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Target: ₹262
CMP: ₹216.25
Star Cement has reported a mixed set of numbers, EBITDA and blended realisation in line with our estimate, while revenue and volume are marginally ahead of our estimate. Revenue up by 10.1 per cent y-o-y (40.2 per cent q-o-q) to ₹913 crore, mainly led by 13.8 per cent y-o-y (43.7 per cent q-o-q) increase in volume of 1.41mt (1.387mt cement + 0.024mt clinker) sales.
However, realisation was down by 3.3 per cent y-o-y and 2.4 per cent q-o-q to ₹6,474. Overall opex per tonne is down by 2.8 per cent y-o-y, but increased by 1.6 per cent q-o-q.
PAT stood at ₹87.7 crore (-8.8 per cent y-o-y, +19.2 per cent q-o-q). The y-o-y decline in PAT was due to higher depreciation charges because of growth capex during the quarter (new GU + clinker unit) coupled with higher interest and tax expenses.
With an improvement in profitability, return ratios & balance sheet and a continued focus on capacity addition, we expect it to trade at higher-than-historical multiples, going forward.
We value the company at 10x FY26E EV/EBITDA to arrive at a target price of ₹262 maintain with Buy rating. While, delay in capex plan and incentive, slower-than-expected demand, regional pricing pressure from new entrant are key downside risks to our call.
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