ICICI Direct recommended hold rating on Star Cement with a target price of Rs 120 in its research report dated May 09, 2019.
ICICI Direct's research report on Star Cement
Star Cement exhibited a weak Q4FY19 performance, missing our estimates on all major fronts. Sales volumes saw growth of 4.7% YoY to 0.84 MT from 0.8 MT in Q4FY18 (vs. I-direct estimates of 0.88 MT). Consequently, topline growth stayed low at 2.2% YoY to Rs 538 crore (vs. I-direct estimate of Rs 572.4 crore). Blended realisations remained lower than previous year by 2.4% YoY at ~Rs 6400/t (vs. I-direct estimates of Rs 6512/t). Cost of raw materials saw 34.2% growth YoY to Rs 137 crore, which also contributed to lower EBITDA margins. Consequently, EBITDA margins contracted ~380 bps to 24.2% with EBITDA/t 15.5% lower YoY at ~ Rs 1550/t. EBITDA for the quarter saw de-growth of 11.5% YoY to Rs 130 crore (below I-direct estimate of Rs 170 crore). Consequently, net profit for the quarter was at Rs 90 crore (vs. I-direct estimate of Rs 95 crore), down 16.8% YoY, partly supported by lower tax expense and finance cost.
We maintain HOLD rating on the stock, with a valuation of 8.5x FY21E EV/EBITDA and arrive at a target price of Rs 120/share.
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