ICICI Securities has reiterated a BUY recommendation on Star Cement with a 12-month target price of Rs 300, implying a potential upside of nearly 41% from the current market price of Rs 213. The brokerage’s optimism stems from a combination of aggressive capacity expansion, structural cost improvements, and accelerating earnings growth. With a dominant position in the North-East and a calculated push into Eastern and Northern India, Star Cement appears poised for a multi-year growth cycle. ICICI projects revenue, EBITDA, and profit after tax to compound at robust double-digit rates through FY28E, underpinned by operating leverage and disciplined capital allocation.

Dominant Franchise in the North-East, Expanding Eastward

Star Cement has built a formidable presence in India’s North-Eastern markets, commanding an estimated ~27% market share in the region. The company currently operates with cement capacity of 9.7 million tonnes per annum (mtpa) and clinker capacity of 6.1 mtpa, positioning it as a leading regional player.

The North-East, traditionally capacity-constrained and structurally undersupplied, has provided Star Cement with pricing resilience and strong brand recall. Now, management is replicating this success model in high-growth Eastern states such as West Bengal and Bihar, thereby broadening its revenue base and reducing geographic concentration risk.

Volume Trajectory: 13% CAGR with Capacity Set to Double

Volume growth has already demonstrated momentum, rising 18.5% in 9MFY26, aided by healthy regional demand and improved capacity utilization following the commissioning of the Meghalaya clinker unit in FY25.

Looking ahead, ICICI Securities estimates a 13% volume CAGR over FY25–28E. The roadmap is ambitious:

Entry into Bihar with 2 mtpa capacity, taking total capacity to 11.7 mtpa by FY28E.

Northern India expansion including:

3 mtpa clinker + 3 mtpa grinding unit in Rajasthan

2 mtpa split grinding unit in Haryana

Deferred Jorhat (Assam) grinding unit of 2 mtpa to be commissioned alongside a new clinker line at Umrangso.

Collectively, these projects will elevate total cement capacity to approximately 18.7 mtpa by FY29E—almost doubling current scale. This expansion is not speculative; it is anchored in demonstrated demand strength and improving utilization rates.

Margin Inflection: EBITDA per Tonne Targeting Rs 1,865

Perhaps the most compelling lever in this story is profitability. During 9MFY26, EBITDA per tonne surged to Rs 1,650, marking a sharp 66% year-on-year improvement. This uplift was driven by stronger realizations, lower raw material costs, and operating leverage.

ICICI Securities projects EBITDA per tonne to reach approximately Rs 1,865 by FY28E, compared to Rs 1,229 in FY25—a structural improvement of around Rs 635 per tonne.

Key margin drivers include:

Increasing share of renewable power and Waste Heat Recovery Systems (WHRS)

Greater use of captive coal

Freight cost optimization via geographically diversified grinding units

State government incentives

These cost initiatives are not cyclical windfalls but structural enhancements that should sustain margins even in moderate pricing environments.

Financial Performance: Earnings Acceleration Visible

The projected financial trajectory reinforces the operational thesis:

Revenue is expected to grow at 14.5% CAGR, while EBITDA and PAT are forecast to expand at approximately 29% and 49% CAGR, respectively. This divergence between revenue and earnings growth underscores margin expansion and operating leverage at play.

Valuation multiples are correspondingly compressing. EV/EBITDA is projected to decline from 15.8x in FY25 to 7.6x by FY28E, reflecting earnings accretion outpacing price appreciation.

Balance Sheet Discipline Amid Rs 4,800 Crore Capex

Despite a significant capex program of approximately Rs 4,800 crore over FY26E–FY29E, management intends to maintain net debt/EBITDA below 1.5x.

This is crucial. Expansion stories often falter under leverage pressure. Star Cement’s disciplined capital allocation strategy—supported by strong internal accruals—mitigates that risk. The company has also indicated openness to QIP funding, if required, to preserve balance sheet health while executing growth initiatives.

As of FY25:

Gross debt stood at Rs 390 crore

Cash at Rs 53 crore

Enterprise value at Rs 8,946 crore

These metrics suggest manageable leverage relative to future cash flows.

Valuation Framework and Target Price

ICICI Securities values Star Cement at 11x EV/EBITDA based on the average of FY27E and FY28E estimates. This yields a target price of Rs 300 over a 12-month horizon.

At the current CMP of Rs 213, the stock trades at:

FY27E P/E of ~17.9x

FY28E P/E of ~15.6x

FY27E EV/EBITDA of ~8.4x

Given projected earnings momentum and structural capacity expansion, the valuation does not appear stretched relative to peers in the mid-cap cement universe.

Key Risks to Monitor

Investors should remain mindful of four principal risks:

Demand slowdown in core markets.

Execution delays in capacity additions.

Commodity price spikes, particularly coal and freight.

Heightened competitive intensity in Eastern and Northern markets.

While these risks are inherent to the sector, Star Cement’s regional dominance and improving cost structure provide a relative cushion.

Investment View: Expansion Cycle Backed by Earnings Power

Star Cement is transitioning from a strong regional champion to a broader multi-state player. The expansion is phased, margin-accretive, and supported by disciplined leverage management. Earnings are expected to scale meaningfully over FY25-28E, with EBITDA and profit growth outpacing topline expansion.

With capacity nearly doubling by FY29E and EBITDA per tonne structurally improving, the company is entering a pivotal growth phase. ICICI Securities’ BUY recommendation with a Rs 300 target reflects confidence in this execution roadmap.

For investors seeking exposure to India’s regional infrastructure growth themes with improving return ratios, Star Cement warrants serious consideration.