Despite slumping sales and a sluggish cement industry, its net profit was boosted due to lower depreciation
Shree Cements has posted a net profit of Rs274.09 crore for the quarter ended 31 March 2013 as compared to Rs114.28 crore for the quarter ended 31 March 2012. Total Income has increased from Rs1,453.56 crore for the quarter ended March 2012 to Rs1,514.41 crore for the quarter ended 31 March 2013.
We had recommended this stock at Rs4,470 and it is currently quoting at Rs4,410.85, up over 2% on the Bombay Stock Exchange (BSE).
Further analysis of the company showed that the company has had a disappointing quarter, growing its net sales only 7% year-on-year (y-o-y) when compared to its three-quarter y-o-y average of 27%. Its operating profit grew at a slightly higher rate of 13% but still well below its three-quarter y-o-y average of 40%. Yet despite these, the company has reported 139% y-o-y higher net profit, at Rs274 crore due to lower depreciation outlay and low cost of power. The company continues to maintain high return ratios, with return on networth and return on capital employed at 39% and 26% respectively. The company is valued at a market capitalisation of 8.47 times operating profit.
SBI Cap Securities, a financial institution, has pegged the stock as a “Hold” and values the company at Rs4,211 per share. One of the key things that helped the operating parameters of the company, according to SBI Cap Securities, is power. The report states:
“Higher contribution from the power segment helped SRCM make up for the weak cement contribution in 3QF13.” Furthermore, the report states: “Remarkably the cement related power & fuel cost dropped sharply to Rs408/tonne compared to Rs573/tonne in 3QF12 and Rs608/tonne in 2QF13. The power cost benefit was driven largely by fall in pet-coke prices that fell to an average of Rs6,375 in 3QF13 from Rs6,900/tonne in 3QF12(Rs6,502/tonne in 2QF13).”
The board of directors has declared interim dividend of Rs8 per equity share of Rs10 each for the financial year 2012-13. The date of payment of dividend will start from 7 May 2013.
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