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Maintain BUY on Birla Corporation - Margin buoyancy continues - HDFC Securities

Posted On: 2021-01-25 09:34:31 (Time Zone: Arizona, USA)

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities

Birla Corp's (BCORP) 3QFY21 consolidated revenue/EBITDA/APAT surged 4/23/83% YoY to Rs 17.77/3.62/1.50bn respectively, led by healthy realisation and lower opex. Thus, unitary EBITDA firmed up 19% YoY to Rs 998/MT. We continue to prefer BCORP in the mid-cap space for its large retail presence in the northern/central markets and ongoing opex reduction. Further, the ongoing expansion will increase its capacity to 21mn MT by 1QFY23, boosting volume growth visibility. We maintain BUY with an unchanged target price of Rs 1,371 (8.5x Dec'22E consolidated EBITDA).

Strong margin sustained in 3QFY21: Sales volume picked up 3% YoY (in- line our estimates), mainly driven by higher sales in the central region. The share of premium cement sales increased to 53% vs 41% YoY. NSR stood 1% higher despite 2% QoQ dip. Adjusted for Rs 326mn write-off of certain receivables from the government, opex went up 1% QoQ, mainly led by fuel and diesel price increase. It still remained 3% lower YoY, bolstering unitary EBITDA by 19% YoY to Rs 998/MT (our estimate Rs 953/MT).

Capex updates and outlook: BCORP noted that its 0.6mn MT clinker expansion in Rajasthan, 4mn MT Greenfield plant in Maharashtra, and 1.2mn MT SGU expansion in UP will get commissioned by 1QFY22, 3QFY22 and 1QFY23 respectively. These will bolster its volume growth FY22 onwards. We continue to prefer BCORP in the mid-cap space for its extensive retail presence in the north/central regions, substantial ongoing opex reduction initiatives, and stable balance sheet outlook despite significant expansion. We maintain our estimates and target price of Rs 1,371/share (8.5x Dec'22E consolidated EBITDA). We reiterate our BUY rating on the stock.

Shares of BIRLA CORPORATION LTD. was last trading in BSE at Rs.720.85 as compared to the previous close of Rs. 720.1. The total number of shares traded during the day was 45820 in over 1939 trades.

The stock hit an intraday high of Rs. 760 and intraday low of 703.5. The net turnover during the day was Rs. 33457256.

Source: Equity Bulls

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