Shree Cement shares rise 2% as board approves expansion plans

The company will increase its clinker capacity to 3.8 million tonnes (mt) and cement grinding capacity to 6.5mt. Responding to this, the stock rose nearly 2% on the NSE in early trade on Wednesday.

The board also approved a proposal to set up 106 MW of solar capacity at a total capital expenditure of Rs 4800 crore. It is likely to be operational by March 2024. Following this expansion, its domestic grinding capacity will increase from 43.4 million tonnes to 53 million tonnes. Investors believe that the company aims to achieve 80 million tonnes of capacity by FY30 and this expansion is a step in that direction.

“Our current forecasts are at 9% capacity CAGR in FY 2011-26E and 6.5% thereafter,” analysts at Emkay Global Financial Services Ltd said in a report on September 15. CAGR is short for Compound Annual Growth Rate.

In addition, the company proposes to set up an integrated cement plant in Rajasthan with clinker and cement capacity of 3.8mt and 3.5mt respectively. This will be done at a capital expenditure of Rs 3500 crore and will be funded through a mix of internal sources and credit. The plant is expected to be commissioned by March 2024.

Shree Cement will also set up a 106 MW solar power plant. Analysts say the expansion will help the company increase the ratio of clean energy use to total energy consumption, reduce fossil fuel use and reduce its carbon footprint.

It should be noted that Shree Cement has increased its renewable energy generation capacity by 10MW year-on-year to 244MW, with the share of green power increasing by 300 basis points (bps) to 48% in FY21. One basis point is one hundredth of a percentage point.

“We build up to 12% and 14% respectively in consolidated volume and EBITDA CAGR in FY 2011-24E,” Emkay said in the report.