Summary
Shree Cement Limited - Q3 FY26 Earnings Call Summary Thursday, February 6, 2026, 4:00 PM
Event Participants
Executives 4 Ashok Bhandari (Senior Advisor), K.K. Jain (Head of Finance & Accounts), S.S. Khandelwal (Company Secretary), Subhash Jajoo (CFO)
Analysts 8 Harsh Mittal (Emkay Global), Indrajit Agarwal (CLSA), Jashandeep Singh Chadha (Nomura), Lakshminarayanan (Tunga Investments), Navin Sahadeo (ICICI Securities), Pinakin (HSBC), Rahul Gupta (Morgan Stanley), Rajesh Ravi (HDFC Securities), Satyadeep Jain (Ambit Capital), Shravan Shah (Dolat Capital), Siddharth Mahortra (Kotak Securities), Tushar Chaudhari (Prabhudas Lilladher)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Sales Volume | 8.7 million tons | +2% YoY; Management intentionally constrained volumes to prioritize value/pricing over market share. |
| Realization (Grey Cement) | ₹4,652 per ton | +2.15% YoY from ₹4,554; Reflects strategy to narrow the price gap with the industry leader to ₹15/bag. |
| RMC Revenue | ₹71 crores | Derived from 19 operational plants; 45% of cement used in RMC is captive consumption. |
| Power & Fuel Cost | ₹1.56 per kcal | Industry-leading low cost; Driven by a 61% renewable energy mix and multi-fuel flexibility. |
| Employee Cost | ₹[Not Disclosed] | Included a one-time ₹56 crore provision for back-liabilities related to the new labor code. |
| Lead Distance | 446 km | Sequential movement not specified, but remains a focus for logistical optimization. |
| Trade Mix | 65% | Lower than the long-term target of 75% due to high Q4 infrastructure demand from government projects. |
| Blended Cement Share | 65% | Proportions remain stable as the company balances product mix with realization targets. |
| Cash & Equivalents | ~₹6,000 crores | Company remains net debt-free with significant liquidity for future expansions. |
Geographic & Segment Commentary
- Regional Volume Mix: Sales were dominated by the North region at 5.3 million tons (61%), followed by the East at 2.3 million tons (26%) and the South at 1.1 million tons (13%). Management noted that the Southern capacity (including the upcoming Kodla unit) will further augment geographic reach.
- Ready Mix Concrete (RMC): Currently operating 19 plants, the segment generated ₹71 crores in Q3 revenue. Strategy involves scaling to 45 plants by September 2026 to improve logistics and cement capacity utilization.
- UAE Operations: Management stated performance is “getting better by the day” with the largest cement plant in the UAE under their control. Detailed financials were not disclosed in the press release but will be provided upon request.
Company-Specific & Strategic Commentary
- Value over Volume Strategy: Since October 2024, the company has narrowed the price delta vs. UltraTech from ₹30/bag to ₹15/bag. This deliberate sacrifice in volume growth aimed to correct a historical undervaluation of the brand.
- Renewable Energy Leadership: Reached a 61% green energy mix with 634 MW of total green capacity (WHR, Solar, Wind). This focus has kept per-kcal costs at ₹1.56, significantly lower than the peer average of ~₹1.80.
- Internal Reorganization: Implementation of a transparent, non-negotiable rebate policy initially caused dealer friction but has now stabilized. A new President of Marketing was inducted in November 2025 to drive volume recovery.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Q4 FY26 Volume | 9.0 - 9.5 million tons | Expected pick-up due to government budget exhaustion before March 31. |
| FY26 Capex | ~₹2,000 crores | ₹1,500 crores spent YTD; ₹500 crores scheduled for Q4, including Kodla plant completion. |
| FY27 Capex | ~₹500 crores | Base capex for 26-30 RMC plants and 2 railway sidings; excludes unconfirmed new cement capacity. |
| Capacity Target | 72 MT by March 2026 | Goal of 80 MT by FY29 is under review based on demand-utilization equilibrium in FY27. |
Risks & Constraints
| Risk | Context |
|---|---|
| Low Capacity Utilization | Current utilization is in the mid-50s% due to intentional volume constraints; management targets a return to 70% before aggressive new expansion. |
| Regulatory Inquiry | Ongoing MCA investigation under Section 210; management characterizes this as a routine inquiry with all requested information submitted. |
| Input Cost Volatility | While currently at ₹1.56/kcal, management warned fuel costs may rise in Feb-March 2026 depending on the landed cost of pet coke/coal. |
Q&A Highlights
Pricing vs. Volume Trade-off
- Question: Why have volumes lagged the industry with utilization in the mid-50s? (Rahul Gupta)
- Answer: Divergence between Shree and UltraTech pricing was too high (₹30/bag). By restraining volume, the gap was halved to ₹15/bag. Performance in Dec/Jan shows volume recovery without losing realization gains (Ashok Bhandari).
Expansion Strategy (80 MT Target)
- Question: Is the target of 80 MT by FY29 still on track? (Satyadeep Jain)
- Answer: Capacity has increased 110x in 40 years, but we will not build “idle capital.” Further expansion beyond 72 MT depends on how demand pans out in FY27 (Ashok Bhandari).
Capex & Cash Allocation
- Question: How will the ₹6,000 crore cash be used if FY27 capex is only ₹500 crore? (Lakshminarayanan)
- Answer: We are currently seeing inefficient 4-5% treasury returns. Once the demand-utilization equilibrium is reached, we will re-accelerate capex, which will “vertically jack up” ROCE (Ashok Bhandari).
Operating Costs
- Question: What drove the higher employee costs this quarter? (Tushar Chaudhari)
- Answer: A ₹56 crore one-time provision for back-liabilities under the new labor code, plus standard increases related to ramping up new plant capacities (Ashok Bhandari/Subhash Jajoo).
Key Takeaway
Shree Cement delivered a quarter defined by its strategic pivot toward “value over volume,” successfully narrowing the pricing gap with its primary competitor to ₹15 per bag. While this resulted in sub-par capacity utilization (mid-50s) and modest 2% YoY volume growth, realization improved to ₹4,652 per ton. The company maintains an industry-leading power and fuel cost of ₹1.56 per kcal, supported by a 61% green energy mix. With ₹6,000 crores in cash and a net debt-free balance sheet, the company is slowing immediate cement capacity expansion to focus on 45 RMC plants and railway sidings (FY27 capex guided at ₹500 crores) until demand justifies moving toward its 80 MT target. Management expects a strong Q4 volume push of 9.0-9.5 million tons as government infrastructure spending accelerates before the fiscal year-end.
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