Anand Rathi is bullish on Star Cement has recommended buy rating on the stock with a target price of Rs 126 in its research report dated November 14, 2018.
Anand Rathi's research report on Star Cement
Its rationalised freight & power and fuel costs and good volume growth, with a strong, ~23%, market share in its key north-east region would drive Star Cement’s performance. Its Q2 was bruised by a huge rise in raw material and freight costs on the shutdown of its clinker plant and expiration of its transport subsidy. Further, it will benefit from the boost to infrastructure spending in the north-east. We are upbeat about its prospects and retain our Buy rating the stock, with a target of `126. Its strong hold on the market persists. On the capacity additions, its commanding ~23% in its key market together with premium pricing in the north-east, would boost its performance. Its high, ~83%, share in retail markets would further aid realisations.
Outlook
With shrinking debt through subsidy receipts and a good pick-up in volume growth and infrastructure activity, we lower our target price to `126 and maintain our Buy recommendation on the stock, which quotes at an FY20e EV/EBITDA of 10x.
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