Shree Cement Limited reported 19% y-o-y increase in revenues during the quarter at Rs. 3,069 crores, however, net profit declined by 36% y-o-y to Rs. 279.5 crores.
Key Financial Highlights:
- Revenues for the quarter increased by 19% y-o-y to Rs. 3,069 crores
- EBITDA declined by 19% y-o-y to Rs. 575 crores
- EBITDA margins declined by 894 bps y-o-y to 18.7% during the quarter
- Other income also declined from Rs. 130 crores in Q1FY18 to Rs. 93.6 crores in Q1FY19
- Depreciation increased from Rs. 231 crores in Q1FY18 to Rs. 305 crores in Q1FY19
- Interest increased from Rs. 33 crores in Q1FY18 to Rs. 56 crores in Q1FY19
- PAT declined by 36.5% y-o-y to Rs. 279.5 crores during the quarter
Key Operational highlights:
- Company reported 18.5% increase in cement sales volume on yoy basis to 6.99 Mn Tonnes
- Realisation per tonne declined by 1% yoy to Rs. 4,107/t primarily due to subdued cement realisation in North, partly offset by strong price in East.
- External power sales increased to 451 million units in Q1FY19 from 284 million units in Q1FY18.
- Power realisation jumped 30% yoy to Rs. 4.4/kwh.
- The cement industry has been under immense pressure due to the high petcoke and diesel prices which are up by 32% and 24% on yoy basis respectively. Hence, power and freight costs increased sharply by 14% yoy and 31% yoy respectively. Also, other expenses jumped 29.3% yoy, primarily due to forex losses, which further impacted the EBITDA.
- The company commissioned a 3 mtpa cement plant at Gulbarga, Karnatka during the quarter.
Pet coke prices have increased substantially since January, 2018. Further, weakening rupee has also impacted the cost of imports of pet coke. Higher diesel prices are likely to keep the freight movements costlier than previous year. Further, realisations have also subdued in the cement industry. Hence, the subdued realisations and cost pressures will likely result in only a modest improvement in FY19 earnings. We expect moderate earnings for the company due to cost pressures.
At CMP of Rs. 17,496, the stock is trading at 14x EV/EBITDA FY20E.