Buy Star Cement, target price Rs 115: HDFC Securities

HDFC Securities has buy call on Star Cement with a target price of Rs 115. The current market price of Star Cement Ltd. is Rs 97.05. Time period given by analyst is one year when Star Cement Ltd. price can reach defined target.

Star Cement Ltd., incorporated in the year 2001, is a Mid Cap company (having a market cap of Rs 3892.26 Crore) operating in Cement sector.

Star Cement Ltd. key Products/Revenue Segments include Cement, Other Operating Revenue and Scrap for the year ending 31-Mar-2021.



Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 680.11 Crore, down -10.33 % from last quarter Total Income of Rs 758.43 Crore and up 30.90 % from last year same quarter Total Income of Rs 519.57 Crore. Company reported net profit after tax of Rs 67.56 Crore in latest quarter.

Investment Rationale
The brokerage maintains BUY on Star Cement with an unchanged TP of INR 115/share (8x its Mar-24E consolidated EBITDA). Star reported strong performance in Q1FY23, with its unitary EBITDA (INR 1267/MT up 4% YoY) topping the industry after two years. This is driven by healthy volume traction and Siliguri ramp-up, robust pricing recovery in the north-east region (NER) and low cost fuel sourcing (vs industry). The company’s plans to increase its capacity by 70% to 9.7mn MT by end-FY24 has gained pace as it received environmental clearance (EC) for the clinker expansion. Robust current cash position and healthy cash flow outlook should keep balance sheet unstressed.

Promoter/FII Holdings
Promoters held 67.37 per cent stake in the company as of 30-Jun-2022, while FIIs owned 0.28 per cent, DIIs 6.15 per cent.