SHREECEM

Trades at Discount Despite Sustainability Push

. reported Q3FY26 results marked by strong cost optimization but muted volume growth. With 60% of electricity consumption from green power, Shree leads the industry in renewable energy adoption, significantly lowering fuel costs. The company is pursuing a value-over-volumes strategy, narrowing its pricing gap with peers, though subdued demand and operational disruptions weighed on volumes. While margins remain competitive, lower utilization levels and reduced capex guidance raise concerns about market share sustainability. Green Power & Cost Advantage - Share of green power: 60%, highest among peers (UltraTech 42.1%, Ambuja 36.9%, ACC 31.3%). - Green power capacity: 634 MW (Dec 2025), up from 582 MW (Mar 2025). - Fuel cost: ₹1.56/kcal, industry-low; management expects ≤₹1.80/kcal. - Sustainability push enhances profitability and pricing power. Pricing Strategy - Value-over-volumes approach to reduce pricing gap with peers. - Pricing gap with UltraTech narrowed from ₹30/bag to ₹15/bag. - Strategy may shift toward volume growth once pricing differential stabilizes. Volumes & Utilization - Q3 volumes: 8.7 mt, flat YoY vs industry’s high single-digit growth. - Guidance: 9.5 mt in Q4FY26, implying FY26 volumes down 3% YoY (vs earlier +4% guidance). - Operational disruptions at Baloda Bazar plant and weak demand in Oct–Nov hurt volumes. - Capacity utilization: 60% in 9MFY26, down from 69% (FY23), 67% (FY24), 64% (FY25); below industry average ~70%. Capex & Expansion - FY26 capex guidance cut to ₹2,000 crore (from ₹3,000 crore). - Incremental capacity additions underway, but low utilization raises competitiveness concerns. Valuation & Outlook - Stock down 16% in past six months. - Trades at 17x FY27 EV/EBITDA, discount to UltraTech (~20x). - Outlook: Strong cost advantage and pricing power, but muted volumes, low utilization, and reduced capex weigh on growth trajectory.