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Motilal Oswal Financial Services has reiterated a Neutral rating on Shree Cement and set a target price of ₹25,060, based on a 16× FY28E EV/EBITDA valuation, in a report dated October 24, 2026. The recommendation reflects a clear trade-off: Shree Cement is delivering strong volume growth and expanding capacity, but sharply lower EBITDA per tonne, fuel inflation and the risk of industry overcapacity limit near-term upside.
Why did Motilal Oswal keep Shree Cement at Neutral?
The broker considers the ₹25,060 target broadly fair at the implied valuation. Demand and volumes are improving, yet profitability has weakened enough that higher sales alone do not justify a more bullish rating. Motilal Oswal’s central question is whether price recovery and cost savings can restore unit economics while new industry capacity keeps pressure on realisations.
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| Measure | 2QFY27 result | Year-on-year change |
|---|---|---|
| Standalone revenue | ₹51.1 billion | Up 19% |
| EBITDA | ₹8.5 billion | Down 3% |
| Profit after tax | ₹2.1 billion | Down 30% |
| Sales volume | 9.3 million tonnes | Up about 18% |
| EBITDA per tonne | ₹912 | Down about 18% |
| Operating margin | About 17% | Down 3.7 percentage points |
| Cement realisation | About ₹4,870 per tonne | Not stated |
Are Shree Cement’s higher volumes offsetting margin pressure?
No, not yet. Volume growth lifted revenue, but the decline in EBITDA per tonne shows that each tonne is contributing less operating profit. The combination of lower unit profitability and a 3.7-point margin contraction explains why EBITDA fell despite an 18% increase in sales volume.
What happened in the first half?
For 1HFY27, revenue was ₹107.3 billion, EBITDA ₹19.2 billion and PAT ₹6.4 billion, with an operating margin of about 18%. Operating cash flow was ₹6.3 billion against ₹6.1 billion of capex, indicating that investment spending was close to the cash generated from operations during the period.
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Can pricing and cost controls improve earnings in 2HFY27?
Management expects a better second half, helped by a recovery in demand, sequential price improvement and cost optimisation. The outcome depends on whether those gains exceed fuel and other input-cost increases.
Fuel is the immediate cost risk
Fuel cost was ₹2.09 per kcal in 2QFY27. Management expects it to rise to ₹2.15–₹2.20 per kcal in 3QFY27. Unless selling prices rise sufficiently, that increase can keep EBITDA per tonne below the ₹1,174 recorded in FY26.
What cost measures are being pursued?
The company is reducing lead distances and increasing the use of alternative fuels and green power. These measures can lower delivered-cost intensity over time, but their effect must be assessed against fuel inflation, logistics costs and the pace of price recovery.
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What is Shree Cement’s volume outlook?
Management guides to FY27 volume of 40–41 million tonnes, implying approximately 10–13% year-over-year growth. That guidance assumes stronger demand in the second half and is a major support for the longer-term construction-materials outlook.
Ready-mix concrete is adding another growth channel
Ready-mix concrete volumes rose 153% year over year to 2.73 lakh cubic metres in 2QFY27, while revenue increased 182% to ₹1.29 billion. The network reached 35 plants, including captive units. This business broadens Shree Cement’s exposure to infrastructure and building activity, although it does not by itself resolve the cement segment’s margin issue.
How does expansion change the investment case?
Shree Cement commissioned a 3.0-million-tonne-per-annum mill in the UAE in September 2026, taking its UAE capacity to 7.0 million tonnes per annum. Management aims to reach 80 million tonnes per annum of total capacity in the near term.
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Expansion strengthens the company’s ability to serve future demand and can improve market reach, but new capacity also increases the importance of utilisation and pricing discipline. Capacity utilisation improved to roughly 56% in 2QFY27 from 52% in 2QFY26. Continued additions across the cement industry could nevertheless make price sustainability difficult.
What valuation supports the ₹25,060 target?
Motilal Oswal’s target uses 16× FY28E EV/EBITDA. The broker estimates EBITDA per tonne of ₹1,018 in FY27 and ₹1,074 in FY28, compared with ₹1,174 in FY26. On its estimates, the shares trade at about 17× FY27E EV/EBITDA and 15× FY28E EV/EBITDA.
| Valuation or earnings measure | Figure |
|---|---|
| Target price | ₹25,060 |
| Target methodology | 16× FY28E EV/EBITDA |
| Estimated FY27 EBITDA per tonne | ₹1,018 |
| Estimated FY28 EBITDA per tonne | ₹1,074 |
| FY26 EBITDA per tonne | ₹1,174 |
| Implied FY27E EV/EBITDA | About 17× |
| Implied FY28E EV/EBITDA | About 15× |
The valuation is described as fair rather than distressed. A stronger rating would require evidence that volume growth, price increases and efficiency gains can lift EBITDA per tonne back toward prior levels despite higher fuel costs and additional industry supply.
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What should construction-sector investors monitor next?
- Realisation: whether cement prices improve sequentially enough to offset fuel inflation.
- EBITDA per tonne: the clearest indicator of whether growth is translating into healthier unit economics.
- Utilisation: whether new and existing capacity can be filled without triggering aggressive discounting.
- Fuel and logistics: movement in fuel cost above the ₹2.09 per kcal reported for 2QFY27 and progress in reducing lead distances.
- Execution: delivery against the 40–41 million-tonne FY27 volume guidance and the planned path toward 80 million tonnes per annum of capacity.
Frequently Asked Questions
What is Motilal Oswal’s Shree Cement target price?
The target is ₹25,060. Motilal Oswal says it is based on a 16× FY28E EV/EBITDA valuation and accompanies a Neutral rating.
Why did Shree Cement’s profit fall when sales volumes grew?
Higher volumes did not compensate for weaker unit economics. EBITDA per tonne fell about 18% to ₹912, while the operating margin declined to roughly 17%, leading to a 30% year-over-year drop in 2QFY27 PAT.
What is Shree Cement’s FY27 volume guidance?
Management guides to 40–41 million tonnes for FY27, equivalent to roughly 10–13% year-over-year growth. The outlook assumes stronger demand in the second half, sequential price improvement and cost optimisation.
How large is Shree Cement’s UAE capacity after the 2026 expansion?
The company commissioned a 3.0-million-tonne-per-annum UAE mill in September 2026. UAE capacity therefore reached 7.0 million tonnes per annum.
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