Buy Shree Cement Limited For Target Rs. 33,960 - Axis Securities Ltd
Est. Vs. Actual for Q4FY25: Revenue – BEAT; EBITDA Margin – BEAT; PAT – BEAT
Change in Estimates post Q4FY25 (Abs.)
FY26E/FY27E: Revenue: 0%/0%; EBITDA: 5%/4%; PAT: 20%/24%
Recommendation Rationale
Capacity Expansion Progressing Well: Shree Cement’s capacity expansion program is progressing on schedule. These strategic additions aim to narrow the gap with larger competitors and reinforce the company’s market position. As of now, the company's installed capacity in India stands at 62.8 MTPA. With planned projects on track, total capacity is expected to rise to 68.8 MTPA by the end of FY26. We estimate a volume CAGR of 9% for the company over FY25–FY27E.
Improvement in EBITDA Margin: Shree Cement is prioritising profitability over pure volume growth. The company aims to drive margin expansion through a focused strategy: increasing the share of premium and blended cement products, scaling up green energy usage, optimising its supply chain, and implementing a more effective pricing approach. Shree Cement continues to be one of the lowest-cost producers in the Indian cement industry, reinforcing its cost leadership even against larger peers. Against this backdrop, we expect EBITDA margins to improve by 300 basis points, reaching 24.5% and EBITDA/tonne to Rs 1330, CAGR growth of 11% over FY25–FY27E
Robust Cement Demand & Consolidation to Benefit Large Players: We expect cement demand to remain robust, with the industry projected to grow at a CAGR of 7%-8% over FY24-FY27, driven by infrastructure and housing spending, as well as strong real estate demand. Further consolidation in the industry is expected to benefit large players such as Shree Cement, providing advantages in pricing, supply chain efficiency, and incremental demand over the long term.
Sector Outlook: Positive
Company Outlook & Guidance: In FY26, cement demand in India is projected to grow by 6.5–7.5%, driven by sustained momentum in infrastructure development, rural recovery, and real estate activity. While external risks such as geopolitical tensions and protectionist trade policies pose potential headwinds, the industry's ability, particularly Shree Cement’s, to balance growth with sustainability and cost efficiency will be crucial in supporting India’s next phase of development. The company aims to grow its volume at a high single digit.
Current Valuation: 19x FY27EV/EBITDA ( Earlier Valuation: 18x FY27 EV/EBITDA)
Current TP: Rs 33,960/share ( Earlier TP : Rs 30,000/share)
Recommendation: We maintain our BUY recommendation on the stock.
Alternative BUY Ideas from our Sector Coverage:
UltraTech Cement Ltd (TP - 13,510/share), Dalmia Bharat (TP - 2,260/share), ACC Ltd (TP - 2,420/share), Ambuja Cements Ltd (TP - Rs 655/share), Birla Corporation (TP - Rs 1,560/share).
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