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Target: ₹190
CMP: ₹179.55
We met up with the Star Cement management. The company is well-poised to achieve a robust 19 per cent volume CAGR during FY23-26E, driven by its upcoming expansions in the northeast (NE) region. Additionally, its cost curve is likely to continue to trend down due to a cool-off in fuel prices, a rising share of low-cost green power, and operational leverage gains.
The forthcoming expansions will also bring in healthy GST incentives, aiding the company in gaining further market share in the NE region and boosting sales outside the NE area.
These factors should buoy the overall margin to ₹1,450/MT in FY26, maintaining Star’s industry-best margin performance from FY23-26, in our view.
Star Cement is in a sweet spot owing to the rising share of low-cost green power, fuel cost reduction and timely expansion in the NE region with large GST incentives. Thus, Star should remain the largest seller in the lucrative NE region and continue to deliver the industry’s best margins. Its balance sheet remains extremely comfortable (net debt to EBITDA < 1x) during FY24-26, despite these expansions.
Hence, we maintain our Buy rating on the company with an unchanged target price of ₹190/share (9x Sep-25E consolidated EBITDA).
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