Shree Cement's Strong Q2 Results Spark Mixed Views from Brokerages

Shree Cement, India's third-largest cement producer by capacity, announced robust financial results for the second quarter of fiscal year 2026 (Q2FY26). Consolidated net profit surged to ₹309.82 crore, a substantial increase from ₹76.64 crore in the same period last year. Revenue from operations grew by 17.43% year-on-year to ₹4,761.07 crore.

Brokerage firm Nuvama Institutional Equities reiterated its 'Hold' rating on the stock with a revised target price of ₹31,120. Nuvama highlighted Shree Cement's cost leadership and sustained volume growth, projecting volumes of 37-38 million tonnes (MnT) for FY26E and capacity reaching 69 MnT by the end of FY26E. They observed that the company focused on realisations, with a slight dip in blended realization but a 4% year-on-year increase in volumes. Ebitda stood at ₹851 crore, exceeding Nuvama's estimate.

In contrast, Choice Institutional Equities maintained its 'Sell' call, citing premium valuations. The brokerage noted that Shree Cement trades at high multiples like 15.5x FY28E EV/Ebitda, making it one of the most richly valued cement companies. Choice highlighted that the company's Return on Equity (ROE) and Return on Capital Employed (ROCE) at 6.7%/9.3% for FY26E are below its cost of equity and capital (around 12.5%). They also pointed to high cash reserves of ₹11,800 crore as an 'overhang' due to a lack of proportional capacity expansion plans. Choice's target price for Shree Cement is ₹26,900.

Impact: This divergence in analyst opinions on valuation versus operational performance creates uncertainty for investors. While strong results could support the stock, valuation concerns might cap its upside, potentially leading to stock price volatility. Investors will be watching future capacity expansion plans and management's ability to maintain profitability against a backdrop of high valuations. Impact rating: 7/10.

Heading Difficult Terms: Ebitda: Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operational profitability. EV/Ebitda: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization. A valuation multiple used to compare companies. EV/CE: Enterprise Value to Capital Employed. Another valuation metric assessing the company's total value relative to the capital invested. ROE: Return on Equity. Measures how much profit a company generates with the money shareholders have invested. ROCE: Return on Capital Employed. Measures how efficiently a company uses its total capital (debt and equity) to generate profits. MnT: Million Tonnes. A unit of measurement for large quantities, often used for commodities like cement. CAGR: Compound Annual Growth Rate. The average annual growth rate over a specific period, assuming profits are reinvested.