Star Cement Ltd. is a prominent manufacturer and seller of cement clinker and cement, headquartered in North East India. It holds the distinction of being the largest cement manufacturer in the region. The company’s manufacturing facilities are strategically located at Lumshnong, Meghalaya, and Guwahati, Assam, allowing it to cater efficiently to the northeastern and eastern states of India. With its stronghold in a growing market, Star Cement has established itself as a significant player in the construction materials sector.
Performance Overview
Star Cement has delivered consistent growth over multiple timeframes, showcasing its ability to thrive in a competitive market:
- 1-Day Performance: 4.4% gain
- 1-Week Performance: 13.6% gain
- 1-Month Performance: 21.5% gain
- 6-Month Performance: 4.5% gain
- 1-Year Performance: 35.4% gain
- 2-Year Performance: 89.1% gain
- 5-Year Performance: 168.5% gain
The stock’s remarkable performance over the long term reflects strong operational capabilities, market demand, and effective management strategies.
Key Financial Metrics
- Market Capitalization: ₹9,280 crore (Small Cap)
- Enterprise Value (EV): ₹9,619 crore
- Book Value per Share: ₹67.94
- Price-to-Earnings Ratio (P/E): 46.88
- PEG Ratio: -187.51 (indicating high valuation with negative earnings growth)
- Dividend Yield: 0.00%
The company’s P/E ratio of 46.88 suggests it is trading at a premium compared to many peers in the construction materials industry. However, its strong market presence in a high-growth region may justify the valuation.
Recent Stock Trends
- RSI in Overbought Zone: The stock’s Relative Strength Index (RSI) crossed above 70, signaling entry into the overbought zone. This suggests heightened demand but also warrants caution as it may indicate a potential price correction in the short term.
- Crossing Last Week’s High: Star Cement closed at ₹229.96, surpassing its previous week’s high of ₹222.80 by 3.21%. Such bullish momentum is often driven by strong investor sentiment and robust trading volumes.
- High Volume and Delivery: Stock volume surged by 3.6 times, while delivery increased by 4.3 times compared to the 5-day average. This indicates strong accumulation by investors.
Shareholding Pattern
The company’s shareholding pattern reflects stable promoter control and diversified public ownership:
- Promoters: 66.47%
- Public Investors: 33.53%
- FII/FPI: 1.36%
- DII: 4.96%
- Non-Institutional Investors: 27.22%
The low promoter pledge of 0.60% further underscores the promoters’ confidence in the company’s growth prospects.
Financial Performance
- Net Sales: ₹641.55 crore
- Expenditure: ₹545.98 crore
- EBITDA: ₹95.57 crore
- Other Income: ₹1.63 crore
- Depreciation: ₹82.53 crore
- Interest: ₹7.11 crore
- Tax: ₹7.56 crore
Star Cement’s financial performance highlights efficient cost management and a focus on maintaining operational profitability. The EBITDA margin of approximately 15% underscores its ability to generate healthy operating cash flows.
Return Ratios
- Return on Equity (RoE): 11.51%
- Return on Capital Employed (RoCE): 16.51%
- Return on Assets (RoA): 9.51%
These ratios reflect the company’s ability to generate returns for shareholders and efficiently utilize its capital and assets.
Growth Patterns
The company’s growth metrics indicate steady progress over different timeframes:
| Metric | TTM/1-Year | 3-Year | 5-Year |
|---|---|---|---|
| Price Growth | 36.19% | 33.02% | 21.64% |
| Net Sales Growth | 5.92% | 19.17% | 9.71% |
| EBITDA Growth | 7.51% | 18.70% | 4.37% |
| Net Profit Growth | -30.03% | 6.00% | -0.25% |
While price growth has been robust, net profit growth has shown variability, reflecting challenges in maintaining profitability amid fluctuating market conditions.
Peer Comparison
| Stock Name | P/B Ratio | P/E Ratio | Dividend Yield | LTP (₹) | Market Capitalization (₹ Cr.) |
| Star Cement | 3.38 | 46.88 | 0.00% | 229.96 | 9,279.98 |
| Ultratech Cement | 5.69 | 53.29 | 0.58% | 12,083.90 | 3,49,119.68 |
| Ambuja Cement | 2.80 | 47.32 | 0.35% | 572.75 | 1,41,038.45 |
| Shree Cement | 4.83 | 55.09 | 0.38% | 27,591.45 | 99,532.71 |
| ACC | 2.53 | 20.66 | 0.33% | 2,248.05 | 42,223.03 |
Star Cement’s valuation metrics are competitive, though its dividend yield is zero, which might deter income-focused investors. However, its focus on growth and expansion could deliver long-term value.
Industry Outlook
- Cement Demand: The construction materials sector is poised for growth, driven by infrastructure projects and real estate development, especially in India’s northeastern and eastern regions.
- Cost Pressures: Rising raw material and transportation costs could impact margins, but operational efficiencies and economies of scale can mitigate these challenges.
- Government Initiatives: Policies promoting affordable housing and infrastructure spending are expected to bolster cement demand, benefiting players like Star Cement.
- Export Potential: The Indian cement industry is increasingly focusing on exports, particularly to neighboring countries. Star Cement could leverage its proximity to eastern ports to explore export markets and diversify its revenue streams.
- Environmental Regulations: As the global focus shifts toward sustainability, stricter environmental regulations could impact operational costs. Companies investing in green technologies and efficient waste management systems could gain a competitive edge.
Technical Analysis
- RSI and Bollinger Bands:
- RSI: Entered overbought territory, currently at 70.92. This indicates heightened buying interest but may also signal potential profit-booking in the short term.
- Bollinger Bands: The stock has breached the upper Bollinger Band at ₹222.32, which suggests strong upward momentum. However, such breaches often lead to consolidation or pullbacks as traders lock in gains.
- MACD:
- The MACD histogram shows a positive crossover at 4.81, with the MACD line (5.20) above the signal line (0.39). This indicates a strong bullish sentiment and continued upward momentum.
- Momentum indicators like MACD are further supported by high volumes, which validate the current uptrend.
- Volume Analysis:
- Recent trading volumes surged to 16.28 million shares, which is 3.6 times the 5-day average. This increase in volume aligns with the price rally, indicating institutional participation.
- Delivery volumes have also risen by 4.3 times, suggesting strong investor confidence in holding positions.
- Support and Resistance Levels:
- Key Support Levels: Immediate support is at ₹213.55, a level that has been tested multiple times and could provide a strong base during corrections.
- Key Resistance Levels: The stock faces resistance at ₹231.79. A breach of this level could lead to a rally toward ₹240, while failure to do so may result in consolidation.
- Short-Term Indicators:
- The 8-day and 21-day exponential moving averages (EMAs) are in a bullish alignment, with the 8-day EMA above the 21-day EMA. This reinforces the short-term bullish outlook.
- The Average Directional Index (ADX) is above 25, indicating a strong trend. A rising ADX typically supports sustained price movements.
- Fibonacci Retracement:
- Using recent highs and lows, Fibonacci retracement levels indicate immediate support at the 38.2% level, near ₹213. A break below this could see the stock testing the 50% retracement at ₹205. However, the bullish momentum suggests limited downside risk.
Risks and Challenges
- Regional Dependence: Heavy reliance on northeastern markets exposes the company to regional economic and political risks.
- Competitive Landscape: Larger players like Ultratech and Shree Cement pose significant competition in terms of scale and pricing power.
- Volatility in Input Costs: Fluctuating raw material prices and energy costs could pressure margins.
- Logistical Challenges: Operating in the northeast, with its challenging terrain and underdeveloped infrastructure, could increase transportation costs and impact supply chain efficiency.
- Economic Slowdown: A slowdown in the broader economy, particularly in construction and real estate sectors, could dampen demand for cement products.
Conclusion
Star Cement Ltd. has established itself as a dominant player in the northeastern cement market, supported by robust operational capabilities and strategic market positioning. Despite challenges like regional dependence and input cost volatility, the company’s consistent growth and competitive financial metrics make it a compelling investment option for growth-focused investors. Monitoring technical levels and industry trends will be crucial for evaluating future opportunities.
Investors seeking exposure to India’s infrastructure growth story may find Star Cement an attractive addition to their portfolio, provided they are mindful of its regional risks and valuation levels.
With its strong foundation and strategic focus on efficiency and growth, Star Cement is well-positioned to capitalize on the expanding construction materials market in India and beyond.
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