Shree Cement 2QFY2014 performance highlights and results update
January 30, 2014, Thursday, 06:22 GMT | 01:22 EST | 11:52 IST | 14:22 SGT
For 2QFY2014 Shree Cement’s (SRCM) results were below our estimates largely on account of weaker-than-expected performance from the power division and lower other income. Weak demand resulted in a 48% yoy decline in power volumes to 409mn units and a 15.2% yoy decline in merchant power realization to Rs.3.4/unit. The EBITDA/unit for power fell 38% yoy to 0.56/unit.
OPM at 20.5%, down 537bp yoy: For 2QFY2014 SRCM posted a 7.7% yoy decline in top-line to Rs.1,318cr. The Cement division posted a top-line growth of 8.4% yoy to Rs.1,180cr, which is in-line with estimates. The division’s revenue rose due to a strong 14.3% yoy growth in volume to 3.43mn tonne. However, cement realization was down 7.5% yoy to Rs.3,441/tonne. The Power division posted a 56% yoy decline in net revenue, impacted by a fall in both volumes and merchant power realization. The company’s OPM fell by 537bp yoy to 20.5%, impacted by a steep fall in cement and merchant power realizations. The EBITDA of the Cement and Merchant Power operations fell by 18.9% yoy and 65.1% yoy. Other income too was down by 65.7% yoy as fixed maturity plans (FMPs) did not mature during the quarter. The bottom-line fell by 45.9% yoy to Rs.117cr.
Outlook and valuation: We expect SRCM to post a 9.3% CAGR in its top-line over FY2013-15E. However, the bottom-line is expected to de-grow at a CAGR of 3.2% over the same period due to weak pricing scenario and high cost pressure. At the current market price, the stock is trading at EV/tonne of US$84 on FY2015E capacity. We maintain our Neutral rating on the stock.