HDFC Securities Bullish on Star Cement, Target Rs 240
HDFC Securities has issued a Buy recommendation for Star Cement Ltd., setting a target price of Rs 240, a significant upside from the current market price of Rs 207.1. The brokerage remains optimistic about the company’s future, despite a slight dip in EBITDA attributed to the stabilization of its recently commissioned clinker units.
With robust volume and revenue growth, coupled with its leadership in the North East (NE) region and strong financials, Star Cement continues to show promise for investors looking for a steady performer in the cement industry. For the quarter ending December 31, 2024, Star Cement reported a consolidated total income of Rs 721.28 crore, reflecting a year-on-year growth of 10.03% from the same quarter in the previous year. This marks a 12.14% increase compared to the preceding quarter’s total income of Rs 643.18 crore. Additionally, the company reported a net profit of Rs 9.05 crore in the latest quarter, underlining its ability to maintain profitability despite the ongoing challenges associated with new unit stabilisation.
HDFC Securities bases its Buy recommendation on Star Cement’s strong growth trajectory. The company reported a 10% increase in both volume and revenue for Q3FY25, driven by the stabilization of new clinker units. Although the impact of stabilization resulted in higher clinker purchases and plant shutdown costs, which affected unit EBITDA, the outlook remains positive. The EBITDA margin, which fell slightly to Rs 977 per tonne in Q3FY25, is expected to rebound by Q4FY25 as the company benefits from better cost efficiencies and volume growth once the new units reach full operational capacity. Furthermore, Star Cement is increasingly focusing on low-cost green power usage, which should contribute to lowering operational costs in the long term. The company’s continued dominance in the highly profitable NE market further reinforces its competitive edge. With an 11x multiple on its FY27E consolidated EBITDA, HDFC Securities maintains a Buy call on Star Cement Ltd., with a revised target price of Rs 240, highlighting its robust financials, strong margin profile, and growth potential. The target price suggests a compelling upside, making it an attractive investment for those seeking exposure to the cement sector.
