Sector Outlook: Positive
Financial performance beats market estimates
Shree Cements reported a revenue of Rs 54,330 million, growing 4% sequentially and 6.5% annually, surpassing market estimates of Rs 51,469 million. The company’s EBITDA was Rs 15,715 million, up 11% QoQ and 52% YoY, with a margin of 29%. This was due to higher volumes, lower fuel costs, and better operating efficiency. Demand increased, raising production and capacity utilisation to 79%. Sales volume reached 9.5 million tonnes for the quarter and 35.5 million tonnes annually, up 12% YoY. Lower lead times and fuel costs reduced expenses, improving margins. EBITDA per tonne was Rs 1,392, up 26% YoY. Despite a sequential drop, PAT increased 29% YoY to Rs 6,757 million, affected by higher depreciation from a new plant. Total capacity was 56 MTPA, with green power capacity rising to 480 MW. Revenue from power was Rs 440 crores with a 10% EBITDA margin. A dividend of Rs 55 per share was declared.
Key Concall Highlights
Capacity Expansion and Utilisation:
- The company has recently added a 3 MTPA capacity in Andhra Pradesh and plans to increase capacity by another 9 MTPA this year.
- The company aims to reach a total capacity of 80 MTPA by 2028 and improve its utilisation rate from 79% to above 80%.
- The company will spend Rs. 100 crores over two years to set up Ready-Mix Concrete (RMC) plants in cities with high market demand.
- The company plans to add 148 MW of green power by March 2025 and 40 MW of solar power by March 2026.
Demand Pattern :
- While analyzing region-wise demand growth, the eastern region grew 20% and northern by 5%. However, the southern region saw a degrowth of 20%. On an overall basis, the growth rate stood at 7%.
Sales, Product, and Input Costs :
- Sales realization was Rs. 4,833 per tonne with a sales volume of 35.5 million tonnes. The company targets 40 MTPA in FY25, aiming for 11-12% growth.
- The Ready-Mix Concrete (RMC) business is set to expand over the next five years, targeting a 4-5% operating margin.
- The company plans to increase sales of its product Bangur Magna to 10-12% of total sales in the near future.
- The cost difference between rail and road dispatches is 10-12%. Currently, 88% of dispatches are by road. By 2028, the company aims to shift most movement to railways to reduce freight costs.
- The company aims to produce 40 million tonnes in the current year.
- Fuel consumption cost per kcal dropped to Rs. 1.82 in Q4FY24 from Rs. 2.56 in Q4FY23.
Other Points :
- The power segment of the company registered a revenue of Rs. 440 crores, with an EBITDA margin of 10%.
Valuation and Outlook
With the government’s focus on infrastructure development, ongoing real estate activity, and a good monsoon, cement demand in India is expected to stay strong, supporting economic growth. Rural and urban housing demand will drive this increase, with the industry set to grow by 7-9% over the next few years. To meet this demand, the company plans to add 9 MTPA capacity this year, aiming for a total of 80 MTPA soon. It targets 80% capacity utilisation and 40 million tonnes of production in FY25. Better realisations, lower costs, and improved efficiency should push EBITDA per tonne above Rs. 1,300. In the second half of FY25, the company expects growth from its diverse operations, cost leadership, higher utilisation, and product rebranding efforts. We remain positive about the company’s performance in the coming year.
