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Investment Rationale

* Capacity Expansion To Drive Growth: The Guwahati 2 MTPA Grinding Unit (Line 2) has ramped up successfully, supporting the company’s ongoing volume growth momentum. Additionally, the Silchar Grinding Unit is expected to be commissioned by Q4FY26. These capacity additions will enhance the company’s total grinding capacity to 9.7 MTPA from the current 7.7 MTPA, providing a strong foundation for sustained growth. Consequently, the company’s volumes are projected to grow at a CAGR of around 12% over FY25–27E.

* Higher Cement Demand In Northeast And Eastern India: Cement demand in Eastern and North-Eastern India is expected to witness healthy growth over FY25–28, driven primarily by government-led infrastructure projects and a continued thrust on housing. Overall demand in the Eastern region is projected to grow at a CAGR of 8–9% during this period. Meanwhile, the North-East region, despite relatively limited infrastructure development, is also poised for strong demand growth, having recorded a historical CAGR of 7.5–8.5%.

* Strong Performance Expected In Q2FY26: The company is expected to report a robust performance in Q2FY26, with Revenue, EBITDA, and PAT growing by 15%, 76%, and 825% YoY, respectively. EBITDA margin is expected at 21% against 15% reported last year.This strong performance will likely be supported by higher volumes, improved cement pricing, and lower input costs.

Valuation & Recommendation:

* Star Cement has guided for 12-15% volume growth in FY26. With its upcoming capacity expansion, it is wellpositioned to capitalise on the rising demand in its operating region, primarily the Northeast. We project SCL will achieve a CAGR of 12%/16% in volume and revenue and a 31%/52% CAGR in EBITDA and PAT over FY25-FY27E.

* The stock is currently trading at 12.5x/11.5xFY26E/27E EV/EBITDA. We recommend a BUY on the stock with a TP of Rs 288/share, implying an upside potential of 10% from the CMP

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