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P owe r b u s i n e s s l a g s g r owt h…
We met the management of Shree Cement to get updates on
development in its power and cement business. The following are the key
takeaways from the meeting.
• Shree Cement is planning to expand its cement capacity to ~20
MTPA by FY16-17 from the current capacity of 13.5 MTPA. The
company is in the process of acquiring land and taking
environmental clearances in Chhattisgarh and Karnataka for the
expansion
• The current cement capacity utilisation is ~80% and is expected
to increase further as the management is anticipating
improvement in cement demand in Q3FY12 and Q4FY12. We
expect total cement sales volume of 10.6 MT in FY12E and 11.1
MT in FY13E
• The proposed 300 MW (150 x 2 MW) thermal power plant is
scheduled to come on stream by Q3FY12. For the power plants,
the company is planning to use imported coal from South Africa
of calorific value ~6000 Kcal/kg
• The company has entered into an agreement with several SEBs
(Punjab, Uttar Pradesh, Tamil Nadu and Uttarakhand) for the sale
of ~225 MW of power on a merchant basis at an average rate of
~| 4.35 per unit. In FY12E, the company is expected to sell ~1000
million units of merchant power and expects EBITDA of ~| 100
crore from the sale of power.
V a l u a t i o n
At the CMP of | 1860, the stock is trading at 57.1x and 15.2x its FY12E and
FY13E earnings, respectively. The stock is trading at EV/EBITDA of 7.5x
and 5.3x FY12E and FY13E EBITDA, respectively. On EV/tonne basis, the
cement business is trading at $70 and $67 its FY12E and FY13E
capacities, respectively. We value the cement business at $75/tonne at its
FY13E capacity of 13.5 MT and power business at 1.5x P/BV. We maintain
our BUY rating on the stock with a target price of | 2068.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P owe r b u s i n e s s l a g s g r owt h…
We met the management of Shree Cement to get updates on
development in its power and cement business. The following are the key
takeaways from the meeting.
• Shree Cement is planning to expand its cement capacity to ~20
MTPA by FY16-17 from the current capacity of 13.5 MTPA. The
company is in the process of acquiring land and taking
environmental clearances in Chhattisgarh and Karnataka for the
expansion
• The current cement capacity utilisation is ~80% and is expected
to increase further as the management is anticipating
improvement in cement demand in Q3FY12 and Q4FY12. We
expect total cement sales volume of 10.6 MT in FY12E and 11.1
MT in FY13E
• The proposed 300 MW (150 x 2 MW) thermal power plant is
scheduled to come on stream by Q3FY12. For the power plants,
the company is planning to use imported coal from South Africa
of calorific value ~6000 Kcal/kg
• The company has entered into an agreement with several SEBs
(Punjab, Uttar Pradesh, Tamil Nadu and Uttarakhand) for the sale
of ~225 MW of power on a merchant basis at an average rate of
~| 4.35 per unit. In FY12E, the company is expected to sell ~1000
million units of merchant power and expects EBITDA of ~| 100
crore from the sale of power.
V a l u a t i o n
At the CMP of | 1860, the stock is trading at 57.1x and 15.2x its FY12E and
FY13E earnings, respectively. The stock is trading at EV/EBITDA of 7.5x
and 5.3x FY12E and FY13E EBITDA, respectively. On EV/tonne basis, the
cement business is trading at $70 and $67 its FY12E and FY13E
capacities, respectively. We value the cement business at $75/tonne at its
FY13E capacity of 13.5 MT and power business at 1.5x P/BV. We maintain
our BUY rating on the stock with a target price of | 2068.
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