Shree Cement share price rallies 40% since April; what should investors do after Q1, buy, sell or hold?

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August 12, 2020 3:07 PM

At 2.50 PM, Shree Cement shares were trading half a per cent down at Rs 21,439 apiece, as compared to a 0.04 per cent fall in the benchmark S&P BSE Sensex

Shree cement share pricePost weak quarterly numbers by the cement maker, research and brokerage firms have mixed views on the stock

Coronavirus lockdown affected Shree Cement’s Indian operations in the April-June quarter, dragging down the company’s on-year net profit to Rs 330 crore. Cement maker had posted a profit of Rs 382 crore in the corresponding quarter of the preceding year. Shree Cement in a statement said that the company’s Indian operations were partially affected due to lockdown announced on account of COVID-19 pandemic by state and central government. Due to the worries over fast-spreading disease, Shree Cement share price hit a 52-week low of Rs 15,500 apiece on BSE in April this year. Since then the stock has rallied nearly 40 per cent to Rs 21,629.55 apiece.

Post weak quarterly numbers by the cement maker, research and brokerage firms have mixed views on the stock. Research and brokerage firm PhilipCapital has maintained a buy rating to the stock with a target price of Rs 24,000, an 11.5 per cent upside. “We see Shree Cement as the biggest opportunity to our supply-chain thesis. We upgrade our target multiple to 19x. As we understand, the key intent at Shree Cement is to deliver a consistent set of numbers (from our ground checks we do hear of some important policy changes to bring this into effect) and this is what will continue to drive its structural re-rating,” it said.

Shree Cement’s revenue was down 24 per cent at Rs 2,480 crore, as against Rs 3,302 crore in the same period last year. Total expenses too fell 25 per cent at Rs 2,163 crore, on the back of lower raw material costs. Prabhudas Lilladher has downgraded the stock to reduce from hold earlier, with a price target of Rs 19,100, downside of over 11 per cent. “We believe that margins have peaked-out as we see stiff competition from new capacities, weak demand outlook and increased likelihood of leakage on volumes coupled with widening gap between A and C category brands,” it said in a report.

At 2.50 PM, Shree Cement shares were trading half a per cent down at Rs 21,439 apiece, as compared to a 0.04 per cent fall in the benchmark S&P BSE Sensex. Enkay Global Financial Services believes that Shree Cement will continue to command premium valuations due to industry-leading profitability and the strong balance sheet. The brokerage firm has given a hold rating to the stock.

Shree Cement reported 22 per cent on-year decline in earnings before interest, tax, depreciation and amortization at Rs 700 crore, while EBITDA/tonne stood at Rs 1,422 in the first quarter. HDFC Securities maintained its reduce rating to the stock with a target price of Rs 20,900 apiece. It expects Shree Cement’s standalone margin to expand on stable realisation and lower input costs.

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