UAE acquisition: Surplus cash deployment at good yield. steady 3Q earnings despite sand and cost challenges Shree Cement announced the acquisition of a majority stake in Union Cement Company (UCC, listed in the UAE) at an enterprise value (EV) of US$305MM (~Rs19.5B). The transaction implies an EV/ton valuation of ~US$75 – a significant discount to past M&A costs (US$125-160/ton) and the cost of greenfield expansion in the Middle East. UCC has been delivering steady operating profits over the past four years despite market challenges. The yield on transaction investment (assuming stable profitability) works out to ~11%, better than the sub-7% treasury yield on liquid funds. While some investors may not like an overseas foray in a low-growth market, we think the deal is essentially deployment of surplus cash at a better yield and does not alter the strong growth profile of Shree. Separately, Shree delivered a steady Dec-Q amidst sand and cost-side challenges (EBITDA Rs5.7B, +16% Y/Y). Net net, we remain positive on Shree and expect strong volume/ EBITDA growth (14% /30% CAGR over FY18-21E) over the medium term supported by sizeable capacity expansion in the next 12 months.