Emkay Global Financial Services has suggested BUY Call for Star Cement in the latest research report, which pegs the target price at Rs 250, suggesting an upside potential of 15.2% from its current market price of Rs 217. The investment thesis hinges on Star’s commanding market share in the Northeast, efficient incentive capitalization, and its calibrated expansion into Rajasthan. Emkay values the stock at 12x FY27E EV/EBITDA and assigns a Rs25/share premium for incentive benefits. With capacity growth, a stronger premium mix, and capital-efficient expansion, the stock is poised for a robust multi-year rerating.

1. Strategic Reinforcement in Northeast Cement Markets

Star Cement is methodically strengthening its dominance in the Northeast, with two new grinding units (GUs) coming up in Silchar and Jorhat by FY27. These units are expected to lift the company’s regional capacity share from 33% in FY25 to a significant 45% in FY27. In volume terms, Star will command 29% of the Northeast’s cement sales.

This fortification is timely, considering that competitors such as JK Lakshmi Cement are facing commissioning delays in their greenfield units. The subdued competitive intensity enhances Star’s ability to hold pricing power in the region, thereby supporting superior EBITDA margins.

2. Diversifying Ambit: Foray into Rajasthan

While consolidating its home turf, Star Cement is planning its next growth orbit through a greenfield expansion in Rajasthan. The proposed project includes a 4–4.5mtpa integrated unit, potentially doubling the company’s total cement capacity to ~16mtpa over the next five years.

This northward expansion not only diversifies the company's geographical presence but also provides a hedge against potential saturation in the Northeast market.

3. Government Incentives Provide Balance Sheet Cushion

Star Cement’s strategic advantage is augmented by its eligibility for tax and subsidy incentives, primarily SGST and IGST reimbursements. Management projects an annual inflow of Rs2–2.5 billion in incentives for the next two years, totaling an estimated Rs17 billion over FY26–FY34.

Using a discounted cash flow model, Emkay assigns a Net Present Value of ~Rs10.3 billion (Rs25/share) to these incentives. This financial padding will be pivotal in managing a projected capex of Rs15 billion during FY26–27, keeping net debt-to-EBITDA well-contained at 0.4x in FY27E.

4. Profitability Metrics Are Poised to Improve Significantly

Star Cement’s EBITDA per tonne is forecasted to improve from Rs885 in FY25 to Rs1,151 in FY26 and Rs1,212 in FY27 (ex-incentives). The EBITDA margin is expected to climb to 22.6% by FY27 from 18.3% in FY25.

The company's strong margin profile is underpinned by operational efficiencies from the Lumshnong clinker line, newly commissioned Waste Heat Recovery System (WHRS), and improved fuel mix including biomass and FSA coal.

5. Premium Product Strategy to Support Realisations

The company’s premium cement mix has already increased to 12%, with a targeted rise to 20% by FY26. Realisations stood at Rs6,867/tonne in Q4FY25, a 6% improvement over Q3FY25.

Such strategic product optimization will support pricing stability, particularly crucial during cyclical monsoon-driven demand volatility.

6. Financial Snapshot & Key Valuation Metrics

Star’s valuation multiple is anticipated to rerate as profitability gains traction. The EV/EBITDA is expected to drop below 10x by FY27, suggesting an attractive valuation re-entry point.

7. Risk Considerations

Despite its strong fundamentals, risks remain. These include:

Delays in commissioning of new capacity.

Any disruption in incentives from the state or central government.

Regional demand contraction or unexpected competitive activity.

Input cost inflation, especially fuel prices.

However, Emkay notes that the company’s balance sheet, operational resilience, and focused regional strategy mitigate many of these potential headwinds.

8. Key Levels for Investors

Current Market Price (CMP): Rs217

Target Price: Rs250

52-Week High: Rs248

52-Week Low: Rs172

Suggested Stop Loss (Short-term traders): Rs205

9. Outlook: BUY and Accumulate on Dips

Star Cement emerges as a compelling mid-cap bet in the infrastructure playbook, with dual engines of regional dominance and upcoming pan-India presence. With clear earnings visibility, operational leverage and policy tailwinds in its favor, Emkay Research maintains a BUY with 12-month target of Rs250. Long-term investors may accumulate on dips with a three-year perspective for outsized returns.