Star Cement Stock Surges 26% Post Q4 Beat: Should You Join the Rally?

Published: May 14, 2025

In a remarkable turn of events, Star Cement's stock has rallied 26% over the past two days, capturing the attention of investors and market analysts alike. This surge follows the company's Q4 results, which not only beat estimates but also showcased resilience in a competitive industry. As the stock reaches new heights, the pressing question remains: Should investors chase this rally?

Q4 Performance: A Closer Look(Rediff)

Star Cement's Q4 results have been a significant driver behind the stock's recent performance. The company reported a revenue increase of 10% year-on-year, reaching ₹642 crore. While the profit after tax saw an 86% decline to ₹6 crore, the EBITDA stood at ₹97 crore, down by 7% YoY. Notably, the EBITDA per tonne approached four digits, a level unmatched by peers this quarter, indicating strong operational efficiency .(Business Standard)

Market Reaction and Trading Volumes(Business Standard)

The market responded enthusiastically to the Q4 results. On May 14, Star Cement's shares traded 3% higher at ₹202.85, with trading volumes surging nearly 20-fold. Approximately 13.76 million equity shares changed hands on the NSE and BSE, representing 3.4% of the company's total equity .(Business Standard)

Analyst Insights and Future Outlook

Analysts at Elara Capital have reiterated a 'Buy' rating on Star Cement, albeit with a revised target price of ₹262. They attribute the company's performance to factors such as incentive income, lower competitive intensity in the North East market, and additional volume from new plants. The brokerage anticipates healthy volume growth due to the ramp-up of recently added capacity and completion of ongoing projects .(Business Standard)

Industry Trends and Government Initiatives(Business Standard)

The Indian cement industry is poised for growth, driven by government initiatives like "Housing for All" and the Smart Cities Mission. Large-scale infrastructure projects, including the National Infrastructure Pipeline and Bharatmala Pariyojana, are expected to stimulate cement demand across the country. Star Cement, in its FY24 annual report, highlighted these developments as key drivers for sustained demand .(Business Standard)

Investment Considerations

Pros:

• Strong operational efficiency, as evidenced by high EBITDA per tonne.(CNBCTV18)

• Positive industry outlook supported by government infrastructure projects.

• Analyst confidence with a 'Buy' rating and a target price above current levels.

Cons:

• Significant decline in profit after tax, indicating potential profitability concerns.

• High trading volumes may suggest speculative interest, leading to volatility.

• The stock's rapid ascent could be followed by a correction if not supported by continued performance.

To Chase or Not to Chase?

Star Cement's recent rally is underpinned by solid Q4 results and a favorable industry backdrop. However, investors should exercise caution. While the company's operational metrics are impressive, the sharp decline in net profit and potential market volatility warrant a measured approach. Prospective investors should consider their risk tolerance and investment horizon before making a decision.