Target: ₹277
CMP: ₹216.70
Star Cementreported healthy growth across parameters with volumes growing 9.7 per cent year on year to 1.6 million tonne (mt) and blended realisations improving 1.7 per cent to ₹7,253 per tonne. EBITDA margin expanded to 26.8 per cent, driven by cost efficiencies and operating leverage from higher volumes.
The company’s overall capex plans remains intact. Total capex for FY27E/28E is guided to be ₹600-700 crore and ₹1,500 crore, respectively. While FY27E capex will be largely funded through internal accruals and cash reserves, FY28E capex will be largely funded through a mix of internal accruals and debt.
The management expects an impact of ₹250-300 per tonne on operating costs in H1FY27 due to the West Asia crisis affecting packing bags and fuel cost. Normalisation is expected from Q3FY27.
The management targets 10-12 per cent volume growth for FY27 while EBITDA/tonne is expected to be in the range of ₹1,500-1,700 (vs. ₹1,819 in FY26) over the next three years. Cement demand was sluggish in April due to elections in Assam and West Bengal, however, pick-up was witnessed in May.
Star Cement’s Q4FY26 numbers reflect healthy execution with volume-led growth and margin expansion. The stock trades at FY27E/28E EV/EBITDA of 9.3x/8.7x respectively. We value the stock at 11.7x of its rolling one-year forward EV/EBITDA and cut our target price to ₹277 (due to near-term margin pressure).