Shree Cement Q3: Net Profit down 22% as Operating costs increase

Profit below estimates - Shree cement reported a net profit of Rs 491.9 crore in Q3FY22, a decline of 22% YoY. The net profit in Q3FY21 was Rs 631.58 crore. Analysts have earlier estimated revenue of Rs 551.5 crore. The profit is below the street estimates. 

Revenue - The revenue for the third quarter stood at Rs 3,551.6 crore, a fall of 6.8% YoY. The revenue was slightly higher than the street estimate of Rs 3,446.9 crore. Consolidated net sales grew 2.2% to Rs 3,637 crore.

EBITDA and Expenses - Operating profit declined by 24.2% and stood at Rs 825.3 crore. EBITDA margin declined sharply from 32.8% to 23.2%. Total expenses spiked by nearly 15% to Rs 2,791 crore from Rs 2,430 crore last year. Power and fuel expenses as a percentage of net sales rose to 22.7% from 17.2% a year earlier. 

Other updates - The Company has commenced commercial production at its Clinker Grinding Unit having capacity of 30 MTPA at Village Patas in Pune District of Maharashtra on 01st February, 2022. 

Dividend - The Board has declared an interim dividend of Rs 45 per share for the financial year 2022.

Shree Cement Q3 Results Review:

Shree Cement had reported a mixed set of numbers for the quarter ended December. The December quarter performance was affected by lower volumes due to delayed monsoons, poor labour availability, regional issues such as construction ban, sand availability and truckers strike, coupled with a rise in power-fuel costs. The volume declined YoY by 8.5% to 6.55 million tonnes while EBITDA/tonne declined to Rs 1,260, a fall of 17.2%.

The company said the pandemic is unlikely to impact the recoverability of the carrying value of its assets as of December 31. Looking at the present situation of the pandemic, the extent to which the same will impact the company's future financial results is currently uncertain and will depend on further developments. 

The share price closed at Rs 24,880, up by 0.63% on Monday.

Brokerage view

Jefferies - has maintained its HOLD call on the cement company but has cut the target price to Rs 26,600 from Rs 27,600. It stated in its report that the EBITDA miss was led by a sharp increase in costs and weaker volumes. An increase in cost is an industry-wide phenomenon. However, volume decline is higher than peers.

CLSA - It maintains OUTPERFORM rating for the company but has reduced the target price to Rs 28,875 per share from the earlier price of Rs 30,050 per share. It stated that EBITDA and profitability decline is in line with estimates. Demand recovery is expected in Q4.

Emkay Global - Maintains a BUY call but has cut the target price from Rs 32,250 per share to Rs 28,650 per share.