Shares of Shree Cement fell over three percent in early trade on Tuesday, a day after the company reported its June quarter earnings.

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The cement major posted a net profit of Rs 661.7 crore in Q1FY22, a rise of 78.5 percent from Rs 370.8 crore in the year-ago quarter. However, the net profit was 13.8 percent lower than Rs 767.65 in the quarter ended March 2021.

Revenue increased 47.9 percent to Rs 3,449.5 crore from Rs 2,332.4 crore, YoY, but declined on a sequential basis from Rs 3,957.96 crore.

Experts believe that even though the company's results were mostly in line with estimates, the street had expected a beat after its peers like UltraTech Cement, Ambuja Cement and ACC delivered a 10 percent to 15 percent beat on EBITDA front.

The company's performance was not good enough to drive earnings upgrade and with limited valuation expansion headroom, said experts.

Global brokerage CLSA maintained an 'underperform' rating on the stock and cut the target price to Rs 28,300 per share from Rs 28,850 earlier on expensive valuation.

Shree Cement’s Q1FY22 Ebitda of Rs 10.1 billion (down 18 percent QoQ) was in line with CLSA's estimates. Volume declined 17 percent QoQ and was slightly better than pan-India peers.

Shree Cement intends to reach 80 mt capacity from current 43.4 mt by 2030, versus our previous expectation of 2025/26 (6% Cagr). With FY21 net cash of Rs 64 billion and cumulative Ebitda of Rs 155 billion over the next three years, the use of cash will be a key focus, CLSA said.

"We forecast FY22 volume growth of 12 percent YoY and Ebitda/t of Rs 1,426. Even post the recent weakness, we find valuations expensive,” the brokerage said.

Meanwhile, brokerage firm Nomura believes that the company's margins are likely to compress in the next two quarters owing to weaker prices and higher input costs.

At 9:50 am, the shares of Shree Cement were trading 3.47 percent lower at Rs 27,305.20 apiece on the BSE.

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