Emkay Global Financial is bullish on Birla Corporation has recommended buy rating on the stock with a target price of Rs 895 in its research report dated November 05, 2020.
Emkay Global Financial's report on Birla Corporation
Results were above estimates, driven by lower opex (variable cost down 8.5% yoy/10.2% qoq) and higher realization (down 1.5% qoq vs. estimate of 4% decline). EBITDA stood at Rs3.8bn vs. estimate of Rs3bn and EBITDA/ton was Rs1,160 vs. estimate of Rs903. Key positives: 1) realization decline at mere 1.5% qoq; 2) higher share of premium products - up 3.7pp yoy on total volumes; 3) 8.5% yoy decline in variable cost/ton; and 4) 26.2% yoy/5% qoq decline in interest expenses. Volume growth was muted at 1.9% yoy. BCORP aims to achieve 25mt capacity by CY25. The 3.9mt Greenfield plant at Mukutban, Maharashtra, is likely to be commissioned by Sep’21. Brownfield expansion of clinker capacity (0.4mt) at Chanderia, Rajasthan, will be completed in FY21.
We keep FY22/23E EBITDA intact but raise FY21E EBITDA by 3.4% on better Q2 print. We like BCORP due to: 1) capacity addition plan and 2) cost-saving initiatives - solar power plants and coal mining through acquired blocks. Maintain Buy/OW in sector EAP.
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