Star Cement Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Volume-led recovery, profit reset: Clinker production nearly doubled YoY as the new 3.3 mt plant stabilized, but PAT halved to ₹169 crores on higher depreciation from newly capitalized assets.
• Subsidy book builds before it pays: Other current assets jumped from ₹12 crores to ₹175 crores as GST subsidy receivables accumulated, a first-year timing lag that management expects to normalize into regular quarterly inflows over the next 1–2 quarters.
• Premium push gains traction: Premium cement share reached ~12% in Q4, up from 5–6% last year, with a target of ~20% in the coming year.
• Rajasthan entry is real but unhurried: Two limestone mines won in Assam and one in Rajasthan, with a potential 4–4.5 mt grinding plus 3 mt clinker plant under evaluation; management is “conservative financially” and will only commit after securing all permissions.
• What to watch next quarter: Whether the accumulated subsidy receivables begin converting to cash, the trajectory of Q1 cement prices after the early monsoon, and any concrete Rajasthan roadmap.

Volume & Profitability Reset

• Clinker scale-up delivered: Clinker production rose to 11.38 lakh tons from 6.93 lakh tons, driven by stabilization of the 3.3 mt clinker plant at Lumshnong, Meghalaya.
• PAT halved on depreciation drag: FY25 PAT fell to ₹169 crores from ₹295 crores, with the entire decline attributable to increased depreciation from the capitalization of two 2 mt grinding units and the clinkerization unit.
• Depreciation will decline from here: The ₹88–89 crore quarterly depreciation run rate is not the new normal; because the company uses the reducing balance method, depreciation will decline each year until a new plant comes on in Q4.
• Trade mix held steady: The 80:20 trade-to-non-trade ratio remained unchanged despite the sharp volume improvement; management expects it to stay within a 2–3% variation band.

Subsidies & Receivables

• The subsidy engine is intact: Annual incentives are expected at ₹220–250 crores for the next couple of years, with no drastic change anticipated. The old Lumshnong plant has two years of subsidy remaining, the Guwahati grinding unit has 6–8 years, and new units at Jorhat and Silchar will add to the pool.
• Timing lag created a receivable bulge: The sharp jump in other current assets reflects accumulated GST subsidy receivables; in the first year of a new plant, subsidy takes 12–18 months to start flowing, after which it becomes a regular quarterly cash inflow. Management expects the accumulated subsidy to get streamlined and stabilized from the next or next-to-next quarter.
• Seasonal variation is normal: The July-to-September quarter incentive may be lower than Q4’s ₹75 crores, consistent with the ₹220–250 crore annual range.

Costs & Efficiency

• Freight spiked on peak-season pressure: Freight per ton rose sharply QoQ by ₹136 to approximately ₹1,280 because Q4 is the peak season; management expects normalization and notes it also depends on fuel prices.
• WHR and kiln gains still to come: The WHRS benefit from Line-III will start reflecting, and as the kiln stabilizes further and produces at higher capacity, both heat rate and power cost will come down.

Capacity Expansion & New Businesses

• Northeast grinding build-out underway: The Silchar grinding unit is expected by Q4 FY26, with a second grinding unit at Jorhat planned for Q3 or Q4 FY27. Current clinker capacity is sufficient for the next 4–5 years, so no near-term clinker expansion is planned in the Northeast.
• Rajasthan as the next leg: The company won a limestone mine in the Nimbol area and is evaluating a substantial entry with ~0.4-0.45 crore tons of grinding capacity and ~0.3 crore tons of clinker capacity. Management wants all permissions in place first and expects to share more detail on the next call.
• Long-term capacity ambition: Current announced capacity of 1.2 crore tons, plus a potential 0.45 crore tons in Rajasthan, plus another Northeast grinding unit in 5–6 years, takes the company toward 1.8-2 crore tons over that horizon.
• AC block and construction chemicals near launch: The AC block unit is almost ready for commercial production, targeting commencement in the last week of May, alongside a construction chemicals plant. Combined first-year EBITDA is expected at approximately ₹15 crores.
• Competitive moat intact in Northeast: Management does not foresee any asset acquisition or Greenfield project by UltraTech or other large players in the next 3–4 financial years, with Dalmia the only exception noted.

Management: "I think except to Dalmia, as you rightly said, like UltraTech and other bigger players in the next three, four financial years we are not able to foresee any asset acquisition or any Greenfield project going over there."

Pricing & Demand Outlook

• FY26 volume target maintained: The revised target remains ~0.54-0.55 crore tons; an early monsoon means Q1 may not reflect the full-year run rate, but management expects to broadly achieve the target by year-end.
• Q1 prices holding for now: Current prices are broadly up ₹5–7 versus the Q4 average; management hopes to maintain this in Q1 but acknowledges the off-season may cause some degradation.
• Premium cement as margin lever: Premium cement sales reached ~12% in Q4, up from 5–6% last year, with a target of ~20% in the coming year.

Tushar Bhajanka: "Though we are aggressive and of course adding up capacities, we are conservative financially and we would want to first get all the permissions, probably in the next call I think we will be in a better position to explain to you what exactly we're doing in Rajasthan."

Guidance & Commitments

Key Metrics