Shree Cement Q2 FY27 Results Analysis: PAT Falls 15%, Fuel Costs Surge 56% (SHREECEM)

Shree Cement Ltd's Q2 FY27 numbers came in soft, with revenue of Rs. 5,896.51 Cr (+23.85% YoY) and PAT growth of -15.13% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

Shree Cement delivered 23.85% YoY revenue growth but the weakest profitability of the visible quarters: operational EBITDA margin fell 322 bps YoY to 17.24% and owners' PAT declined 15.13% YoY, driven almost entirely by power and fuel costs rising 55.67% YoY. Management's 'healthier profit from Q2 FY27' guidance was missed, pushing the entire recovery burden onto the seasonally stronger H2, while working capital deteriorated (inventories +30.52% YTD) and H1 free cash flow turned negative at −Rs.95.50 Cr. The balance sheet remains a fortress at 0.08x debt-equity and overseas subsidiaries returned to profit (Rs.114.42 Cr in Q2), but the fuel-cost shock remains unresolved.

Key Investment Insights

Key Positives

• Consolidated revenue grew 23.85% YoY to Rs.5,896.51 Cr
• Overseas subsidiaries returned to profit: four unreviewed overseas subsidiaries posted Q2 net profit of Rs.114.42 Cr (H1 Rs.251.26 Cr) after the war-disrupted Q1
• Subsidiaries contributed Rs.56.49 Cr, 21.58% of consolidated owners' PAT
• Balance sheet remains strong: debt-equity of 0.08, current ratio 2.03, net worth Rs.23,862.41 Cr
• H1 capex of Rs.894.66 Cr is 59.64% of the FY27 Rs.1,500 Cr guidance — on track
• Effective tax rate of 28.26% (Q2) and 28.31% (H1) tracking the ~30% guidance
• Freight (−194 bps), employee (−53 bps) and other expenses (−64 bps) all improved as ratios YoY; depreciation fell 211 bps as a ratio

Risk Factors

• Owners' PAT fell 15.13% YoY and 50.52% QoQ to Rs.261.82 Cr despite 23.85% revenue growth
• Operational EBITDA margin compressed to 17.24% (−322 bps YoY, −317 bps QoQ), the lowest of the visible quarters
• Power and fuel costs rose 55.67% YoY, absorbing 639 bps more of revenue (31.26% vs 24.87%)
• Management's 'healthier profit from Q2 FY27' guidance was missed; the recovery is now deferred entirely to H2 with H1 owners' PAT down 16.84% YoY
• Inventory build of Rs.97.14 Cr absorbed margin (produced > sold) vs a Rs.33.20 Cr drawdown a year ago
• Working capital deteriorated: inventories +30.52% YTD, receivables +21.31% YTD; CFO/EBITDA at 0.31x and H1 FCF negative at −Rs.95.50 Cr