On Monday, JPMorgan initiated coverage on Shree Cement Ltd (SRCM:IN) stock with a Neutral rating and a price target of INR 27,125.00. The new target is based on a 17 times EV/EBITDA multiple applied to the company's four-quarter rolling EBITDA estimates. This valuation implies approximately 36 times the fiscal year 2026 earnings per share (EPS).
The financial institution's stance is partly influenced by Shree Cement's forecasted EPS growth and return on equity (RoE), which are both anticipated to be lower than those of UltraTech Cement (UTCEM), despite similar valuations.
The analyst notes that Shree Cement is implementing cost reduction initiatives that aim to decrease costs by about INR 500 per metric ton (MT) by fiscal year 2028.
These initiatives include increasing the share of renewable energy in their mix from 54% to 62% by FY28 and reversing recent logistic cost increases through enhanced rail usage.
JPMorgan's assessment also takes into account the flat cement price realizations projected over the next three years. However, they expect the company's EBITDA per MT to increase due to the anticipated lower costs.
The firm acknowledges that near-term price increases could be beneficial for Shree Cement, but it also cautions that delays in project execution and continued pricing pressures pose key risks to the company.
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