Star Cement Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Star Cement Ltd (STARCEMENT) Q3 FY24 Earnings Concall

• Cement Production and Sales Performance
  • Clinker production 7.37 lakh tons in Q324 vs 7.39 lakh tons in Q323.
  • Cement production 9.82 lakh tons in Q324 vs 9.22 lakh tons in Q323.
  • Cement production increased by 7% year-on-year.
  • Sold 9.6 lakh tons of cement and 0.3 lakh tons of clinker in Q324.
  • Cement sales increased 7% to 9.6 lakh tons vs 9.08 lakh tons in Q323.
  • Northeast cement sales were 7.32 lakh tons vs 6.62 lakh tons in Q323.
  • Outside northeast cement sales were 2.38 lakh tons vs 2.45 lakh tons.
• Financial Performance
  • Total revenue was INR 655 crore in Q324 vs INR 629 crore in Q323.
  • EBITDA was INR 153 crore in Q324 vs INR 120 crore in Q323.
  • Net profit was INR 74 crore vs INR 53 crore in Q323.
  • EBITDA per ton was INR 1,576 in Q324 vs INR 1,324 in Q323.
• Capacity Expansion
  • Guwahati grinding unit commissioning in March 2023.
  • SGST incentives of INR 150-160 cr annually from Guwahati grinding unit.
  • Tax benefit with 17% rate at new Guwahati plant.
  • Lumshnong clinker unit commissioning in March 2023.
  • Lower clinker heat rate and power cost at new Lumshnong unit.
  • Silchar grinding unit commissioning in Aug-Sep 2023.
  • Minor delays vs original timelines due to equipment delivery.
• Capex Update
  • Guwahati: INR 330 cr spent till Dec’22, INR 55 cr in Q423 vs INR 430 cr budget.
  • Lumshnong: INR 850 cr spent till Dec’22, INR 200 cr in Q423 and Q124 vs INR 1300 cr budget.
  • Silchar: INR 20 cr spent on land purchase so far vs revised INR 450 cr budget.
• Volume Growth Outlook
  • 9M volume growth at 9% vs 13-14% full year target.
  • Q4 volume growth expected at 5-7% for industry, 8-10% for company.
  • Next year targeting 18-20% volume growth with Guwahati capacity.
• Pricing Trends
  • Northeast prices increased INR 7 in Q3 vs Q2.
  • Outside northeast prices dropped INR 15-20 in Bihar and Bengal.
  • Premium cement share at 6.5% vs 4.5% in Q3FY23.
  • Premium cement growth at 47% in Q3.
  • Some pressure likely in Q4 with INR 5 decline expected.
• Managing Clinker Requirement
  • Have 1.8 lakh ton clinker inventory currently.
  • Producing at full capacity to build stock.
  • New grinding unit will ramp up gradually from March.
  • New clinker unit starts in April.
  • Inventory and production to meet requirement during transition.
• Expansion Plans
  • Targeting 20 million tonne capacity in next 7-8 years.
  • Evaluating greenfield mines in south and north India.
  • Likely organic expansion by setting up plants at new mines.
  • Small acquisitions not feasible currently in the market.
• Siliguri Plant Utilization
  • Capacity utilization was 47-48% in Q3.
  • Expected to improve to 52% in Q4.
  • Constrained by clinker availability currently.
  • Will improve with new clinker unit commissioned.
  • Targeting above 60% utilization post clinker expansion
• AAC Blocks Update
  • Land work completed for Guwahati AAC blocks plant.
  • Machinery orders placed, project on track.
  • Expected to commission by Aug 2024.
  • 25% margins and 20% RoCE targeted.
• Assam Opportunity
  • Total Northeast cement market size is 13 million metric tonnes, with Assam accounting for over 7.5 million tonnes.
  • Star Cement currently sells 1.8 million tonnes in Assam, targeting over 2.6 million tonnes by FY2026.
  • With 30-35% market share, there is room to grow without high risks of oversupply.