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Strong volumes, but higher fuel costs impacted Q1

SRCM reported weak standalone operating performance in Q1FY27 despite robust 17% YoY volume growth, as higher production costs weighed on profitability. While blended NSR improved 2.3% QoQ aided by price hikes and higher premium product share, EBITDA/t declined to INR1,024 (PLe: INR1,115/t) due to elevated P&F and freight costs. The increase in costs was primarily due to disruption in contracted pet coke and gypsum supplies following the Middle East conflict, forcing the company to use highercost low-quality domestic coal, which effectively lowered clinker conversion, increased OPC sales and impacted realisations. Management expects costs to moderate from Q2FY27 as contracted pet coke supplies normalise and has maintained its FY27 volume guidance of ~40mt (~10%YoY growth).

As per management, fuel costs have largely peaked out for SRCM (assuming no further external disruptions) as the company has largely absorbed the impact of elevated fuel and RM costs in Q1FY27. However, the company still needs to demonstrate a consistent strategy on balancing volume growth while maintaining profitability by reducing the pricing gap with leader. Execution on these fronts will remain critical for sustainable earnings growth. Over the long term, the UAE and North-East capacity expansions should support incremental volume growth, while SRCM's strong balance sheet, cost leadership and increasing renewable energy share continue to underpin its long-term growth outlook. We increase our FY27/28E EBITDA estimates by 5%/3% on higher volume assumption. At CMP, the stock is trading at 15.1x FY28E EV/EBITDA. Maintain ‘Accumulate’ with a revised TP of INR29,085 (earlier INR28,834), valuing the stock at same 17x Mar’28E EV/EBITDA.

Strong revenue growth on robust volumes and higher prices:

Std. revenue increased 13.6% YoY to INR56.2bn (- 0.4% QoQ; PLe INR54.3bn) on strong volumes and higher cement prices. Cement & clinker volumes grew 17.2% YoY to 10.49mt (-2.6% QoQ; PLe 10.11mt) led by healthy demand momentum and lower base. Blended NSR grew 2.3% QoQ to INR5,360/t (-3% YoY; PLe INR5,370/t) led by increase in cement prices in the Eastern region and increase in premium share to 23.3% (22% QoQ; 17.7% YoY).

EBITDA declined YoY on higher P&F costs:

Blended EBITDA/t works out at INR1,024 (-25.4% YoY/ -11.8% QoQ) vs PLe INR1,115/t. EBITDA declined 12.6% YoY to INR10.7bn (-36.4% QoQ; PLe INR11.3bn) due to higher P&F costs which grew 10.3% YoY to INR1,412 on higher domestic coal costs during Q1. RE share increased to 65.2% (61% QoQ; 64% YoY). Freight cost/t grew 2.9% YoY to INR1,246. RM costs/t increased 2.3% to INR640. Other expense/t grew 1.3% YoY to INR763/t. PAT declined 29% YoY to INR4.4bn (+17.7% QoQ, PLe INR5.5bn). Expanded its RMC footprint to 33 operational plants in Q1FY27. RMC volume stood at 2.36 lakh cbm vs 0.92 lakh cbm in Q1FY26.

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