Shree Cement (SRCM IN) – Management Meet Update – Market share pressure necessitates shifting gears – Accumulate

We met the management of Shree Cement (SRCM) to understand the current business dynamics, concerns of oversupply in the Northern region, and the company’s long-term strategy. The management highlighted good traction in non-trade segment in the past 2 weeks and expects pricing to improve. However, in trade, demand has not yet picked up pace as expected (on GST rationalization), and price recovery would be gradual from Q4FY26. With over 40mtpa capacities expected to get commissioned in the Northern region over the next 2 years, the management reiterated its focus on achieving efficiencies across units. This would have some impact on the Northern market share (pan-India market share is 9% and North is 21-22%), which would be compensated by improving volumes in rest of India and shift in its year-old ‘value over volume’ strategy. SRCM reiterated continued focus on efficiencies and delivery of EBITDA/t. Since inception, SRCM has been a pioneer in achieving cost efficiencies. With the industry having replicated SRCM’s strategies, the latter may have to recalibrate its approach by capitalizing on own strengths and drive volume growth. Over the last few quarters, SRCM has lost market share, a cause of concern, and regaining volume momentum amid rising competitive intensity will be the key for SRCM to outperform. We cut our FY27/28E EBITDA estimates by ~4%/6% on lower pricing assumptions. The stock is trading at EV of 15.6x/13.8x of FY27/FY28E EBITDA. Maintain ‘Accumulate’ with revised TP of Rs29,850 (earlier Rs31,769) valuing at 17x EV of Sep’27E EBITDA.