Axis Securities has reaffirmed its ‘Buy’ rating on Shree Cement Ltd on Thursday, setting a target price of Rs 33,960. This valuation underscores the company’s ambitious capacity expansion plans and its strategic focus on premiumisation and market diversification.
Shree Cement reported total sales of Rs 18,037 crore, marking an 8 per cent decline year-on-year. The dip is attributed to reduced demand and lower blended realisation in key markets in North and East India, compounded by the effects of the general election, excessive rainfall, and reduced government capital expenditure. Despite the challenges, the company’s strategic initiatives aim to counteract these adverse conditions, positioning it for future growth, Axis said.
The company’s Ebitda margin decreased to 21.3 per cent in FY25 from 22.3 per cent in FY24. This was largely due to subdued cement realisation prices in its operational regions. Additionally, the Ebitda per tonne declined by 12 per cent to Rs 1,070, reflecting the challenges in demand and realisation. The brokerage said the company remains focused on cost-efficiency and operational excellence to improve margins.
Axis said despite these challenges, Shree Cement’s premium brands like Roofon Plus and Bangur Magna have shown strong market traction, contributing to a double-digit growth in trade sales volume. The introduction of Bangur Marble further cements its position in the premium segment, enhancing its product portfolio and market reach.
Shree Cement has been actively expanding its capacity. The company commissioned an integrated cement unit in Guntur, Andhra Pradesh, and a clinker grinding unit in Baloda Bazar, Raipur, bringing total capacity to 59.8 mtpa. The company targets 80 mtpa by FY28, indicating a strong growth trajectory. This expansion is crucial for meeting the anticipated rise in demand and maintaining its competitive edge.
In addition to capacity expansion, Shree Cement has entered the Ready-Mixed Concrete (RMX) business, aligning with its core cement operations. This move is part of its strategy to directly engage with urban and infrastructure development, capitalising on the growing market demand, Axis said. The RMX segment is expected to bolster the company’s revenue streams and market presence.
Axis Securities noted that the company’s sustainability initiatives remain a focal point, with significant progress in green power capacity, increasing to 581.9 MW, and enhancing the share of green energy in its total consumption. Shree Cement is recognised as the lowest-cost cement producer in India, supported by a robust sales network and strong financials. These sustainability efforts are integral to its long-term strategy, ensuring resilience and adaptability.
Axis Securities values Shree Cement at 19x FY27E EV/EBITDA, projecting a 12.6 per cent upside from the current market price of Rs 30,139. The stock currently trades at 20x/17x FY26E/FY27E EV/EBITDA, reflecting the company’s strategic positioning and growth potential. The strong presence in Northern and Eastern India markets, coupled with its strategic initiatives, positions Shree Cement well for future growth.