Shree Cement Faces Market Share Concerns Amid Premium Pricing Strategy and Expansion Drive

Shree Cement's strategy of focusing on premium selling prices rather than maximizing sales volume is raising concerns about market share loss. In the second quarter of fiscal year 2025-26, Shree Cement's sales volume grew by 3.9%, aligning with industry growth. However, for the first half of the year, its volumes declined by 2% year-on-year, contrasting with the industry's estimated 4% growth. Despite this, the company has reiterated its full-year sales guidance of 37–38 million tonnes (mt), anticipating stronger performance in the post-monsoon period.

Competitors like UltraTech Cement are expanding capacity, particularly in North India where Shree Cement has a significant presence, potentially intensifying challenges.

Shree Cement is actively expanding its own capacity. A new 3.65 million tonnes per annum (mtpa) clinker unit has been commissioned in Rajasthan, with a 3 mtpa cement mill expected soon. Additionally, a 3 mtpa integrated cement manufacturing facility in Kodla, Karnataka, is slated for commissioning in the third quarter. These additions are set to increase Shree Cement's total capacity to 67 mtpa by FY26, aiming for 72–75 mtpa by FY27 and 80 mtpa by FY29.

Financially, adjusted standalone Ebitda grew 48% year-on-year to Rs875 crore in Q2 but missed analyst estimates. Ebitda per tonne rose 42% year-on-year but fell 19% sequentially due to higher operating costs and slower dispatches. The average selling price per tonne (realization) increased about 11% year-on-year to Rs5,447, supported by a higher contribution from premium brands like Bangur Marble Cement, which now form about 21% of trade sales, helping to protect margins.

Impact This news has a moderate impact on the Indian stock market, particularly on the cement sector. Shree Cement's market share dynamics and pricing strategy, alongside its expansion plans and competitor actions, are key factors for investors in this segment. The company's stock performance and premium valuation relative to peers highlight its investor appeal but also potential risks if market share erosion continues. Rating: 7/10

Difficult Terms Explained: Ebitda: Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating performance. Tonnes (T): A unit of weight, commonly used for bulk materials like cement. (1 tonne = 1000 kilograms). mtpa: Million Tonnes Per Annum. It refers to the production capacity of a plant in millions of tonnes per year. Clinker: A hard, nodular material produced in the manufacture of Portland cement. It is then ground with gypsum to produce cement. Enterprise Value/Ebitda (EV/Ebitda): A valuation metric that compares a company's total value (market capitalization plus debt, minus cash) to its earnings before interest, taxes, depreciation, and amortization. It's used to assess how much investors are willing to pay for each unit of a company's operating earnings.