Rising star of east: A stock that may fetch you 52% returns

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Centrum Broking is bullish on a north-east based cement company and is optimistic that it will make investors richer by 52 percent. Initiating coverage on Star Ferro and Cement with a buy rating, the brokerage has set a target price of Rs 250 per share. It feels that Star Ferro and Cement is closer to a brand play than a commodity one.

So, why the bullishness? Centrum Broking estimates that strong cash flow and brown-field expansion capability will sustain its over 20 percent volume growth beyond FY17. What also works in favour of the company is cement price which is atleast Rs 20 per bag higher in the core NE markets than those in West Bengal. Significant state thrust on roads and hydro power projects offers long-term cement demand potential of 15 percent CAGR.

"The company's EBITDA MT at Rs 1284-2298 during FY14-17 are highest in industry on account of its superior brand in a lucrative market, various incentives/tax exemptions. Better cost efficiency led by captive power, proximity to high quality limestone and operating leverage should facilitate further margin expansion," the brokerage says in a note.

It also sees restructuring of the group can be an additional value-unlocking trigger.

However, at the same time it warns that downside risks to the bullishness include geo-political disturbances in the region, sharp recovery in input & freight cost and delays in subsidy recovery from government.

Centrum expects the company to deliver net sales and EBITDA growth of 11 percent and 27 percent year-on-year driven by 18 percent Y-o-Y volume growth in the cement business.

(Posted by Nasrin Sultana)