Neutral Shree Cement; target of Rs 25060: Motilal Oswal

What happened

Motilal Oswal said Shree Cement's 2QFY27 EBITDA beat its estimate, helped by stronger volume growth and operating profit per sale. Revenue rose about 19% to INR51.1b, but EBITDA fell about 3% to INR8.5b and profit fell about 30%.

Confirmed

Global impact / market context

The broker keeps a Neutral rating and a Rs 25,060 target, saying the stock trades fairly at 17x/15x FY27E/FY28E EV/EBITDA. That means future profit per sale is expected to fall, so sales growth may not fully offset weaker pricing and costs.

Analyst inference

Sales rose even as profit per sale (margin) and EBITDA per tonne dropped, so higher volumes carried the quarter. The broker expects EBITDA per tonne of INR1,018/INR1,074 in FY27/FY28 versus INR1,174 in FY26, signaling a weaker profit path.

Analyst inference

What to watch

1. Watch whether sales volume keeps growing near 18% year on year, because that growth helped revenue beat estimates and offset a contraction in operating margin. Confirmed
2. The broker's implied path for EBITDA per tonne, INR1,018 in FY27 and INR1,074 in FY28 versus INR1,174 in FY26, is a forecast and should be watched against actual results. Proposed
3. Watch the 16x FY28E EV/EBITDA valuation behind the target, because profit per sale staying weak could leave the stock without room for a higher rating. Analyst inference

Evidence

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