Shree Cement stock gains 2% as board approves expansion plans
Shares of Shree Cement Ltd are in focus on Wednesday after its board approved a slew of expansion plans.
The company will increase its clinker capacity by 3.8 million tonne (mt) and cement grinding capacity by 6.5mt. Reacting to this, the stock rose around 2% on the NSE in Wednesday's opening trade.
The board also approved a proposal to set up 106megawatt solar capacity at a total capex of Rs4800 crore. This is likely to be commissioned by March 2024. Post this expansion, its domestic grinding capacity would rise from 43.4mt to 53 mt. Investors would reckon that the company aims to achieve 80 mt capacity by FY30 and this expansion is a step towards that.
"Our current forecasts imply a 9% capacity CAGR over FY21-26E and 6.5% thereafter," analysts at Emkay Global Financial Services Ltd said in a report on 15 September. CAGR is short for compounded annual growth rate.
Furthermore, the company has proposed to set up an integrated cement plant in Rajasthan with clinker and cement capacity of 3.8mt and 3.5mt, respectively. This would be done at a capital expenditure of Rs3500 crore and would be funded through a mix of internal accruals and debt. This plant is expected to be commissioned by March 2024.
Shree Cement would also set up a 106 megawatt solar power plant. Analysts say this expansion will help the company enhance the proportion of clean energy usage in total energy consumption, reduce fossil fuel use and help reduce its carbon footprint.
It should be noted that Shree Cement has increased renewable power generation capacity by 10MW year-on-year to 244MW, with the share of green power up by 300 basis points (bps) year-on-year to 48% in FY21. One basis point is one hundredth of a percentage point.
"We build in consolidated volume and Ebitda CAGRs of 12% and 14%, respectively, over FY21-24E," added the Emkay report.