Sell Shree Cement; target of Rs 13400: Centrum
Centrum’s research report on Shree Cement
Shree Cement’s (SRCM) EBITDA declined 20% YoY in Q2FY18 despite 9%/1% YoY cement volume/NSR increase. This was driven by rising petcoke prices and higher diesel price, which led to unitary EBITDA declining 21% YoY (on high base of last year) to Rs1,107/MT. Continued sharp decline in external power sales amid high fuel inflation, further contributed to the decline in total EBITDA.
While we expect SRCM to deliver 19% EBITDA CAGR over the next two years and also fund its aggressive expansion through internal accruals, its valuation remains extremely expensive at 22x/18x its FY18/19E EBITDA. We re-iterate SELL with a TP of Rs13,400.
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