin will "plunge" around 350 basis points on year due to "weakness in pricing."

 

The company will detail its March quarter earnings on May 14. At the post-earnings conference, investors and analysts will monitor the progress in capacity utilisation, demand projections for the company's key markets, and updates, if any, on the tax evasion overhang.

 

On Monday, shares of Shree Cement ended 0.5% higher at INR 31,155 on the National Stock Exchange of India.

 

Following are the Jan-Mar standalone earnings estimates for Shree Cement based on reports from 15 brokerages in descending order of estimates of net profit:

 

Brokerage firm	Net Sales	Net Profit	EBITDA
	(In INR million)
Systematix Shares and Stocks (India) Ltd	50,700	7,300	12,600
Elara Securities (India) Pvt Ltd	50,091	6,352	13,804
Nirmal Bang Equities Pvt Ltd	51,406	6,228	13,829
Anand Rathi Share and Stock Brokers Ltd	51,830	6,210	--
InCred Research Services Pvt Ltd	53,740	5,663	13,467
Kotak Institutional Equities	49,958	5,608	13,886
HDFC Securities Ltd	51,900	5,431	12,881
ICICI Securities Ltd	49,960	5,367	13,400
JM Financial Institutional Securities Pvt Ltd	50,783	5,081	14,114
Nomura Equity Research	49,649	5,024	13,464
Motilal Oswal Financial Services Ltd	49,600	4,300	13,200
YES Securities (India) Ltd	46,490	4,172	12,136
Prabhudas Lilladher Pvt Ltd	50,266	4,166	12,313
Equirus Securities Pvt Ltd	53,178	3,792	12,765
Nuvama Wealth Management Ltd	46,970	2,876	11,163
Average	50,435	5,171	13,073

 

End

 

Edited by Saji George Titus

 

 

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