Buy Birla Corp; target of Rs 509: Motilal Oswal

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Buy Birla Corp; target of Rs 509: Motilal Oswal

Motilal Oswal is bullish on Birla Corporation and has recommended buy rating on the stock with a target of Rs 509 in its January 24, 2011 research report.

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Motilal Oswal is bullish on Birla Corporation and has recommended buy rating on the stock with a target of Rs 509 in its January 24, 2011 research report.

"Birla Corporation's 3QFY11 performance was below estimates, with EBITDA of Rs 910 million (against our estimate of Rs 1 billion). However, higher other income and lower tax boosted reported PAT to Rs 696 million (against our estimate of Rs 725 million). Cement volumes were flat YoY (~7.3% QoQ) at 1.49mt (against our estimate of 1.45mt). Realizations declined by 5% QoQ (~14% YoY) to Rs 2,953/ton (against our estimate of Rs 3,159/ton). Net sales de-grew by 14% YoY (~1% QoQ) to Rs 4.8 billion (against our estimate of Rs 5 billion), impacted by a 13% YoY decline in cement revenues and 4% YoY de-growth in non-cement business (jute and others) revenues."

"EBITDA margins improved by 320bp QoQ (down ~10.1pp YoY) to 19% (against our estimate of 20.2%) and PAT degrew by 38% YoY (flat QoQ) to Rs 696 million (against our estimate of Rs 725 million).  The company commissioned a 15MW WHRS based CPP in 3QFY11, with another 7.5MW HRS unit to be commissioned in 4QFY11, which will drive savings of ~Rs 70/ton in FY12. An upgrade in our 4QFY11 pricing assumptions to Rs 10/bag QoQ improvement (v/s Rs 5/bag earlier) will drive a 7% upgrade in FY12 EPS to Rs 59.8 and a 4% upgrade in FY13 to Rs 72.5. The stock trades at 5.6x FY12E EPS and 4.6x FY13E EPS, and USD 52/ton and USD 37/ton respectively. Maintain Buy with a target price of Rs 509 (~4x FY13E EV/EBITDA)," says Motilal Oswal research report.

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