Shree Cement Expected to Reach Rs 27,907: Prabhudas Lilladher Recommendation

Shree Cement Reports Strong Operating Performance in Q4FY26

Prabhudas Lilladher's research report highlights the strong operating performance of Shree Cement (SRCM) in the fourth quarter of fiscal year 2026. The company reported inline standard operating performance, led by a significant volume growth of 9.5% year-over-year (YoY) and blended net sales realisation (NSR) growth of 3.7% quarter-over-quarter (QoQ). Cement NSR increased by 1.6% QoQ due to price hikes, efforts to narrow the pricing gap with the leader over the last one year, and a higher premium product share.

The improvement in NSR was driven by price hikes and efforts to narrow the pricing gap with the leader. Freight costs increased due to an increase in lead distance by 12 kilometers QoQ, while other expenses declined due to higher operating leverage. Raw material (RM) per ton was higher, but product and fuel (P&F) costs were inline, supported by higher renewable energy (RE) share at 61% and improved thermal efficiency. This led to earnings before interest, taxes, depreciation, and amortization (EBITDA) per ton of INR1,161 (Prabhudas Lilladher's estimate of INR1,156/t).

Key Highlights

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Going ahead, management has guided for ~40 million tons of cement volumes in fiscal year 2027 (~9-10% growth), while near-term costs are expected to increase by ~INR150-200/t in Q1FY27 due to higher fuel and packaging costs. SRCM has also curtailed FY27 capex from Rs30 billion (Q2 concall) to Rs15 billion as management is aligning with industry peers to improve its utilization (66% in Q4). The company is prioritizing its North-East market entry with 1 million tons per annum (mtpa) in the first phase and intends to increase to ~4 mtpa in subsequent phases.

In the existing key markets, pricing is now almost stabilized (with reduced gap with the leader) and management would focus on improving volumes at this pricing driving profitability. Execution on this balanced strategy remains a key monitorable going ahead. Near-term fuel and packaging cost pressures are expected to persist, making price hikes and cost optimisation critical for margin protection. SRCM's strong balance sheet, cost leadership, and rising renewable energy share should continue to support earnings resilience.

Outlook

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We tweak our FY27/28E EBITDA estimates by -3/+2% factoring in higher cost assumptions. At current market price (CMP), the stock is trading at 17.2x/15x FY27/FY28E enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). We maintain an 'Accumulate' rating with a revised target price of INR27,907 (earlier INR27,370), valuing the stock at the same 17x March 2028 EV/EBITDA.