This cement maker got downgraded despite strong earnings. Here's why

The current 52-week low for Star Cement is ₹197.79. The stock may fall to ₹179 in the next one year, says Investec, which downgraded the rating on the stock to 'sell' despite a strong set of numbers in the latest quarter.

Metric	Oct-Dec 2025 growth (YoY)
Revenue	22.4%
EBITDA	94.3%
Operating Margin	Up 800 basis points
Net profit	8.3x

While an increase in prices helped the Maharashtra-based cement maker to beat street estimates in the latest third quarter, the management cut the volume guidance for the full year ending March 2026, signaling potential demand softness ahead.

However, the biggest fear for Investec is the aggressive expansion plan, largely funded by debt, into North India that the cement maker has lined up.  "Math indicates that they won’t cover their cost of credit," the report said.

Star Cement plans to add 9 million tonnes of grey cement (GU) capacity, or 6 million tonnes of clinker capacity, across projects, including the foray into North India, at a cost of ₹4,800 crore (nearly $530 million). That's more than half of the company's total market capitalisation of nearly $980 million currently.

Compounding these issues, a lower goods and services tax (GST) regime is expected to pressure cash flows. Incentives under the current setup contributed around 18% of EBITDA from FY22 to FY25, and their erosion could strain finances further, the report added while slashing the target enterprise value by 30% to 7 times the estimated EBITDA in March 2028.

EBITDA stands for earnings before interest, tax, depreciation, and amortisation. It's a measure of strength for a company's core business.

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