Star Cement Ltd., the dominant cement producer across India's northeast, delivered a first quarter marked by a familiar theme: lukewarm volumes offset by industry-leading profitability. ICICI Securities has maintained its Buy rating on the stock, trimming its target price marginally to Rs 251 from Rs 260 earlier — still implying roughly 26% upside from the current market price of Rs 199. Despite a sharp 12% sequential jump in cost per tonne, the company held onto its industry-superior EBITDA per tonne of Rs 1,244, even after stripping out government incentive income.

Realisation Gains Cushion a Cost Surge

Star's Q1FY27 EBITDA came in at Rs 195 crore, down 15% year-on-year but just 3% short of the brokerage's estimate. Volume growth of 4% year-on-year to 1.35 million tonnes was broadly in line with expectations, but cost per tonne disappointed, climbing 11.6% sequentially — about 4% higher than ICICI Securities had forecast. Variable cost per tonne jumped 7% quarter-on-quarter, while staff costs surged 16% year-on-year and 12% sequentially.

Cement realisations provided a partial offset, rising 3% sequentially against the brokerage's expectation of just 0.5% growth. As a result, EBITDA per tonne of Rs 1,436 — down 18% year-on-year and 21% sequentially — missed the brokerage's forecast by only 3%. Incentive income contributed Rs 192 per tonne during the quarter; stripped of that support, core EBITDA per tonne stood at Rs 1,244, which ICICI Securities characterizes as industry top-tier.

Conference Call Highlights

A Regional Diversification Story With More Chapters Ahead

ICICI Securities frames Star as fundamentally a growth story of geographic diversification beyond its northeast India stronghold. The Nimbol project in Rajasthan represents the company's first major push into North India, with land acquisition and regulatory clearances in advanced stages — a public hearing is slated for late August 2026, with Environmental Clearance expected by early October. Separately, Star is evaluating a 2 million tonne grinding unit in either West Bengal or Bihar, contingent on a favourable industrial policy expected from the West Bengal government.

Despite this expansion, the brokerage expects Star's balance sheet to remain conservatively managed, with net debt/EBITDA of roughly 1.1x projected for FY28E, while return on equity is expected to hold in a healthy 10-11% range through the capex cycle.

Estimate Cuts and the Target Price Bridge

Reflecting the combination of softer near-term volume growth and elevated fuel costs, ICICI Securities has trimmed its FY27E and FY28E EBITDA estimates by roughly 7% each.

Despite these cuts, the brokerage's underlying valuation approach is unchanged. The target price of Rs 251 is derived by applying 11x FY28E EV/EBITDA to Star's core, ex-incentive EBITDA, then adding back the net present value of expected government incentive income.

Financial Trajectory: FY25A to FY28E

Key Risk

ICICI Securities flags a single, concentrated risk to its thesis: a sharp rise in input costs or a material decline in cement prices in Star's core northeast markets, either of which could compress the industry-leading margins that underpin the brokerage's valuation premium for the stock.