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 yoy (40.2 per cent qoq) to ₹913 crore, mainly led by 13.8 per cent yoy (43.7 per cent qoq) increase in volume of 1.41mt (1.387mt cement + 0.024mt clinker) sales.
However, realisation was down by 3.3 per cent yoy and 2.4 per cent qoq to ₹6,474. Overall opex per tonne is down by 2.8 per cent yoy, but increased by 1.6 per cent qoq.
PAT stood at ₹87.7 crore (-8.8 per cent yoy, +19.2 per cent qoq). The yoy 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.