Brokerage firm Prabhudas Lilladher has increased its target price for Shree Cement to Rs 28,379. The move follows strong Q2FY27 volume growth of 17.7%. While the company improved its product mix and realized better prices, investors should monitor rising fuel costs, which are expected to pressure profit margins in the coming quarters.
Brokerage firm Prabhudas Lilladher has updated its outlook on Shree Cement, raising the target price to Rs 28,379. This revision reflects the company's performance in the second quarter of the 2027 fiscal year. For investors, the update highlights a blend of strong operational growth and the ongoing challenge of managing energy costs in a volatile commodity market.
Shree Cement reported a volume growth of 17.7% year-on-year, reaching 9.31 million tonnes in the second quarter. This growth was supported by strategic price increases in northern markets, where the company holds a strong presence. A key factor behind the improved sales performance has been the expansion of the company's premium product segment. These higher-value products now contribute 28.7% of total sales, which helps the company command better pricing compared to standard cement offerings.
Despite the volume success, the company is dealing with rising operational costs. The landed cost of fuel, a major expense for cement manufacturers, stood at Rs 2.09 per kcal during the quarter. This pressure was driven by unpredictable prices for pet coke and coal. To mitigate this risk, management has actively adjusted the fuel mix. The company reduced its reliance on pet coke, which now accounts for 11% of the fuel used, down from 66% in the same period last year. Conversely, the use of imported coal has increased to 75%. Despite these efforts to manage costs, the management has indicated that fuel expenses could climb further to a range of Rs 2.15 to Rs 2.20 per kcal in the third quarter, which may create pressure on profit margins.
Looking ahead, the company has provided a volume guidance of 40 to 41 million tonnes for the full 2027 fiscal year. The brokerage note also observed that cement prices in October were trending higher than in September, suggesting a potentially better pricing environment in the second half of the year. The valuation remains a point of focus, with the stock trading at roughly 14.1 times its estimated earnings for the 2028 fiscal year.
For investors, the most important factors to track will be the company's ability to maintain these volume levels and manage energy costs. Since fuel is the largest variable expense for cement companies, any further spike in global pet coke or coal prices could impact the bottom line. Shareholders will also be watching whether the trend of higher cement prices continues in the coming months, as this will determine if the company can offset the rising cost of production and maintain its profit margins.