BROKER’S CALL.
Motilal Oswal SHREE CEMENT (NEUTRAL)
Target: ₹27,700
CMP: ₹25,976.60
Shree Cement has been consistent in capacity expansion (mostly through organic routes), with a capacity CAGR of about 12 per cent over FY1424. The company plans to increase its grinding capacity organically at a similar CAGR over FY2427E to reach 65mtpa/75mtpa by FY26E/FY27. However, most of these expansions will focus on its existing markets and a large part of Central and West regions will remain untapped till FY27. The company is one of the lowestcost producers in the cement industry. Now, it is also focusing on improving brand equity by enhancing consumer pull for its products in the market, and increasing premium product share.
We estimate Shree Cement to generate cumulative OCF of ₹7,800 crore over FY2526 while, estimated capex of ₹9,000 crore. We expect the company to post FCF outflow until FY26 due to accelerated growth plans (capex guidance of ₹12,500 crore over FY25FY27), leading to a negative FCF yield. We cut EBITDA estimates for FY25/26 by 5 per cent (each) due to pricing pressure (allIndia average cement price declined 5 6 per cent qoq in Q4FY24). The stock currently trades at 18x/16x FY25E/FY26E EV/EBITDA.
We reiterate our Neutral rating and value SRCM at 17x FY26E EV/EBITDA to arrive at our TP of ₹27,700.
Prabhudas Lilladher INTERGLOBE AVIATION (ACCUMULATE)
Target: ₹3,961
CMP: ₹3,545.05
We attended the InterGlobe Aviation (IndiGo) analyst meet wherein management highlighted plans to add more than one aircraft per week, increase capacity by early double digits, expand the network by launching 10 new destinations and add 5,5006,000 employees in FY25E.
Despite escalation in engine issues at P&W, growth guidance of early double digits is an indication IndiGo is well placed to mitigate supply chain challenges. In addition, commentary on yields was positive (expectation of growth in Q4FY24 versus a flattish guidance given earlier) with increasing focus on international markets.
We increase our EBITDAR assumptions by about 4 per cent over the next 2 years as we tweak our ASKM forecast given the growth commentary. Overall, we expect revenue CAGR of 13 per cent over FY24EFY26 with EBITDAR margin of 23.9/23.2/21.9 per cent in FY24E/FY25E/ FY26E (lower in last year due to higher fuel cost).
IndiGo expects gross addition of >1 aircraft per week in FY25. Nonetheless, given AoG figure is in mid70’s net addition will be lower. Current order book is abour 960 and steady delivery is expected from the recent order of 500 aircrafts placed in 2023. We retain our ‘Accumulate’ rating with a revised target price of ₹3,961 (earlier ₹3,312) as we increase our EV/EBITDA multiple to 8.5x (earlier 7.5x).