Hold Star Cement; target of Rs 125: Emkay Global Financial

Emkay Global Financial recommended hold rating on Star Cement with a target price of Rs 125 in its research report dated March 27, 2023.

Broker Research

March 27, 2023 / 13:37 IST

Hold Star Cement

26 Aug, 2025 12:21

Volume

Todays L/H

Emkay Global Financial's research report on Star Cement

North East Region (NER): Effective clinker and cement capacity in NER stood at 9mtpa and 12mtpa, respectively, while demand is likely to be around 12.8mtpa. Nearly 65% of demand is contributed by Assam, 11% by Tripura, 6% by Meghalaya, 5% by Manipur, and the remaining by Mizoram and Arunachal Pradesh. Cement demand in the region has increased at a 9% CAGR in the last five years (~400bps higher than the pan-India average). Management expects demand in the region to grow at 10-12% YoY in FY24, with a pick-up in planned infrastructure development in the area. Star leads NER with a market share of ~23% and is likely to retain its leadership position in the medium term, in our view. Project updates: Star’s current cement capacity stands at 5.7mt, with a 2mt grinding unit in the East and the remaining in NER. Star has embarked upon an ambitious capex plan in NER with 3mt clinker capacity expansion at Lumshong, Meghalaya (by Jan-24), and 2mt cement capacity addition each at Guwahati (by Dec-23) and Silchar (by Q3FY25) in Assam. Including 12MW WHRS, the total project cost stands at ~Rs22bn (Rs2bn already spent), which is likely to be spent by FY25E. Capex guidance for FY23 and FY24 stands at Rs5-5.5bn and Rs11- 12bn, respectively. Management expects land acquisition for the Silchar plant (50% of the land has already been acquired) to be completed by Jun-23. Post the expansion, the company’s capacity is likely to increase by 70% to 9.7mt, which should provide strong volume growth over the medium term. Star is also evaluating M&A opportunities outside NER.

Outlook

We have a HOLD rating on the stock with a TP of Rs125, based on 8x its Mar-25 EV/E.

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