Emkay Global Financial' research report on Star Cement
Star, with the upcoming commissioning of grinding units (GUs) in Silchar and Jorhat (both in Assam) is set to consolidate its leadership position in the Northeast. We estimate its volume/capacity share to increase to ~29%/45% by FY27E from ~23%/33% as of FY25-end, respectively. On the incentives front, the management has given guidance of Rs2-2.5bnpa of incentives for the next two years. We have valued incentives receivable (over the next 9 years), per DCF methodology, and estimate the net present value of incentives at ~Rs10bn (~Rs25/sh). We believe incentives shall cushion Star’s balance sheet amid ongoing and planned (Rajasthan) capacity expansions. Ex-incentives, we see Star’s EBITDA/t rise to Rs1,151 in FY26E and Rs1,212 in FY27E from Rs885 in FY25.
Outlook
We assume coverage on Star Cement (Star) with BUY and target price of Rs 250, while valuing the stock at FY27E EV/EBITDA of 12x.
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