Axis Securities has maintained its BUY recommendation on Star Cement Ltd., while revising its target price to Rs 300 per share from Rs 320, citing strong volume growth prospects, capacity expansion, and sustained profitability despite near-term cost pressures. The company's Q4FY26 performance exceeded expectations across revenue, EBITDA, and profit metrics, supported by robust cement demand in eastern and northeastern India. Star Cement continues to strengthen its regional leadership through aggressive capacity additions and strategic market expansion. While inflationary pressures on fuel, freight, and packaging may weigh on margins in the near term, management remains confident about long-term earnings growth supported by infrastructure spending, housing demand, and operational efficiencies.

Axis Securities Reiterates BUY Call on Star Cement After Strong Q4FY26 Outperformance

Star Cement Ltd. has delivered a quarter that comfortably surpassed analyst expectations, prompting Axis Securities to maintain its BUY recommendation despite trimming its target price slightly to Rs 300 per share.

The brokerage highlighted that the company's operational execution remained impressive during Q4FY26, with growth recorded across all major performance indicators. Revenue, profitability, margins, and cement volumes exceeded estimates, reflecting the benefits of recently commissioned capacity and improved cost efficiencies.

At the current market price of approximately Rs 216, the revised target still implies a potential upside of nearly 39%, making the stock one of the preferred picks within the cement sector.

Q4FY26 Earnings Deliver a Strong Beat Across Parameters

Star Cement reported consolidated revenue of Rs 1,174 crore during Q4FY26, representing a healthy 12% year-on-year increase. The growth was driven primarily by higher cement dispatches and improved operating performance.

The quarter's standout feature was profitability.

EBITDA climbed 20% year-on-year to Rs 315 crore, while net profit surged 20% to Rs 148 crore.

The company's EBITDA margin expanded to 26.8%, compared with 25.0% in the corresponding quarter last year, demonstrating its ability to maintain pricing discipline while controlling costs.

Quarterly cement volumes increased 13% year-on-year to approximately 1.73 million tonnes, reflecting strong market demand and successful ramp-up of newly commissioned capacities.

Capacity Expansion Strategy Remains the Core Growth Driver

The brokerage believes Star Cement's multi-year expansion roadmap could significantly alter the company's growth trajectory.

Following the commissioning of its 2 MTPA Silchar grinding unit, the company's total cement capacity has increased to 9.7 MTPA.

Management is now pursuing multiple expansion projects across India, including:

5 MTPA grinding unit and 3.3 MTPA clinker facility in Rajasthan.
2 MTPA cement grinding plant in Bihar.
Additional grinding capacity in Haryana.
New grinding unit in Jorhat linked to the Umrangso clinker facility.

The Rajasthan project alone involves capital expenditure of approximately Rs 2,500 crore and is expected to become operational during H1FY29.

Axis Securities expects these projects to support volume growth of approximately 11% CAGR between FY25 and FY28.

Demand Outlook in East and Northeast India Remains Constructive

The investment thesis continues to be supported by the favorable demand environment in Star Cement's core markets.

Eastern India is projected to witness cement demand growth of approximately 8–9% CAGR over the next several years, supported by infrastructure development and housing activity.

The Northeast region also remains attractive despite infrastructure challenges. Historical demand growth in the region has ranged between 7.5% and 8.5%, and management expects this momentum to continue.

Star Cement currently derives approximately 70% of its sales volumes from the Northeast and 30% from Eastern India, giving it a dominant regional franchise with extensive dealer relationships and strong trade penetration.

Pricing Improvements and Cost Efficiency Support Margins

One of the most encouraging aspects of the quarter was the improvement in profitability per tonne.

EBITDA per tonne increased 6% year-on-year to Rs 1,818, significantly exceeding analyst estimates.

Meanwhile:

Realisation stood at Rs 6,772 per tonne.
Cost per tonne declined 4% year-on-year to Rs 4,954.
Freight costs fell 8% year-on-year.
Power and fuel costs declined 24% year-on-year.

Axis Securities expects EBITDA margins to remain in the 23–24% range over the medium term while EBITDA per tonne could grow at roughly 10% CAGR through FY28.

Management Flags Temporary Margin Headwinds in FY27

Despite the positive long-term outlook, management acknowledged near-term challenges.

Coal shortages, rising diesel prices, higher packing material costs, and logistics disruptions linked to West Asian geopolitical tensions are expected to pressure margins during the first half of FY27.

Management estimates cost inflation of approximately Rs 250–300 per tonne during H1FY27.

However, the company expects these pressures to gradually normalize as fuel availability improves and logistics bottlenecks ease. The company's long-term fuel linkages and growing share of green energy consumption, currently at 34%, should help mitigate some of the inflationary impact.

Financial Outlook Remains Strong Through FY28

Axis Securities forecasts continued earnings expansion over the next two years.

The stock currently trades at approximately 9.4x FY27E EV/EBITDA and 8.6x FY28E EV/EBITDA, which Axis believes remains attractive considering the company's growth profile and regional leadership position.

Investment View and Key Levels for Investors

Research House: Axis Securities
Rating: BUY
Current Market Price: Rs 216
Target Price: Rs 300
Potential Upside: 39%

The brokerage's investment case is built on Star Cement's expanding manufacturing footprint, dominant northeastern franchise, healthy balance sheet, and ability to generate industry-leading EBITDA per tonne.

Investors should monitor cement demand trends, pricing discipline, and input-cost movements closely. Key risks include weaker-than-expected cement demand, lower realizations, and sustained increases in fuel and freight costs.

For long-term investors seeking exposure to India's infrastructure and housing growth story, Star Cement remains a compelling regional cement play with substantial earnings visibility and meaningful upside potential.