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Results marginally lower than estimates; Capex on track

Shree Cements (SRCM) reported results which were only marginally lower than our expectations. Volumes de-grew 7.3% YoY while realizations fell 2.2% QoQ and as a result, revenue declined by 19% YoY. EBITDA at Rs5.9bn was down 32% YoY and 5% below our estimates. Management highlighted that its strategy of value over volumes and increased premium cement sales (15% of trade sales) resulted in minimizing the fall in realizations. Company’s capex plan is on track and is expected to be completed by 1QFY26 thereby inching closer to the long term vision of 80mn mt by FY28. We have rolled our valuation forward to Sep26 and revised TP now stands at Rs25,562 (earlier Rs26,300) based on 16x EV/EBITDA multiple.

2QFY25 result highlights

Shree cement reported results which were only marginally lower than our expectations. While volumes and realizations were lower than our expectations, lower costs helped mitigate further fall in EBITDA. Revenue at Rs37.3bn is down 19% YoY and 5% below our estimate. Volumes at 7.6mn mt are down 7% YoY and 3.5% below our estimate. Realizations at Rs4904 are down 2.2% QoQ. Operating costs at Rs4,124 declined 9% YoY driven by lower P&F and other expenses. EBITDA came in at Rs5.9bn, down 32% YoY and 5% below our estimate. EBITDA/mt came in at Rs780 vs Rs951 in previous quarter. PAT at Rs931mn is down 81% YoY and 71% QoQ..

Uptick in demand key for sustained price hikes; low cost inventory to flow in 1QFY26

Demand recovery post-elections and monsoon has been slower than anticipated, as reflected in management’s recent commentary. Our channel checks further corroborate this trend, indicating that the demand pickup has been gradual, with multiple price hikes failing to gain traction. A meaningful recovery in demand in 2HFY25 remains a key monitorable, as it could drive both improved industry pricing and overall market sentiment. The average fuel cost for the quarter is Rs 1.71/kcal, down from Rs 2.05/kcal last year. Additionally, the company has secured a fuel supply contract at Rs 1.5/kcal, effective from 1QFY26, which is expected to boost profitability by reducing input costs.

Capex plans on track to be completed by 1QFY26

Ongoing capex includes Jaitaran, Rajasthan (6.0 MTPA), Kodla, Karnataka (3.00 MTPA), Baloda Bazar, Chhattisgarh (3.40 MTPA), and Etah, Uttar Pradesh (3.00 MTPA). The Company expects to commission all these projects by 1QFY26. Company’s plan of adding 90MW green power is on track and is expected to be completed by the end of FY25

Valuation and outlook

We have rolled our valuation forward to Sep26 and continue to value SRCM based on 16x Sep26E EV/EBITDA to arrive at our TP of Rs25,562 (earlier Rs26,300). We are building in 8%/12% revenue/EBITDA CAGR for the company over FY24-27E. We maintain our ADD rating on the stock.

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