Star Cement Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Operational turnaround, subsidy mask removed: Operational EBITDA nearly doubled YoY to INR147 crores from INR85–INR86 crores, even as the reported subsidy benefit collapsed from INR38 crores to INR6 crores.
• Volume growth outpaces a sluggish Northeast: Star grew Northeast volumes close to 10% against an industry that managed only ~3%, though overall volume growth was dragged to 7% by deliberate restraint in low-margin outside markets.
• Two plants go live within weeks: The Guwahati grinding unit commissions 1st March 2024 and the Lumshnong clinker plant on 31st March 2024, removing the clinker bottleneck and unlocking both volume and tax benefits.
• FY25 volume ambition set at 18–20%: Management is targeting aggressive growth, powered by the 0.2 crore ton Guwahati addition and a clinker supply that is no longer constrained.
• What to watch next quarter: The pace of the Guwahati ramp and the start of its INR800/ton SGST benefit, whether Q4 pricing holds against the reported INR5/bag pressure, and any concrete lock-in of the next greenfield site in South or Rajasthan.

Volume & Demand Dynamics

• Northeast outperformance: Star grew ~10% in its home market while the industry grew only ~3%, a gap management expects to sustain with Q4 industry growth at 5–7% and Star targeting 8–10%.
• Outside Northeast deliberately shrunk: Sales outside the Northeast fell to 2.38 lakh tons from 2.45 lakh tons YoY, a function of clinker shortage and a conscious choice not to chase low-price, low-margin business in Bengal and Bihar.
• Siliguri idling: The Siliguri grinding unit ran at only 47–48% utilization because clinker was rationed; management expects this to improve to ~52% in Q4 and further once the new clinker line starts in April.
• FY25 volume bet: Management is "very sure" of 18–20% growth next year, driven entirely by the 0.2 crore ton Guwahati addition coming online and the removal of the clinker constraint that held back outside-Northeast sales.

Vinit Tiwari: "we look forward to a pretty aggressive growth. As far as Star is concerned, we will definitely look for a pretty aggressive growth, and we are very sure of doing a growth somewhere in the range of 18%, 20% next year."

Profitability & Costs

• Operational EBITDA nearly doubled: Excluding the subsidy, EBITDA jumped from INR85–INR86 crores to INR147 crores YoY, a gain management attributes to volume, mix and cost control.
• Fuel cost tailwind: Fuel cost per kcal fell to INR1.75 from INR1.9 sequentially as lower coal prices worked through inventory; Q4 is expected around INR1.7.
• Regional profitability gap is stark: Northeast realizations run at INR1,700–INR1,800 per ton while outside Northeast contributes only ~INR300 per ton, explaining why management starves the latter when clinker is tight.
• Q4 pricing under watch: Northeast prices improved ~INR7 QoQ, but outside Northeast saw a INR15–INR20 drop; management flagged INR5/bag pressure entering Q4, though January has so far held status quo.

Capacity Expansion & Projects

• Two imminent commissions: The Guwahati grinding unit (1st March 2024) and the Lumshnong clinker plant (31st March 2024) are on track, with 1.8 lakh tons of clinker already stockpiled to support the Guwahati ramp.
• Capex coming in under budget: Guwahati revised down to ~INR385 crores from INR430 crores; Lumshnong clinker project revised to ~INR1,250 crores from INR1,300 crores, subject to final confirmation.
• Silchar grinding unit next in line: Commissioning expected August–September 2024, and being in Assam it will qualify for the same SGST benefit structure.
• Beyond the Northeast: Management is evaluating a greenfield clinker plant of 0.25 crore tons plus grinding units in either South India or Rajasthan, with a capex of ~INR2,500 crores over 2.5 years; no site is yet locked.
• 2030 ambition: Star aims to add about 1 crore ton of capacity beyond current plans by 2030, funded through internal accruals that management expects to be healthy thanks to GST benefits, market growth and efficiencies, plus possible market fundraising.

Tushar Bhajanka: "most of the inorganic opportunities, which are floating around in the industry are very big for our size. Some of the smaller players in South are at the moment not willing to sell. And there is no small player left in Rajasthan or East."

Tax & Subsidy Benefits

• Guwahati SGST benefit: Once the plant commissions on 1st March, the first 2–2.5 months will absorb input credit on capex SGST; thereafter, an INR800/ton benefit on 0.2 crore tons capacity kicks in, subject to a cap of 200% of fixed capital investment.
• Clinker IGST benefit: The new Lumshnong clinker plant attracts INR300/ton under the IGST scheme, valid until 2027, and passes through to the same legal entity (SCL).
• Lower tax rate for Guwahati: Because the plant commissions before March 2024, it qualifies for the 17% corporate tax bracket rather than 25%.
• Assam sales growth to monetize benefits: Management targets 20% Assam sales growth next year, reaching ~0.26 crore tons by FY26 September when Silchar also comes online with its own GST benefit.

Strategy & Market Position

• Northeast market share ambition: Star holds 24–25% today and is explicitly targeting 30–32%, with management calling the goal "very, very clear."
• No further Northeast expansion for 4–5 years: After the current capex cycle, the natural progression is to step outward; the Northeast capacity will be sufficient for the medium term.
• Premium cement push: Doubling the premium cement portion by the end of next financial year is "one of our biggest agendas," though management declined to disclose the current premium percentage when asked.
• Organic over inorganic: Greenfield is the preferred path; mines may be acquired inorganically but plants will be built, as available targets are either too large or unwilling to sell.
• New capacity utilization plan: The new clinker plant is expected to run at ~50% initially, with the Guwahati grinding unit at 60–70%, leaving headroom for the aggressive FY25 growth target.

Tushar Bhajanka: "premium agenda is one of our core agendas and rather one of our biggest agenda for our volume push as well. So from where we stand today, we look forward to double ourselves by the end of next financial year."

Guidance & Commitments

Key Metrics