Shree Cement, like other players in the Indian cement sector, has reported improved performance in the March 2006 quarter. Operating profit grew 100 per cent YoY to Rs 81.59 crore in the last quarter, which was considerably faster than the 38 per cent YoY growth in net sales to Rs 225.5 crore. Profit growth in the last quarter has been largely aided by improved realisations in the company’s key northern markets and that helped offset higher input costs. Meanwhile, Shree Cement’s despatches in Q4 FY06 were at 0.986Mt compared with 0.834Mt a year earlier, say analysts. Net realisations was pegged at Rs 2287 a tonne in the last quarter, up 16.8 per cent YoY.
However, the company had to deal with a rising cost base. Shree Cement’s freight and selling expenses rose 45.67 per cent to Rs 40.64 crore and that was largely owing to the Supreme Court order banning overloading of trucks. Also, consumption of raw materials went up by 57.25 per cent to Rs 33.18 crore. Analysts attributed the rise in raw material cost to higher transportation cost incurred by Shree Cement for fly ash.
Going forward, the company will be able to leverage the additional 1.2 million tonne capacity coming onstream in Rajasthan. The stock gets a discounting of nearly 17.5 times estimated FY07 earnings, against Gujarat Ambuja’s estimated FY07 P/E of 21 and UltraTech Cement’s FY07 P/E of 33.