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On Tuesday, Morgan Stanley (NYSE:MS) analysts adjusted their stance on Shree Cement Ltd (SRCM:IN), upgrading the stock rating from Underweight to Equal-weight. Accompanying the rating change, the firm also increased the price target from INR24,200.00 to INR26,950.00.
The analysts cited a tactical move for the upgrade, noting that Shree Cement is positioned to benefit in the near term from robust demand and a favorable pricing environment in the North and Central regions of India. These factors are expected to bolster the company's earnings over the ensuing quarters.
Despite the positive short-term outlook, Morgan Stanley maintains a cautious long-term perspective on Shree Cement, anticipating the company to continue trading at a discount compared to UltraTech Cement (NSE:ULTC) (UTCEM:IN). The analysts attribute this to Shree Cement's slower capacity and volume growth, as well as limited market share gains.
The firm also pointed out that there is a low likelihood of significant cost improvements for Shree Cement. This assessment suggests a cap on the potential for margin expansion, which is a crucial factor for the company's future profitability.
In summary, while the upgrade to Equal-weight reflects an improved near-term earnings outlook for Shree Cement, Morgan Stanley's analysis implies that structural challenges remain, potentially restraining the stock's performance in comparison to some of its peers.
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