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ICICI Securities Report
Star Cement Ltd. Q1 FY25 performance appears to be in the slow lane owing to muted volumes (flat YoY) and ‘one-off' cost impact (external purchase of clinker). As a result, Ebitda (at Rs 1.16 billion, down 10% YoY/ 35% QoQ) stood 24% below our expectation.
Yet, recovery appears to be in sight, as the newly commissioned 3.3 million tonnes per annum clinker line has stabilised – shall not only reverse the impact of external clinker purchase, but also offer accrual of state incentives.
Factoring in the underlying weakness in cement prices, while we prune our FY25E Ebitda by 16%, we keep it largely intact for FY26E as we assume demand/price recovery from H2FY25.
Star remains a niche player in the north-east India complimented by:
capex incentives of ~Rs 300/tonne
benefits of increase in share of green power; and
strong balance sheet with healthy return of equity.
We continue to value the stock at 11 times FY26E enterprise value/Ebitda and maintain 'Buy' with a revised target price of Rs 257 (Rs 271 earlier).
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