Star Cement hosted conference call on August 09, 2023. In the conference call the company was represented by Mr Kushal Shrivatsava-Executive Director, Mr Vinit Kumar Tiwari-CEO and Mr Manoj Agarwal-CFO.

Key takeaways of the call

Volume data:

Clinker production stood at 7.27 lac tonnes in Q1FY2024 as against 6.92 lac tonnes in Q1FY2023

Cement Production stood at 11.94 lac tonnes in Q1FY2024 as against 9.90 lac tonnes in Q1FY2023 a growth of 21% plus.

Cement sales of 11.54 lac tonnes in Q1FY2024 as against 9.8 lac tonnes in Q1FY2023. Clinker sales stood at 0.1 lac tonnes in Q1FY2024.

Geography wise North East cement sales stood at 8.36 lac tones in Q1FY2024 as against 6.48 lac tonnes in Q1FY2023. Outside North East cement sales stood at 3.29 lac tonnes in Q1FY2024 as against 3.32 lac tonnes.

PBIDT stood at Rs 138 cr flat when compared to Q1of FY2023. EBITDA was flat due to decrease in  GST refund and increase in power and fuel cost.

EBITDA per ton stood at Rs 1185 per ton as against Rs 1400 per ton in Q1FY2023.

PBT stood at Rs 104 cr in Q1FY2024 as against Rs 105 cr in Q1FY2023.

On account of recognition of deferred tax asset due to timing difference on one of the property, plant and equipment in subsidiary company tax expenses were low at Rs 10.7 cr in Q1FY2024.

EBITDA per ton stood at Rs 1185/ per ton in Q1FY2024 as against Rs 1400/per ton in Q1FY2023. Increase in fuel cost, high cost inventory and reduction in GST refund led to lower EBITDA per ton.

The company had received around Rs 300 cr GST subsidy in Q1FY2023 which was not there in Q1FY2024.

Trade sales stood at 88% of the total sales in Q1FY2024. The company focused on trade sales and increased the trade sales contribution by 2% in Q1FY2024.

Premium products share stood at 4% of the total sales in Q1FY2024. The company has taken initiatives to double the contribution of premium products contribution in next 2-3 quarters.

Power and fuel cost:

Cost was Rs 2.1/ per K.Cal in Q4FY2023 which increased to 2.35/k.cal in Q1FY2024 due to high inventory cost of 2.4/k.cal. The company expects the same to reduce to 1.95/k.cal in Q2FY2024.

The company expects around Rs 180/per tonne reduction in power and fuel cost.

Coal procured from Nagaland was 30% of the total coal consumption. Biomass procured was 7% and the company plans to increase the same to 15% going forward.

Grid power cost at Guwahati has increased from Rs 6 per unit to Rs 7.25 per unit.

WHRS: The company has commissioned the 12.3 MW WHRS plant. The power and fuel cost was lower by around Rs 9 cr in Q1.The company expects to save around Rs 45-50 crore on account of commissioning of WHRS.

Other expenses: Other expenses were down by around Rs 22 crore in Q1FY2024 when compared to Q4FY2023. The company had availed consultancy services from BCG in Q4FY2023 which is not there in the current quarter. Further, the company is availing consultancy services from one of the big4, however the cost will be not to that extent.

Incentive: The company on account of setting up 25 MW solar plant in Assam will get 200% SGST benefit for the 2MT new grinding unit. The company is selling around 17 lac tonnes in Assam which will be increased 20-21 lac tonnes post the new plant. The company will have the benefit for 15 years, however, plans to exhaust the same by 7 years.

Blending ratio:Clinkerization in North East stood at 1.3x as against 1.5x in other regions. The company does not expect any significant increase in the same.

Expansion: The company is setting up a 3 million ton clinker plant which is expected to be commissioned in January-February of 2024 at ac a cost of Rs 1300 cr of which it has incurred Rs 580 crore.

The company is setting up a 2 million ton grinding unit in Assam which is expected to be commissioned in November 2023 at a cost of Rs 400-420 crore of which Rs 142 crore is incurred.

Also the company plans to set up a grinding unit in Silchar at a cost of Rs 450 cr. The company has acquired 75% land for the same and the rest will be acquired soon. The company expects to get environment clearance by Dec 2023 and the plant to be commissioned by December 2024.

CAPEX:

The company expects to incur capex of around Rs 800 cr for the clinker plant and the grinding unit in Assam in FY2024. The company also plans to incur CAPEX of Rs 40 cr towards AC block plant and Rs 80 crore towards 25 MW solar plant in FY2024.

CAPEX with respect to Silchar grinding unit will be incurred in FY2025.

Growth: The company is looking not only to grow but to grow profitably as such wants to grow organically where the Return on Investment is high.

The company is participating in auction of mines in other regions.

However, the  company is also looking at acquisition of companies whose capacity is in the range of 1-2.5 million tonnes  where other large players will not be interested in.

Debt: The company expects the peak debt to be around Rs 500 cr. The company will start borrowing the same in phases in Q3-Q4FY2024. The company expects interest rate to be competitive  in the range of 8-8.5%.

The company plans to repay majority of debt by end of FY2025.

Outlook:

The company expects to maintain volume growth of 13-14% in FY2024. Volumes will be impacted in Q2 due to late monsoon in North East however over all volumes will be maintained.

Prices are stabe in North East in Q2 when compared to Q1. The company had undertaken price increases from  April 1, which is holding and is stable.

The company’s focus market is North East and wants to consolidate trade sales and solidify market share to 32-33%.

The company capacity utilization in Silguri plant is around 70-75% and wants to increase the same by diversifying in Eastern markets.