Detailed Narrative
Strong Q4 Performance Driven by Volume Growth
Star Cement reported a robust Q4 FY25, with revenue increasing by 15.1% YoY to ₹1,052 crores from ₹914 crores and EBITDA surging by 42.6% YoY to ₹268 crores from ₹188 crores. This performance was primarily fueled by a 64.2% YoY increase in clinker production to 11.38 lakh tons and a 6.6% rise in cement production to 14.79 lakh tons. The growth was largely attributed to the stabilization of the 3.3 MT clinker plant at Lumshnong, Meghalaya, contributing to an improved EBITDA per ton of ₹1,749 in Q4 FY25 compared to ₹1,329 last year.
Full Year Profitability Impacted by Depreciation
While Q4 PAT grew by 39.8% YoY to ₹123 crores, the full year FY25 PAT saw a significant decline of 42.7% to ₹169 crores from ₹295 crores in FY24. This decrease was primarily attributed to increased depreciation expenses resulting from the capitalization of new 2 MT clinker grinding units and the clinkerization unit. Despite this, full year revenue grew by 8.6% to ₹3,163 crores from ₹2,911 crores in the previous financial year.
Ambitious Capacity Expansion Plans and Capex Outlay
The company has outlined substantial capital expenditure plans, targeting ₹823 crores for FY26 and ₹600 crores for FY27. These investments are primarily for new grinding units, with the Silchar unit expected to be commissioned by Q4 FY26 and another unit by Q3/Q4 FY27. Management also indicated plans to evaluate Rajasthan for a 4-4.5 MT grinding and 3 MT clinker capacity, aiming for an overall capacity of 18-20 million tons in the next 5-6 years, beyond the currently announced 12 million tons.
Stable Pricing Environment and Positive Incentive Outlook
Star Cement observed a ₹5-7 per ton price increase post Q4 FY25, which it hopes to maintain in Q1 FY26, though some degradation is anticipated during the off-season. The company expects to realize annual incentives of ₹200-250 crores for the next couple of years, with ₹75 crores booked in Q4 FY25 and ₹167 crores for the full FY25. Management clarified that most of the subsidy is GST-related, with a typical 12-18 month accumulation period followed by regular cash inflows.
Focus on Efficiency, Premium Products, and New Ventures
The company is leveraging its new kiln and Waste Heat Recovery System (WHRS) for efficiency gains, with WHRS benefits starting to reflect in Q4. Management also highlighted growth in premium cement sales, reaching almost 12% in Q4 from 5-6% last year, with a target to achieve 20% in the coming year. Additionally, the AC block unit in Guwahati is almost ready for commercial production, expected to commence this week, and is projected to contribute an EBITDA of approximately ₹15 crores in its first year of operation.
Limited Competitive Threat in Northeast and Debt Position
Management indicated a relatively stable competitive landscape in the Northeast region, with no major capacity additions expected from other players (excluding Dalmia) in the next three to four financial years, suggesting a favorable market for Star Cement's planned expansions. The company reported a gross debt of ₹350-360 crores and a net debt of ₹200-210 crores, after accounting for ₹150 crores of subsidy receivables.