Star Cement LtdQ1 FY23Cement & Cement Products

Star Cement Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Star Cement targets to become a 20 million tons company in the next 5 to 10 years.
→In the near term (next 3 to 5 years), the roadmap is to reach around 10 million tons, with expectations possibly up to 15-20 million tons.
→Northeast market remains the primary focus due to high profitability; plans to expand production capacity there to about 3 million tons.
→Outside Northeast, growth is planned via acquisition of mines or plants, with minimum plant capacity acquisitions targeting around 1.5 to 2 million tons.
→Volume growth for the current year is expected to be healthy, targeting more than 12%-13% growth.
→Market growth outlook for states like West Bengal, Bihar, Jharkhand is approximately 7%-8%; historical growth outside Northeast was 34% in FY23 but expected to normalize to 10%-12%.

Margin guidance

Category 3

→Target volume growth of over 12%-13% annually going forward, supporting revenue growth.
→Long-term vision to become a 20 million ton company in the next 5 to 10 years.
→EBITDA per ton expected to be maintained or improved around Rs. 1,250-1,300.
→FY23 EBITDA stood at Rs. 520 crores with a healthy EBITDA per ton of Rs. 1,297.
→Profit after tax in FY23 was Rs. 248 crores, stable despite increase in tax expenses.
→Growth outside Northeast is emphasized with 10%-12% expected growth in new markets versus a 7%-8% market growth.
→Peak debt planned is around Rs. 500 crores to fund expansion, expected to be repaid in the first year of operation.
→Incremental CAPEX of about Rs. 1,300 crores in FY24 and Rs. 400 crores in FY25 aligned with expansion plans.

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Fundraise plans

Yes

→Star Cement is planning a peak debt of about INR 500 crores for its ongoing expansion.
→This peak debt is expected to be repaid within one year after the commencement of the expanded capacity, targeting debt-free status by March 2025.
→For FY24, the company anticipates CAPEX of approximately INR 1,300 crores and about INR 400 crores in FY25.
→No specific mentions of new equity fundraising were made in the provided transcript.
→Overall, the company expects to rely mainly on manageable debt for expansion without extending beyond INR 500 crores and aims to repay it quickly.

Order book

The transcript does not specifically mention current or expected orderbook or pending orders for Star Cement Limited. Key points related to future outlook and plans include: - The company aims to become a 20 million tons cement company over the next 5 to 10 years. - Focus on growth in Northeast and expansion outside Northeast markets such as West Bengal, Bihar, and Jharkhand, with expected market growth of 7%-8% in these areas. - New CEO Vinit Tiwari to lead operations and management decisions, including expansion plans. - Planned CAPEX: approximately Rs. 1,300 crores in FY24 and Rs. 400 crores in FY25 to support expansion. - Peak debt expected to be around Rs. 500 crores for the expansion period. - Growth target includes more than 12%-13% volume growth annually going forward. No explicit details on current or pending orders were disclosed.

Capex plans

Yes

→FY24 CAPEX planned at about ₹1,300 crores.
→FY25 CAPEX expected to be around ₹400 crores.
→Current expansion includes the Meghalaya clinker plant (3 million tons) commissioning planned for January next year.
→Grinding units: Guwahati unit to commission by November this year; Silchar unit in August-September next year.
→Total ongoing expansion outlay approximately ₹2,200 crores.
→Peak debt related to expansion capped at around ₹500 crores, expected to be repaid within a year post commencement.
→Future growth beyond Northeast will involve acquiring mines or small plants (minimum capacity ~1.5 to 2 million tons).
→Management aims for a 5-to-10-year vision to grow to a 20 million tons company, with investments both inorganic and organic.

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1Star Cement Ltd

Rev 3Mar 3

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