HDFC Securities has lowered its target price for Star Cement to ₹250 from ₹270, citing potential margin pressure and rising competition in the Northeast. Despite the cut, the brokerage remains positive on the company’s 12% annual volume growth outlook through 2029. Investors may watch how the company manages debt and operational costs as it invests in a major 5-million-tonne greenfield project in North India.
HDFC Securities has adjusted its target price for Star Cement to ₹250, down from the previous ₹270. While the brokerage maintains a positive stance on the stock, the revision reflects expected changes in profit margins and a more competitive environment in the Northeast region over the coming years.
Star Cement has historically maintained strong profit margins, often exceeding ₹1,400 per metric tonne. However, the brokerage anticipates a gradual moderation, projecting margins to move toward ₹1,234 per metric tonne by fiscal 2029. This adjustment is linked to two primary factors: the initial operating costs of a large new greenfield facility and intensified regional competition. While the company expects to reduce logistics costs by approximately ₹100 per metric tonne by fiscal 2028, these gains may be balanced out by the costs of scaling up new capacity.
The company is currently working on a 5-million-metric-tonne integrated plant in North India, which is expected to become operational by fiscal 2029. This expansion is a significant step to boost volume growth in new territories. As the company continues to spend on this project, the brokerage estimates that the net debt-to-earnings ratio may peak at around 2.3 times by fiscal 2029. Managing this debt while ensuring the new plant starts operations on schedule will be a key factor for the company's financial health.
Regarding immediate performance, management indicated that volume growth for the second quarter of fiscal 2027 remained flat year-over-year. A slow start in July was balanced by improved demand trends in August and September. On the cost front, the company expects stability for the current quarter, as a slight decline in fuel expenses is likely to help offset rising packing costs and flat net sales realizations.
For investors, the primary monitorables include the execution timeline of the North Indian greenfield unit and the company's ability to maintain its market share in the Northeast despite rising competition. The company’s move into North India marks a strategic shift to reduce its geographical concentration, but the success of this expansion will depend on its ability to compete against established players in the northern market without significantly eroding margins.