Shares of Shree Cement experienced a sharp decline on November 12 after the cement giant reported an 81% year-on-year drop in its net profit for Q2, bringing in just ₹93.1 crore for the quarter ending September 30, 2024.
The unexpected slump in earnings has led several brokerages to reduce their target prices for the stock, signalling caution to those looking to invest in stocks within the cement sector.
Shree Cement's Q2 earnings hit by sluggish demand and price pressures
The Bangur family-backed Shree Cement reported that its disappointing Q2 results were primarily due to challenging demand conditions. A prolonged monsoon season dampened construction activities, impacting cement demand across regions, while softer pricing conditions added further strain to profitability. This downturn poses a significant setback for investors looking to invest in stocks tied to infrastructure and construction growth.
Analysts weigh in on Shree Cement's future growth
Analysts remain cautiously optimistic about Shree Cement’s future, particularly due to its substantial capex plans aimed at delivering sustained volume growth. Additionally, the company’s efforts to enhance cost efficiency are expected to reinforce its cost leadership in the competitive cement industry. However, the brokerage adjusted its EBITDA estimates for FY25-27 downward due to the current weak pricing environment, signalling a temporary setback for investors looking to invest in stocks in the cement sector.
Shree Cement stock underperforms compared to the broader market
The decline in Shree Cement shares has mirrored the stock’s challenging year, with prices down approximately 15% since January 2024. This contrasts sharply with the Nifty 50 index, which has gained around 10% over the same period. Over the past year, Shree Cement’s stock has slid by 8%, while Nifty has seen a robust 23% rise, further underscoring the broader market's outperformance and cautionary signals for those considering to invest in stocks tied to the cement sector.
Future outlook for Shree Cement investors
While Shree Cement’s current position reflects a tough period for the company, analysts believe that its capex initiatives and cost control strategies could offer support for its growth ambitions. For investors looking to invest in stocks, particularly in the infrastructure or cement sectors, Shree Cement presents both risks and potential long-term gains, depending on how the demand environment evolves.
In the short term, however, the pricing pressures and reduced profit forecasts suggest that potential investors may want to approach cautiously until market conditions show signs of improvement.
For android only