Earnings Outlook: Shree Cement volume, operating profit seen down QoQ

26 Jul 2022

Shree Cement Ltd’s sales volume in the quarter ended June would likely have been higher than a year ago due to the low base of last year but lower than the previous quarter. Higher realisation from cement price hikes would, however, result in revenue rise for the company.

The company’s revenue from operations is seen at 40.5 bln rupees according to an average of estimates by 12 brokerages, indicating an 18% growth on the year and a 1.2% decline on the quarter.

The June quarter net profit is seen at 5.1 bln rupees according an average of estimates by 11 brokerages. The estimated figure is lower by 23% from that of the year-ago period and also lower by 21% as compared to the previous quarter.

The operating profit of Shree Cement, as represented by the earnings before interest, tax, depreciation, and amortisation figure, is seen at 8.1 bln rupees in the June quarter, according to an average of estimates by 10 brokerages. It is 30% lower than 11.5 bln rupees of EBITDA in the year ago period and 23% lower than that of the previous quarter, data from Informist Corporate Fundamental Database showed.

The steep fall in operating profit in the June quarter would hit the company’s net profit and cause it to fall.

The company will declare its June quarter results on Thursday.

Brokerage Kotak Institutional Equities estimates the company’s volume in Apr-Jun to be 7.5 mln tn factoring in demand moderation due to higher cement prices. The estimated volume is 9.6% higher than year ago period due to a low base and 6.6% lower than that of the previous quarter.

Another brokerage Axis Securities predicts Shree Cement’s Apr-Jun revenue to be higher on the year due to better volume and higher realization.

However, the elevated and rising input costs would have hit Shree Cement’s profitability in the June quarter.

According to ICICI direct.com Research, Shree Cement’s “higher dependence on petcoke and imported coal is expected to lead to a sharp increase of 13% in the cost of production on a QoQ (quarter on quarter) basis”. On a year on year it is expected to increase 26%, the brokerage said.

Due to an on-the-quarter increase of 10%-15% in power and fuel costs led by pet coke and coal prices in the past six months and a 5%-7% increase in freight costs Kotak Institutional Equities estimates the operating profit per tn to fall 4% on the quarter and 26% on the year to 1,087 rupees. This will factor in the partial offsetting impact of higher realisations, the brokerage said.