Star cement is one of the biggest player in north east india and has highest EBIDTA per ton among all cement players. In Q3FY24 it reported EBIDTA per ton more then 1500/ton which was highest in the industry.

We had earlier recommended Star cement on 6^th June 2023 at 145 levels and we had booked profit around 210 levels. Now as new capacity have come online which also has huge subsidy benefit we have again given a buy call at 230 levels for target of 500+ in next 12 months.

Name :- Star cement

Cmp :- 230

Buying range :- 225-235

Conviction :- very high.

Star cement has one of the best EBIDTA per ton and is one of the major cement player in north east market. Recently star cement has completed phase 1 of capex and is poised for big growth in FY25. With new capacity coming online total grinding capacity has increased to 7.7 MT from 5.5 MT and clinker capacity has increased to 6.1 MTPA from 2.8 MTPA. star cement in phase 2 of expansion will add another 3 MT grinding capacity in north east in next 12-18 months.

Another big positive for star cement is subsidy it will get from new plant from 2MT  grinding unit it will get rs 800/ton and for 3.3MT clinker unit it will get rs 300/ton. Now these new plants will run at 100% capacity and old plants will slowdown and manufacture according to demand. Another big positive is for new plant tax rate is 17% vs 25% this will also lead to additional savings. Now all this subsidy and tax savings itself will lead to additional income of 250-260 crore for full year and this will continue for next 6-7 years.

Now the above image is regarding details of the benefit which star cement will get from new manufacturing plant and the image is taken from Q3FY24 post earnings transcript page no 10.

Link :- 334299bb-bbec-4e8b-b27e-1ee1e332343c.pdf (bseindia.com)

Now for FY25 that is current year we @Dialwealth expect star cement to report topline of 3400-3500 and EBIDTA of Rs 900 to 1000 crore which means EBIDTA is expected to grow by 100% from FY24 and PAT is likely to come at 650-700 crore which means stock is trading at 13 times current year earnings which is very attractive. Star cement is likely to report strong Q4 number as well and stock is likely to outperform in short/medium and long term. Investors with 12 months time frame can expect very good returns.

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