Shree Cements - Sustained Cost Efficiency; Result Update Q2FY15 :: Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Shree Cement’s (SRCM) Q2FY15 EBITDA of INR3.06bn was marginally ahead of our estimate with low costs making up for the realisation disappointment. While realisations dipped 3% QoQ (higher than our 2% estimate) overall cost/t stood just flat QoQ due to ~3% QoQ drop in employee cost and other expenses. While freight cost/t rose ~5% QoQ, we expect the same to decline going forward factoring benefits of fuel price cuts. EBITDA/t at INR722 was flat YoY. Performance of the power segment was in line with EBITDA of INR309mn (up ~30% YoY). Current cement prices in SRCM’s key market-North-are ~5% higher than Q2FY15 and should rise further as demand gains momentum in the busy season. Factoring benefits of low fuel cost and capex tracking guidance, we broadly retain our forward estimates. Slowing capacity additions and expected demand revival will catapult capacity utilisations in North to ~87% in FY17E benefitting SRCM.

Cement: Performance in line with estimates

Cement volume growth remained robust, rising 11% YoY, while realisations dipped ~3% QoQ due to price weakness in Q2. While the 5% QoQ rise in freight cost/t disappointed, overall cost/t stood largely in line. Ergo, EBITDA/t of INR722 (up 1% YoY, but down 12% QoQ) matched our estimate. 

Power segment: Delivering on expectations

Power sales of 491mn units were 3% above estimate and power revenue of INR1,929mn was up ~40% YoY. Hence, EBITDA of the power segment at INR309mn stood marginally higher than our INR301mn estimate.

LINK
https://www.edelweiss.in/research/Shree-Cements--Sustained-Cost-Efficiency;-Result-Update-Q2FY15/28234.html