Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shree Cement Ltd
Rising costs in cement, add to power woes
„3Q in line; challenging times for both cement and power
Shree reported in line 3Q FY11 EBITDA at Rs1.58bn, down 53% YoY but up 10%
QoQ. On a YoY basis, profits were hurt by a combination of higher operating
costs (+15%) & lower cement prices (-11%). On a QoQ basis, higher cement
volumes (+15%) & scale economies provided key support. Merchant power sales
improved QoQ but stayed ~50% below 1Q levels.
FY11E-12E earnings cut on lower volumes and higher costs
We have cut FY11-12 EBITDA forecasts 14-17% led by a combination of lower
cement volumes, lower power sales, and higher operating costs. Risk to FY12E is
on the downside if power demand weakens or capacity expansion slows.
Power outlook dragged by volatile prices and rising costs
Shree’s expansion plans in merchant-power were likely triggered by 1) historically
high energy prices; 2) low cost of captive power helped by pet coke usage; &
3) significant tax breaks. F’cast returns in merchant power are still above Shree’s
cost of capital but visibility has deteriorated due to volatile energy prices &
doubling of pet coke costs.
Cement prices in north on the rise, but unlikely to sustain
Shree confirmed recent reports of price hikes in north India and expects average
cement prices in 4Q FY11 to be up sharply versus 3Q levels. We think such price
hikes reflect rational production efforts of the industry and are not sustainable.
PO cut; maintain Neutral due to low valuation
We have cut our PO for Shree 19%, to Rs1825/sh led by the power business; our
valuation of the cement business is unchanged at ~US$95/ton. For power, we
have cut FY12E-EBITDA 21% & lowered valuation to ~7x EV/EBITDA.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shree Cement Ltd
Rising costs in cement, add to power woes
„3Q in line; challenging times for both cement and power
Shree reported in line 3Q FY11 EBITDA at Rs1.58bn, down 53% YoY but up 10%
QoQ. On a YoY basis, profits were hurt by a combination of higher operating
costs (+15%) & lower cement prices (-11%). On a QoQ basis, higher cement
volumes (+15%) & scale economies provided key support. Merchant power sales
improved QoQ but stayed ~50% below 1Q levels.
FY11E-12E earnings cut on lower volumes and higher costs
We have cut FY11-12 EBITDA forecasts 14-17% led by a combination of lower
cement volumes, lower power sales, and higher operating costs. Risk to FY12E is
on the downside if power demand weakens or capacity expansion slows.
Power outlook dragged by volatile prices and rising costs
Shree’s expansion plans in merchant-power were likely triggered by 1) historically
high energy prices; 2) low cost of captive power helped by pet coke usage; &
3) significant tax breaks. F’cast returns in merchant power are still above Shree’s
cost of capital but visibility has deteriorated due to volatile energy prices &
doubling of pet coke costs.
Cement prices in north on the rise, but unlikely to sustain
Shree confirmed recent reports of price hikes in north India and expects average
cement prices in 4Q FY11 to be up sharply versus 3Q levels. We think such price
hikes reflect rational production efforts of the industry and are not sustainable.
PO cut; maintain Neutral due to low valuation
We have cut our PO for Shree 19%, to Rs1825/sh led by the power business; our
valuation of the cement business is unchanged at ~US$95/ton. For power, we
have cut FY12E-EBITDA 21% & lowered valuation to ~7x EV/EBITDA.
No comments:
Post a Comment