500% Dividend: Cement Stock To Gain By Rs 6,700 After Turning EX-Dividend; Sharekhan Sets Rs 34,000 TP

Leading cement maker, Shree Cement has turned ex-dividend on February 8 for its upcoming dividend payout to the tune of 500%. The stock ended in red on its ex-dividend day. However, there is a buy-on-dips opportunity for Shree Cement with the potential of nearly Rs 6,700 upside on its current market price. Brokerage Sharekhan upgraded its outlook to BUY as the company is regaining operational efficiencies.

Shree Cement Dividend:

The board has declared an interim dividend of a whopping Rs 50 per share having a face value of Rs 10 each for FY24. In percentage terms, the payout is up to 500%.

The dividend is payable to those shareholders who hold shares on the record date fixed by the Company- i.e. Thursday, 08th February 2024. The dividend shall be paid from Wednesday, 21st February 2024.

Hence, all the investors who hold shares of Shree Cement as of February 8, 2024, will be eligible for the dividend payout.

Shree Cement Share Price:

On BSE, Shree Cement shares ended at Rs 27,371.40 apiece, down by 2.64% on Thursday. The shares ranged from Rs 28,200 to Rs 27,259.65 apiece in the trading hours.

Currently, it has a market cap of Rs 98,758.06 crore.

Shree Cement Outlook:

In its latest research note, Sharekhan said, that Shree Cement Limited reported a strong operational beat for Q3FY2024 led by lower-than-expected opex/tonne. Standalone revenues stood at Rs. 4,9001 crore (up 20.4% y-o-y), driven by healthy volume growth (up 11% y-o-y), while blended realisations were up 8.8% y-o-y. Blended EBITDA/ tonne at Rs. 1388 (up 57.4% y-o-y) was much above our expectations of Rs. 1225, driven by a sharp
reduction in Power & fuel costs (down 14% y-o-y on per tonne basis) and freight costs (down 7% y-o-y)."

Further, the brokerage added, "Consequently, standalone operating profit/net profit was up 74% y-o-y/165% y-o-y at Rs. 1234 crore/ Rs. 734 crore. The management retained 12% y-o-y volume growth for FY2024 while targeting ~15% y-o-y volume growth for FY2025. Its capacity expansion plans remain on track to reach 56 MTPA/62 MTPA/75 MTPA by FY2024/FY2025/FY2027, respectively."

Also, Shree Cement will be incurring Rs. 12,500 crore capex over the next three years, which will be financed by its cash (Rs. 6000 crores) and internal accruals. In the near term, it is expected to benefit from higher utilisations and lower operating structure in Q4FY2024, as per the brokerage.

Among the key positives highlighted by Sharekhan on Shree Cement are:

- Strong beat on operational profitability led by sharp y-o-y and q-o-q decline in power & fuel and freight costs per tonne basis.

- Management retained volume growth guidance for FY2024 and expects strong ~15% y-o-y volume growth for FY2025.

While key negatives are: Blended realisations at Rs. 5513 on a per tonne basis came in lower than estimated; Eastern region growth was subdued at 2-3% q-o-q (7-8% y-o-y) for the company.

On the valuation, Sharekhan's note said, "Shree Cement is on a solid volume growth trajectory over the next two years, aided by sustained healthy demand and new capacity additions. Further, operational profitability is expected to improve, led by declining power & fuel costs and operating efficiencies derived from increased utilisation levels. The company's robust expansion plans remain on track and are expected to be funded through internal accruals, maintaining balance sheet strength."

"The stock currently trades at an EV/EBITDA of 17.6x/14.5x its FY2025E/FY2026E earnings, which provides room for upside considering its strong earnings growth outlook over the next 2-3 years. Hence, we upgrade the stock to Buy with a revised price target (PT) of Rs. 34,000, rolling forward our valuation multiple to FY2026E earnings and factoring upwardly revised estimates," lastly the brokerage said.

Hence, there is a potential upside of Rs 6,628.6 or 24.22% in Shree Cement shares ahead.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.