External broker reports(aggregated public sources), HDFC Securities

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<div><div><div><ul><li>High volume growth on a low base YoY: We estimate that 15 companies under coverage would report ~7% QoQ aggregate seasonal sales volume decline.</li><li>Mixed realisation gains QoQ: While energy cost continues to rise QoQ, the industry could not fully pass on the inflation across all regions.</li><li>Cost inflation elevated: We estimate that overall fuel costs would soar 7/42% QoQ/YoY amid rising imported coal and pet coke prices.</li></ul><ul style="list-style-type: none;"><li> </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p></div></div></div>

High volume growth on a low base YoY: We estimate that 15 companies under coverage would report ~7% QoQ aggregate seasonal sales volume decline.Mixed realisation gains QoQ: While energy cost continues to rise QoQ, the industry could not fully pass on the inflation across all regions.Cost inflation elevated: We estimate that overall fuel costs would soar 7/42% QoQ/YoY amid rising imported coal and pet coke prices. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cement - Cost Inflation Continues, Margin Contracts

External broker reports(aggregated public sources), Nirmal Bang

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<div><div><div><div><ul><li>Weak seasonal demand and decline in prices against the backdrop of high input costs would mean muted realizations</li><li>The trend in cement pricing has been discouraging so far.</li><li>The news regarding CCI’s investigation on cement companies might be a factor for subdued pricing.</li></ul></div></div></div></div><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Weak seasonal demand and decline in prices against the backdrop of high input costs would mean muted realizationsThe trend in cement pricing has been discouraging so far.The news regarding CCI’s investigation on cement companies might be a factor for subdued pricing.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cement Sector - Elevated Energy Costs to Weigh on Margins

Equity Bottom-Up

<div><div><div><div><ul><li>Eastern region poised to grow: Eastern states are comparatively under-developed and in the last few years, new cement companies have entered these markets and existing players have added capacities to capitalize on the potential boom in the region in the medium to long term.</li><li>SRCM has commissioned a third clinker line at Chhattisgarh (4mn mt), which will supply clinker to the recently commissioned grinding units in the Eastern markets.</li><li>The recent clinker capacity additions by SRCM and UTCEM are likely to result in higher supply in the near term. </li></ul></div></div></div></div><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Eastern region poised to grow: Eastern states are comparatively under-developed and in the last few years, new cement companies have entered these markets and existing players have added capacities to capitalize on the potential boom in the region in the medium to long term.SRCM has commissioned a third clinker line at Chhattisgarh (4mn mt), which will supply clinker to the recently commissioned grinding units in the Eastern markets.The recent clinker capacity additions by SRCM and UTCEM are likely to result in higher supply in the near term. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Shree Cements Ltd. - Sluggish Demand in April’22; Cost Inflation Remains an Overhang

<div><div><div><div><ul><li>Summary of change in recommendation of our coverage universe: We have cut targets prices for our covered companies by 10-30% on account of reduced earnings expectations as well as lower target multiples.</li></ul><div><div><div><div><ul><li>Near term earnings outlook weak and positive triggers missing: We expect earnings to remain weak for the cement sector for the next two quarters on account of elevated costs and weak realizations amid a seasonally weak demand period.</li></ul><div><div><div><div><ul><li>Reversal in coal and crude prices can offer some solace: We believe that high competitive intensity will subside once the inflationary pressures recede and hence reversal of higher coal and crude prices is important.</li></ul></div></div></div></div></div></div></div></div></div></div></div></div><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Summary of change in recommendation of our coverage universe: We have cut targets prices for our covered companies by 10-30% on account of reduced earnings expectations as well as lower target multiples.Near term earnings outlook weak and positive triggers missing: We expect earnings to remain weak for the cement sector for the next two quarters on account of elevated costs and weak realizations amid a seasonally weak demand period.Reversal in coal and crude prices can offer some solace: We believe that high competitive intensity will subside once the inflationary pressures recede and hence reversal of higher coal and crude prices is important.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cement Sector - Headwinds Galore; Turning 'neutral' on the Sector

<div><div><div><div><ul><li>4QFY22 performance: SRCM reported revenue of Rs41bn, up 3.6% YoY and 7% below our estimate.</li></ul><div><div><div><div><ul><li>Capex plans: The company has commissioned 3rd clinker line at Chhattisgarh recently, which has total capacity of 4mn mt.</li></ul><div><div><div><div><ul><li>This plant will supply clinker for the recently commissioned grinding units in East. SRCM had earlier announced a capex plan, which includes: (1) Setting up of an integrated cement plant in Nawalgarh tehsil of Rajasthan with clinker capacity of 3.8mn mt and cement grinding capacity of 3.5mn mt (2) Setting up of grinding unit in the Purulia district in West Bengal with 3mn mt capacity and (3) Setting up of 106MW solar power plant at various locations. </li></ul></div></div></div></div></div></div></div></div></div></div></div></div><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

4QFY22 performance: SRCM reported revenue of Rs41bn, up 3.6% YoY and 7% below our estimate.Capex plans: The company has commissioned 3rd clinker line at Chhattisgarh recently, which has total capacity of 4mn mt.This plant will supply clinker for the recently commissioned grinding units in East. SRCM had earlier announced a capex plan, which includes: (1) Setting up of an integrated cement plant in Nawalgarh tehsil of Rajasthan with clinker capacity of 3.8mn mt and cement grinding capacity of 3.5mn mt (2) Setting up of grinding unit in the Purulia district in West Bengal with 3mn mt capacity and (3) Setting up of 106MW solar power plant at various locations. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Shree Cements Ltd - Lower Pricing Impacts EBITDA; Costs Remain in Control

India

Shree Cement Ltd. manufactures cement and cement products. The Company sells its products primarily in Northern India under its own brand names.

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Shree Cement (SRCM IN)

Cement - Cost Inflation Continues, Margin Contracts

High volume growth on a low base YoY: We estimate that 15 companies under coverage would report ~7% QoQ aggregate seasonal sales volume decline.

HDFC Securities

Cement Sector - Elevated Energy Costs to Weigh on Margins

1QFY23 earnings for the cement sector will be muted as we expect margin pressure to continue in the near term due to higher operating costs,...

Nirmal Bang

Shree Cements Ltd. - Sluggish Demand in April’22; Cost Inflation Remains an Overhang

We hosted the management of Shree Cements (SRCM) at our Annual Conference to understand the company’s future prospects and industry dynamics in the...

Nirmal Bang

Cement Sector - Headwinds Galore; Turning 'neutral' on the Sector

We are turning ‘neutral’ on the cement sector as we believe that there are multiple headwinds, which will inhibit earnings growth and in turn lead...

Nirmal Bang

Shree Cements Ltd - Lower Pricing Impacts EBITDA; Costs Remain in Control

Shree Cements Ltd (SRCM) reported relatively weak numbers for 4QFY22 with reported EBITDA coming in at Rs9.1bn, down 23% YoY and 14% below our...

Nirmal Bang

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