Shree Cement has joined the elite club of companies with Rs 1-trillion market capitalization (market-cap) on the BSE, after its share price hit a new high of Rs 28,059, rallying 5 per cent in intra-day trade on Monday. The company engaged in the manufacture and sale of cement and cement related products surpassed its previous high of Rs 27,356, touched on February 4, 2021.
With the market-cap of Rs 1.01 trillion, at 01:30 pm; Shree Cement stood at number 33th position in overall market-cap ranking, the BSE data shows. The stock was up 4.5 per cent at Rs 27,926, against 1.3 per cent risen in the S&P BSE Sensex. Shree Cement became the second pure cement company after UltraTech Cement (Rs 1.85 trillion market-cap) to achieve the feat.
Thus far in the six trading days of February, Shree Cement has surged 23 per cent after the company reported healthy Ebitda (earnings before interest, taxes, depreciation, and amortisation) growth of 28.2 per cent year on year (YoY) to Rs 1,089 crore driven by improved sales volume (up 14.6 per cent YoY to 7.16 MT) and lower production costs. In comparison, the S&P BSE Sensex was up 11 per cent during the same period.
Shree Cement is one of the strongest players in the northern region with operating units at Rajasthan, Haryana, Uttar Pradesh and Uttarakhand. Apart from stronghold in north, which accounts for around 66 per cent of revenues, the company also has increased its share in east and south markets with operating units at Chhattisgarh, Jharkhand and Bihar as well as operating unit in Karnataka.
Tracking the data since FY07, Shree Cement has always reported double digit return on equity (RoE); thus speaking strongly of the management’s efficient capital allocation. These healthy returns have been generated with net debt/EBITDA remaining below 1x throughout this period. Analysts at ICICI Securities believe the same is going to be maintained despite new capex announcement involving capex of Rs 1,000 crore with an aim of doubling the capacity in seven years.
“We expect the company to continue its leadership on the costs that would, in turn, help it to consistently gain the market share with improved profitability and return matrix. Thus, it remains long term structural play. Hence, we maintain our BUY rating on the company with a revised target price of Rs 31,000/share (20x FY23E EV/EBITDA) (earlier target price Rs 28,000)”, the brokerage firm said in results update.