Company Report | Q4FY11 Result Update

LONG TERM INVESTMENT CALL

31 May 2011 Hold

Q3FY11 Result Highlights

Industry Cement

CMP (INR) 1,801 Shree Cement Ltd. (SCL) top-line and operating profit for
Target (INR) 1,950 Q4FY11 came in line with Unicon’s estimates. While
Upside / (Downside) (%) 7% production remained flat for the quarter under review,
52 week High/Low (INR) 2,296 / 1,520 growth in revenue was led by higher realisation which
Market Cap (INR BN) 63 increased 13% YoY basis to INr 4,107/tonne. The cement
3M Avg. Daily Vol (‘000) 11 production remained flat at 2.6MnT for the quarter.
P/E (FY13E) 9x
Income from operation at INR 10.7bn increased by 13% YoY
Shareholding Pattern (%)
on the back of higher realisation.
Non
Institutions The operating profit at INR 2.6bn reduced by 16% YoY due
23% Promoters
Institutions to rise in raw-material cost when measured as % of sales.
65%
12% Power and fuel cost increased by 70% YoY to INR 3bn and
Freight chares increased to INR 498Mn, +40% YoY.

Company however reported profit after tax of INR 657Mn

Stock Performance compared to loss of INR 714Mn during same quarter last
2600 SCL NSE Nifty year. This was led by lower interest charge (-21% YoY).
2450

2300 Segment Performance

2150

2000
Cement segment, for the quarter grew by 6.8% YoY but
1850
profit before interest and tax declined by 67%. This was due
1700
to muted volume growth and higher input and fuel costs.
1550
May

Jul

Oct
Jun

Sep

Jan

Mar

Apr
Dec
Aug

Nov

Feb

Power segment, however partially off set the decline of

Performance (%) profit in its cement division. The power division of the
1M 3M 1 Year company grew by 55% YoY during the quarter. The profit
Company -6.7% 6.8% -7.3% before interest and tax was INR 158Mn compared to loss of
NIFTY -4.0% 4.0% 7.6% INR 53Mn during same quarter last year.
(INR in Mn)
Valuation and Outlook
Particulars Actual Estimates
Total Income 10,724 10,277
At the CMP, stock trades at 9xits FY13e consensus estimate
EBIDTA 2,640 2,503
and 5.6x on EV/EBITDA basis.
Adj. PAT 657 1,007
* Source: AceEquity, Unicon Research
Given the likely pressure on profit margin owing to higher
Analyst
Falgesh Sanghvi | fsanghvi@uniconindia.in input and fuel cost amidst supply concerns, we lower our
price target to INR 1,950 (~6x EV/EBITDA of FY13e) Hold
for price target of 1,950/-.

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@uniconindia.in
 Financials (INR in mn)
Particulars Q4FY11 Q4FY10 YoY FY11 FY10 YoY (%)
Income from Operation 10,724 9,451 13.5 35,141 36,432 (3.5)
Operating Exp. 8,085 6,297 28.4 26,747 21,494 24.4
Change in Stock (175) (29) (336) (197)
RM Consumption 1,121 842 16.3 3,723 3,238 11.4
% of Sales 8.82 8.61 21 bps 0 bps
Purchase of Traded Goods 15 22 (33.7) 625 92 580.7
% of Sales 0.1 0.2 -10 bps 0 bps
Staff Costs 537 499 7.6 1,985 1,586 25.2
% of Sales 5.0 5.3 -27 bps 0 bps
Power and Fuel 3,020 1,779 69.8 9,123 6,105 49.4
% of Sales 28.2 18.8 934 bps 0 bps
Freight on Inter-unit Clinker 498 355 40.4 1,610 1,327 21.3
Trf.
% of Sales 4.6 3.8 89 bps 0 bps
Freight & Selling Exp 1,815 1,911 (5.0) 6,141 6,298 (2.5)
% of Sales 16.9 20.2 -329 bps 0 bps
Other Expenses 912 807 13.0 3,390 2,847 19.1
% of Sales 8.5 8.5 -3 bps 0 bps
Assets Cons. & Prem. W. OFF 343 112 206.1 485 198 145.4
% of Sales 3.2 1.2 201 bps 0 bps
EBITDA 2,640 3,154 (16.3) 8,394 14,939 (43.8)
EBITDA (%) 24.6 33.4 -876 bps 0 bps
Depreciation 2,650 2,786 (4.9) 6,758 5,704 18.5
EBIT (10) 368 (102.8) 1,637 9,234 (82.3)
EBIT (%) (0.1) 3.9 -399 bps 0 bps
Interest (Net) 519 662 (21.6) 1,753 1,291 35.8
Other Income 186 201 (7.8) 1,220 1,172 4.1
Statutory Liab. (Exceptional) - (437) - (437)
PBT (344) (529) (35.0) 1,103 8,679 (87.3)
Tax Provision (1,001) 185 (994) 1,918
PAT 657 (714) 2,097 6,761
PAT (%) 6 (8) 6 19
Source: Company, Unicon Research

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@uniconindia.in
 Unicon Investment Ranking Methodology

Rating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20% <= -20%

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@uniconindia.in