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Highlights from the Quarter (Q1 FY23)

During Q1 FY23, the top-line grew by 30% yoy to Rs.666.1 cr and down by 11% as compared to Rs.749.2 cr on qoq basis. PAT is similar at Rs.68 cr in this quarter as compared to the corresponding quarter previous year. This is on account of increased tax expenses, due to the sunset of the tax exemption period in respect of the Guwahati grinding units and its subsidiary Star Cement Meghalaya Limited. Cement sales volume for the quarter was 9.8 lakh tonnes as compared to 7.6 lakh tonnes on yoy basis (growth of 28.9% yoy). Growth in the cement sales was driven by the ramp-up in Siliguri, leading to 2x in the volume growth in the East region. The price of the cement was up by Rs.10 per bag in the North East region on account of lower sales by Eastern cement players. EBITDA margin improved by 50 bps yoy to 18.6%, due to higher realization and lower advertisement costs. On a per ton basis, EBITDA stands at Rs.1,266 in Q1FY23 as compared to Rs.1,220 on yoy basis and Rs.984 on qoq basis

Going forward, the management expects volume growth of 18% to 4 mt in FY23 driven by a pick-up in demand and improvement in capacity utilization of the new plant at Siliguri as compared to the last year

The company has estimated a capex of Rs. 2,000 cr over the next couple of years in building a 3 MTPA clinker plant in Meghalaya, two grinding units of 2 million ton each. It has received environmental clearance and work will start in full swing post-monsoon. The clinker plant is expected to be completed by Dec’23, while grinding units will be coming up by Jan-March’24.

OUTLOOK AND VALUATION

Healthy regional dynamics in the North East region as well as an increase in capacity in the East by the company, should augur well for the company on a long-term basis. Going forward, we expect the company to deliver an EPS of Rs.6.3 in FY24; assigning a target multiple of 18.5x, we arrive at a target price of Rs.117, showcasing an upside potential of 27% for 18-24 months.

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