Analysts split on Shree Cement post Q2 show: should you buy, sell, or hold?

While Nuvama Institutional Equities has reiterated its 'Hold' rating on Shree Cement, Choice Institutional Equities has maintained a 'Sell' call, citing expensive valuations and limited upside

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Brokerages remain split on the country’s third-largest cement producer by capacity, Shree Cement, after the company reported a strong set of numbers for the July–September 2025 quarter (Q2FY26).

 

While Nuvama Institutional Equities has reiterated its ‘Hold’ rating on the stock, Choice Institutional Equities has maintained a ‘Sell’ call, citing expensive valuations and limited upside.

 

Shree Cement reported an over fourfold rise in consolidated net profit to ₹309.82 crore in Q2FY26, against ₹76.64 crore in the same period last year, aided by higher volumes and product premiumisation. Revenue from operations grew 17.43 per cent year-on-year to ₹4,761.07 crore from ₹4,054.17 crore in Q2FY25.

Nuvama: Focus on realisations; cost leadership intact

According to Nuvama, Shree Cement continued to prioritise realisations over volumes during the quarter. Volumes improved 4 per cent YoY, while blended realisation dipped 1.5 per cent QoQ.

 

The company’s Ebitda came in at ₹851 crore, 5 per cent higher than Nuvama’s estimate, translating into an Ebitda per tonne of ₹1,078.

 

The brokerage has revised its FY26E Ebitda estimate upwards by 2 per cent and maintained its ‘HOLD’ rating with a revised target price of ₹31,120 (earlier ₹30,873), based on 18x Q2FY28E EV/Ebitda.

 

“SRCM’s capex plan shall help deliver sustained volume growth, and cost efficiency measures would allow it to maintain cost leadership in the cement industry,” Nuvama said in its report.

 

The brokerage expects the company to clock volumes of 37–38 MnT in FY26E, with capacity likely to reach 69 MnT by end-FY26E and 72–75 MnT by FY28E.  CATCH STOCK MARKET LIVE UPDATES TODAY

Choice: Premium valuations leave little room for upside

In contrast, Choice Institutional Equities remains cautious on the counter. The brokerage said Shree Cement trades at FY28E EV/Ebitda and EV/CE multiples of 15.5x and 3.3x, respectively — making it one of the most richly valued cement companies under its coverage.

 

At 6.7 per cent/9.3 per cent (FY26E), Shree Cement’s ROE/ROCE fails to cover its cost of equity and capital of around 12.5 per cent, even under optimistic assumptions, the brokerage noted.

 

The firm’s cash and equivalents stood at ₹11,800 crore, accounting for nearly 11.5 per cent of its market capitalisation. Choice termed this high cash level an “overhang”, citing an absence of a proportional capacity expansion plan.

 

“There is limited scope for SRCM’s best-in-class management to improve ROCE through cost-cutting initiatives. Its cost structure is already among the most efficient in the sector, supported by about 60 per cent renewable power usage and minimal room to save further on logistics or raw materials,” the brokerage said.

 

Choice also noted that the company does not intend to expand capacity beyond 80 MnT by FY28/29E, and expects cash reserves to stay elevated at ₹127 billion by FY28E.

 

While acknowledging the company’s strong governance standards, brand equity, and operating efficiency, Choice said valuations remain stretched.

 

The brokerage forecasts Ebitda CAGR of 15.3 per cent over FY25–28E, driven by annual volume growth of 6 per cent and realisation growth of 6.0/1.0/1.0 per cent in FY26E/27E/28E, respectively.

 

“We value SRCM at ₹26,900 per share using our EV/CE framework, assigning an EV/CE multiple of 3.3x for FY27E and FY28E,” it added.  Although ROCE is expected to improve from 7.2 per cent in FY25 to 10.2 per cent in FY28E, the brokerage said returns would still not cover the cost of capital.

 

“At our target price of ₹26,900, the FY28E implied EV/Ebitda multiple stands at 15.1x, which is quite high given its return profile. Risk to our Sell rating includes stronger-than-expected sector tailwinds and investor apathy towards its valuation multiple,” Choice said.