ICICI Securities, a leading Indian research house, has issued a “BUY” call on Shree Cement (SRCM) with a target price of Rs 35,330, representing a 19% upside from the current market price (CMP) of Rs 29,690. The report highlights SRCM’s deliberate shift toward value over volume, targeting modest volume growth but robust profitability. Management’s focus on narrowing the pricing gap with larger peers, strong cash reserves, and potential shareholder rewards in FY26 underpin the bullish outlook. Despite recent soft demand due to weather and geopolitical factors, SRCM’s disciplined expansion and margin resilience make it a compelling investment, with risks limited to sharp price or fuel cost volatility.

Strategic Priorities: Value Over Volume

Shree Cement’s FY26 Playbook is unequivocal: prioritize profitability over market share. The company, led by Chairman H M Bangur, has guided for a 2–3% volume growth against an industry expectation of 7–8%. If demand remains robust, this could edge up to 3–4%. This cautious stance is a deliberate move to avoid aggressive discounting and instead focus on realizations and margins. SRCM’s channel checks confirm the company is not chasing volumes at the expense of pricing, reflecting a mature, margin-driven strategy.

Narrowing the Pricing Gap is a key tactical objective. In several North Indian markets, SRCM has reduced the price differential with larger peers to Rs 20–25 per bag, down from Rs 30–35 previously. Management is committed to further narrowing this gap, signaling confidence in brand strength and operational efficiency.

Financial Performance and Outlook

EBITDA and Margin Expansion are central to the investment thesis. SRCM expects FY26 EBITDA per tonne to stabilize around Rs 1,400, in line with Q4FY25 levels, and well above the FY25 average of Rs 1,070. This improvement is driven by price hikes, cost optimization, and disciplined volume management. The company anticipates a 6% year-on-year realization growth, translating into a 9% revenue uptick for FY26.

Profitability Metrics reveal a robust rebound. After a challenging FY25, where net profit nearly halved, FY26E net profit is projected to double, with EPS expected to jump from Rs 331.5 to Rs 639.3. EBITDA margins are forecast to expand from 21.3% in FY25 to 27.4% in FY26E, underscoring the benefits of a value-driven approach.

Capacity Expansion and Capital Allocation

Organic Growth Trajectory remains a hallmark. SRCM commissioned its Chhattisgarh grinding unit in April 2025 and plans to bring two new clinkerization units (3 million tonnes each) online in Karnataka and Rajasthan within six months. The company’s long-term vision is to reach 80 million tonnes per annum (mtpa) by FY30, and 100 mtpa by FY33/34, with annual additions of 5 mtpa post-80 mtpa milestone.

Cash-Rich Balance Sheet provides significant flexibility. With net cash of Rs 55 billion, SRCM is well-positioned to fund its ambitious expansion plans without leveraging its balance sheet. This financial strength also enables the company to consider rewarding shareholders through special dividends or buybacks in FY26, coinciding with its 40th anniversary.

Market Dynamics and Demand Outlook

Recent Demand Softness is attributed to external factors. Q1FY26 volumes have been subdued due to heat waves, early monsoon onset, and Indo-Pak border tensions in North India. However, management remains optimistic that good monsoon rains will revive both rural and urban demand in the coming quarters.

Inorganic Growth is not a priority. SRCM maintains a conservative stance on mergers and acquisitions, preferring disciplined organic expansion over aggressive M&A.

Valuation and Investment Case

Target Price and Upside are compelling. ICICI Securities maintains a “BUY” rating with a target price of Rs 35,330, implying a 19% upside from current levels. The valuation is based on a 19x FY27E EV/EBITDA multiple, reflecting confidence in SRCM’s margin expansion and growth trajectory.

Key Risks and Shareholding Pattern

Downside Risks include a sharp fall in cement prices or a major surge in fuel costs. These factors could pressure margins and erode profitability, though SRCM’s disciplined approach and strong balance sheet provide a buffer.

Shareholding Structure remains stable, with promoters holding 62.6% and institutional investors accounting for 25%. The free float stands at 37%, ensuring reasonable liquidity for investors.

ESG and Corporate Governance

ESG Performance is solid, with the company scoring 66.4 out of 100 in 2024, up marginally from 66.2 in 2023. Governance scores are particularly strong at 74.3, reflecting robust disclosure and management practices.

Conclusion and Investor Levels

Investment Recommendation: ICICI Securities reiterates its “BUY” call on Shree Cement with a target price of Rs 35,330, representing a 19% upside from current levels. The stock is currently trading at Rs 29,690.

Key Levels for Investors:

Current Market Price (CMP): Rs 29,690

Target Price: Rs 35,330

Upside Potential: 19%

Support Level (52-week low): Rs 23,500

Resistance Level (52-week high): Rs 31,925

Shree Cement’s disciplined approach to growth, margin resilience, and strong balance sheet make it a standout in the Indian cement sector. Investors should watch for execution on capacity expansion and any shareholder rewards in the coming year.