MOSL: SHREE CEMENT (Buy)-Impacted by fair value loss related to investments in IL&FS
Shree Cement: Impacted by fair value loss related to investments in IL&FS, excluding which PAT exceeds our estimate
(SRCM IN, Mkt Cap USD7.3b, CMP INR15391, TP INR20010, 30% Upside, Buy)
- Healthy volume and realization growth: SRCM’s 2QFY19 volumes including clinker increased ~16% YoY to 5.64mt (est. 5.51mt). Realizations increased ~2% YoY /4% QoQ to INR 4,268 (est. INR 4207) due to stronger prices in the North. Revenue stood at INR25.8b, +21% YoY (est. INR24.6b). Cement revenue stood at INR24b (+18% YoY), while Power revenues stood at INR1.79b (+75%YoY).
- Investments related to IL&FS impacts earnings: EBITDA came in at INR6.0b (+8% YoY) v/s est. of INR4.55b due to forex loss of INR840m in 2QFY19. Overall, margins were at 23.3% (-2.8pp YoY, +2.3pp QoQ) due to 7% YoY increase in unitary costing. Power EBITDA was at INR405m resulting in cement EBITDA/t of INR999/t (v/s est. INR813/t). The company accounted for fair-value loss of INR1,781m due to the principal investment made in the Preference Shares of the IL&FS group. As a result, reported PAT stood at INR494m while adjusted PAT stood at INR3.11b (+47% YoY) v/s est. of INR1.55b.
- Key highlights: (1) The company has announced capacity expansion of 3mt of cement grinding unit in Cuttack at a capex of INR4.23b and 2.5mt in Jharkhand at a capex of INR4.8b, (2) the company is focused on selling more trade volumes, contribution of trade is 70% (60% in 2QFY18), (3) capex for FY19 is INR17b while that for FY20 is INR12b.
Shree Cements is engaged in the manufacture of cement. Co.'s brands include Shree Ultra, Bangur Cement, and Rockstrong Cement. Shree Ultra is Co.'s flagship brand. This brand has two variants, Shree Ultra OPC and Shree Ultra Jung Rodhak Cement. Shree Ultra Jung Rodhak Cement has unique rust prevention properties. Bangur Cement, launched as a premium brand in the market, is designed to meet the high end market segment. Rockstrong Cement is the youngest brand. This brand has high performance and ability to withstand exceptionally harsh environment conditions.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.