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YES Securities
Birla Corporation (Buy)
CMP: ₹526.9
Target: ₹724
Cement volumes of Birla Corporation for the quarter came in at 3.85 MT (+13.2 per cent y-o-y/+20 per cent q-o-q) as against our estimates of 3.58 MT. Net sales in Q4FY19 stood at ₹1,870 crore, replicating the growth in volumes as realisations remained flattish on y-o-y & q-o-q basis. EBITDA/tonne of ₹804 (+6 per cent y-o-y/+24.6 per cent q-o-q) was below our expectations of ₹855 as outward freight costs were higher than anticipated. However, total cost of production witnessed reduction of 1 per cent y-o-y/3 per cent q-o-q primarily due to decline in raw material cost (-10.6 per cent y-o-y/-18.2 per cent q-o-q).
Company in its presentation has mentioned about enhancing the mechanical mining capability at Chanderia unit resulting into reduction in purchased limestone. Operating profit during Q4FY19 was ₹309.5 crore (est. of ₹306.2 crore), which grew by 20 per cent y-o-y and 49.4 per cent q-o-q.
We factor in entire capex plan over FY20-FY21 with total outgo of ₹2,600 crore. Accordingly, we expect net debt/EBITDA and net debt/equity to stand at about 4.1x and ~0.9x by FY21E respectively. We have valued Birla Corporation at EV/EBITDA of 9x on FY20E, arriving at a target price of ₹724/share (+45 per cent upside). We maintain our ‘buy’ rating.
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