Buy Birla Corporation; target of Rs 2055: Asit C Mehta

Asit C Mehta is bullish on Birla Corporation has recommended buy rating on the stock with a target price of Rs 2055 in its research report dated April 08 2024.

Broker Research

April 09, 2024 / 14:36 IST

Buy

live

bselive
nselive

Volume

Todays L/H

Asit C Mehta report on Birla Corporation

We initiate coverage on Birla Corporation Ltd (BCORP) with a strong “BUY” recommendation and target price of Rs2055 based on 8x FY26E EV/EBITDA. Our recommendation is primarily based on 1). Leading player in demand-rich region, i.e., Central India, 2). Capacity addition and volume growth higher than the industry average, 3). Improved cost-efficiency, 4). Less dependency on grid on the back of higher usage of captive coal mines, 5). Strong focus on premiumisation, 6). Incentive-based plants and 7) Healthy balance sheet with better return ratios. Despite having an intense competition in central region, BCORP’s major focus on premium segment sale, cost optimization, and strong branding with marketing strategy has enable it to strengthen the market share. BCORP’s Mukutban Plant (unit of RCCPL) utilization rate has improved to 60% in 3QFY24 vs. 40% in 2QFY24 and has started delivering positive EBITDA. We believe that there will be continued focus on plant modernization and improvement in cost structure to deliver higher EBITDA for Mukutban Plant, going forward. We expect revenue/EBITDA growth of 8%/ 40% CAGR over FY23-FY26E, driven by strong volumes and improved cost efficiency.

Outlook

We value the company at 8x FY26E EV/EBITDA to arrive at a target price of Rs 2055 (an upside of 36% from the CMP) and initiate coverage with a BUY rating. While, Delay in capex plan, slower than expected demand, regional pricing pressure from new entrant are key downside risks to our call.

For all recommendations report, click here