Buy Star Ferro; target of Rs 135: ICICIDirect

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26 Aug, 2025 12:21

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ICICIDirect's research report on Star FerroStar Ferro’s (SFCL) revenues increased 11.1% YoY to | 563.2 crore (above I-direct estimate of | 509.8 crore) led by 10.0% YoY increase in volumes to 0.89 MT (vs. I-direct estimate of 0.81 MT).EBITDA margins declined from 30.5% in Q4FY15 to 22.5% (below I-direct estimate of 30.1%) led by increase in raw material expenses (up 77.2% YoY driven by higher volumes in traded goods) and other expenses (up 17.5% YoY due to increase in freight expenses). The company reported a net profit decline of 27.7% YoY to | 39.8 crore (below I-direct estimate of | 50.3 crore), mainly due to lower EBITDA margin and higher interest expenses (up 7.8% YoY). For the full year FY16, revenues grew 19.8% YoY to | 1,709.5 crore while EBITDA margins declined 735 bps YoY to 23.1%. Overall, net profit grew 10.3% YoY | 92.0 crore in FY16.SFCL’s utilisation has improved from 44.1% in FY13 to over 75% in FY16 led by robust demand in the North-East region (NER). We expect the same to remain healthy, going forward, given limited available capacity in the market, in which it operates. The company aims to achieve market share of over ~30% in the next five to seven years from the current 23% (led by aggressive marketing efforts). Although, we do not expect the company to maintain | 1,500 EBITDA/tonne post FY18 due to expiry of NEIIPP policy, healthy demand & pricing environment in NER region will enable the company to maintain EBITDA/tonne of over |1000/tonne (in line with many large cap cement companies). In addition, if the company is able to get the pending capital subsidy of |600 crore from the government, it will help SFCL reduce debt significantly. Hence, we maintain our BUY recommendation on the stock with a revised target price of | 135/share (i.e. 6.0x FY18E EV/EBITDA).For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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