Star Cement remains in a sweet spot owing to the rising share of low-cost green power, fuel cost reduction, and timely expansion in the North East region with large GST incentives. Thus, Star should remain the largest seller in the lucrative NE region and continue to deliver the industry's best margins.
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We maintain our Buy rating on Star Cement Ltd. with an unchanged target price of Rs 240/share (11 times FY27E consolidated Ebitda). We recently interacted with the management on the company's growth prospects.
Star's industry-best margin performance should continue to be buoyed by resumption of large GST incentives FY25 onwards along with savings from rising share of low-cost green power and stabilization of recently-commissioned kiln.
It is also augmenting its TSR share to ~15% by H1 FY26 and invested in a large fleet of trucks to reduce freight cost volatility. We estimate Star Cement will deliver 11% volume CAGR during FY24-27E, and its margin will expand to ~Rs 1,430/metric tonne during FY26-27E.
Star's cement capacity will expand by another 4 million metric tonne by FY27-end with upcoming expansions in the north-east region which will bolster its market leadership.
It has also won limestone mines in Rajasthan and Assam, which will pave the way for future expansions.
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