PL Capital retains 'Accumulate' on Shree Cement, trims target; here's why

Shree Cement (SRCM) has seen robust traction in the non-trade segment over the past two weeks, with pricing expected to improve in the coming months, according to brokerage PL Capital. 

 

The brokerage maintained its ‘Accumulate’ rating on the Shree Cement stock, noting that SRCM has historically led in driving cost efficiencies. However, with industry peers increasingly adopting similar strategies, PL Capital highlighted that the company may need to recalibrate its approach, leveraging core strengths to accelerate volume growth.

 

Following a recent interaction with SRCM management to assess business dynamics, northern region oversupply concerns, and long-term strategy, PL Capital analysts Tushar Chaudhari, Satyam Kesarwani, and Pranav Iyer revised their target price to ₹29,850 from ₹31,769. This is based on 17 times enterprise value (EV) on September 2027 estimated Ebitda. The stock currently trades at an EV multiple of 15.6 times and 13.8 times FY27/FY28E Ebitda. The brokerage trimmed FY27/28E Ebitda estimates by 4 per cent and 6 per cent, respectively, citing lower pricing assumptions.

 

“Over the last few quarters, SRCM has lost market share, which is a concern. Regaining volume momentum amid rising competitive intensity will be key to outperformance. Management highlighted strong non-trade traction in the past two weeks and expects pricing to improve. However, trade demand has yet to pick up as expected, and price recovery is likely to be gradual from Q4FY26,” the analysts wrote in their research report.

 

With over 40 mtpa of new capacities expected in the North over the next two years, management reiterated its focus on operational efficiencies. PL Capital noted this could impact the Northern market share, currently 21–22 per cent, but any shortfall could be offset by volume gains elsewhere in India and a shift in SRCM’s “value over volume” strategy. “The company remains focused on efficiencies and Ebitda per tonne delivery,” the brokerage added.  ALSO READ | Nuvama lifts Sona BLW's target price on strong railway, EV motor growth

Near-term demand and pricing outlook

PL Capital highlighted mixed regional demand trends. “North will remain a core market, but rising competition could affect market share. East remains structurally attractive but faces intermittent demand softness.”

 

The brokerage noted that SRCM has not aggressively chased volumes in recent quarters, leading to some market share loss. Management indicated it may revisit strategies to achieve desired volume growth. SRCM’s pan-India market share, around 9 per cent, is expected to rise in the coming years with capacity additions in other regions.

 

Infrastructure spending continues to support demand, though government capex remains skewed toward defense and strategic projects, limiting broad-based construction growth. Management expects overall industry demand to improve from FY27, with volumes growing 7–8 per cent.

Focus on cost efficiencies

Rail connectivity across grinding units remains a priority. While rail offers theoretical cost advantages over road, secondary handling has narrowed the gap to ₹0.25 per tonne per km. Rail currently accounts for 11 per cent of dispatches, with a medium-term target of 20 per cent.

 

SRCM anticipates utilisation in the North may remain flat until demand recovers, with potential share loss. Logistics optimisation through better plant-to-market allocation and controlled lead distances remains a focus, aided by expanded railway sidings.  ALSO READ | IndiGo flight cancellation: Use fall to buy for the long term, say analysts

Capex rollout, capacity expansion

PL Capital said SRCM’s expansion roadmap is on track, targeting 80 mtpa by FY29E, up from 68 mtpa in FY26 and 72 mtpa in FY27. Incremental capacity will focus on South and East India, with brownfield clinker and grinding unit expansions for faster ramp-up. Limestone reserves, with 50-year mine life, remain a competitive edge, with auctions unlikely to affect operations until 2044.

 

The brokerage also highlighted positive momentum in UAE operations. “One kiln is being refurbished, and additional grinding capacity can be added quickly due to available space and infrastructure. UAE plant capacity is expected to rise from 4 mtpa to 7 mtpa with an investment of AED110 million in one year.”

 

Management believes the UAE market offers stable demand, attractive pricing, and improving Ebitda per tonne.