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Axis Securities Report
We maintain our 'Buy' rating for Star Cement Ltd. with a target price of Rs 165 per share, reflecting an upside potential of 15% from the current market price (Rs. 144.85).
The East and North East India market is expected to see elevated cement demand, driven by increased capex towards infrastructure and affordable housing. The company is well-poised to capture rising cement demand in the region with its upcoming capacity.
Star Cement expended Rs 572 crore on capex in FY23. Rs 1,300 crore of capex is expected in FY24 and the balance of Rs 400 crore in FY25. Ongoing capacity expansion will cost Rs 2,200 crore. The company aims to take the debt of Rs 500 crore to fund the current expansion.
We expect the company to grow its volume/revenue/Ebitda/adjusted profit after tax at a compound annual growth rate of 15%/13%22/%/14% over FY23-FY25E. The stock is currently trading at 10 times and nine times FY24E/FY25E enterprise value/Ebitda.
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