Shree Cement (SRCM) reported an EBITDA/t of Rs 1,183, much higher than peers. Volume growth continued to impress (3.7 mTPA, 17.3 per cent YoY) and realisations remained strong in the aftermath of the Binani closure (Rs 4,009/t, 11.3 per cent YoY, 3.4 per cent QoQ). Power division barely broke even (EBITDA loss of Rs 10 mn), given higher landed fuel costs. This was also reflected in cement operating costs hardening by ~1.4 per cent QoQ (to Rs 2,825/t or Rs 141/bag)
SRCM announced the acquisition of JPA?s Panipat grinding unit (1.5 mTPA) for Rs 3.6 bn (US$ 40/t). Given its excess clinker capacity in North, the acquisition is a shot in the arm as it provides a ready grinding capacity at a reasonable valuation. It also brings the company closer to its target of 25 mTPA by 2015. The company may show positive movement in stock valuations given, 1) Unmatched operational excellence, outlined in its lowest cost; and 2) Capital cost leadership, as demonstrated through continued reinvestment at reasonable cost.
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