Buy Star Cement; target of Rs 257: ICICI Securities

ICICI Securities's research report on Star Cement

Star Cement’s (Star) Q1FY25 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 INR 1.16bn, down 10% YoY/ 35% QoQ) stood 24% below our expectation. Yet, recovery appears to be in sight, as the newly commissioned 3.3mtpa 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%,

Outlook

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: 1) capex incentives of ~INR 300/t; 2) benefits of increase in share of green power; and 3) strong balance sheet with healthy RoE. We continue to value the stock at 11x FY26E EV/EBITDA and maintain BUY with a revised TP of INR 257 (INR 271 earlier).