Star Cement share price jumps 12% to hit all-time high; what should investors do?

Star Cement share price surged over 12 per cent to hit its fresh all-time high of ₹219.45 in morning trade on BSE on Monday, February 12. Star Cement share price opened at ₹200.90 against the previous close of ₹195.60 and jumped over 12 per cent to its fresh all-time high of ₹219.45. The stock, however, cooled off and traded 8.15 per cent higher at ₹211.55 around 11:20 am.

Star Cement on February 7 reported a standalone net profit of ₹56.41 crore for Q3FY24, up 86 per cent from ₹30.30 crore in the same quarter last year. Revenue from operations for the quarter rose 6 per cent year-on-year to ₹659 crore from ₹621.2 crore in the same quarter last year, according to the company's exchange filing.

Star Cement share price jumped 4.34 per cent in the next trading session on February 8. The stock, however, saw some profit booking in the next session on February 9, ending 0.15 per cent lower.

In the last one year, Star Cement share price has gained over 72 per cent, as of the February 9 close. The stock hit its 52-week low of ₹104.15 on March 17 last year; it has jumped 88 per cent from its 52-week low.

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Attractive long-term buy

Most brokerage firms are positive about the stock for the long term.

Axis Securities has a buy call on Star Cement with a target price of ₹225.

The brokerage firm pointed out that cement demand may increase in the east and northeast regions of the country due to heightened investments in infrastructure and affordable housing and the company is well-positioned to meet the burgeoning cement demand with its upcoming capacity.

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Axis projects the company to achieve a compound annual growth rate (CAGR) of 11 per cent in both volume and revenue and a 19 per cent CAGR in EBITDA during FY23-FY26E.

Axis underscored that the company anticipates high double-digit volume growth in FY25, supported by its new capacity. However, it has revised its volume growth guidance for FY24 to 9-10 per cent from the earlier 11-12 per cent, citing subdued demand observed in Jan’24 and thereafter. Additionally, the company aims to capture a market share of 30 per cent in the North-East market, up from the current 25 per cent.

HDFC Securities has a buy call on Star Cement with a target price of ₹245, citing Star reported yet another stellar quarter.

HDFC believes the best for Star Cement is yet to come.

"Star will be commissioning 3/2mnMT clinker/griding capacities in the northeast region (NER) in Mar-24 and 2mn MT SGU in Assam by FY26E. Equipped with large incentives, Star is set to deliver both higher margin (industry best) and 20 per cent volume CAGR during FY24-26E, accelerating its market share gain in NER. Star is also gearing up its green power consumption, which will further bolster the margin outlook," HDFC said.

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Emkay Global Financial Services has an 'add' rating on the stock with a target price of ₹210 due to better-than-expected profitability.

"Star has embarked on a journey to strengthen its market share in NER to over 30 per cent (currently at 25 per cent) by FY26-27, by more than doubling its capacity. Factoring in the Q3 performance, we raise our EBITDA by 4-7 per cent for FY25-26E and maintain our add rating on the stock, with a revised Dec-24E target price to ₹210 (based on 10x EV/EBITDA)," said Emkay.

Technical views

While the stock remains an attractive long term buy, some technical experts see the scope of some profit booking at the current juncture. They say one can buy the stock after some correction. 

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers observed that despite the stock's recent rally, a bearish crab pattern has formed in the ₹210-220 zone on a monthly scale. A bearish crab pattern typically suggests a potential reversal in the uptrend, indicating caution for investors.

There could be a significant resistance near ₹220, implying that the stock price may struggle to surpass this level due to the bearish pattern.

Patel advises booking profit at the current juncture.

"It is advisable to book profits near ₹220. Investors should consider selling their Star Cement positions to lock in gains, given the potential resistance and bearish pattern. After booking profits, it's suggested to wait for a meaningful correction, indicating that the stock may experience a pullback from its current levels," said Patel.

However, Patel added that if the stock manages to close above ₹220 on a monthly scale, it could indicate further bullish momentum, potentially pushing the price towards the ₹240 level within one month.

"Overall, cautious approach for Star Cement investors, with a recommendation to consider booking profits near the 220 zone and monitoring the stock's behaviour for potential further upside or correction," said Patel.

Foram Chheda, CMT, and the founder of ChartAnalytics.co.in observed that after consolidating for nearly three months, the stock price of Star Cement made a break out from an ascending triangle last month which triggered an upside momentum.

Chheda pointed out that the stock remains above multiple moving averages of 50-day, 100-day, and 200-day MA, indicating a strong uptrend in place.

"Today, the stock has achieved its pattern target where one can consider booking 50 per cent profits for the near term and trail the stop loss higher to ₹190," said Chheda.

"One can look for a lower level toward ₹183-184 to buy the stock again in the event of any potential retracement," Chheda said.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.