Motilal Oswal's research report on Birla Corporation
Birla Corporation (BCORP)’s 2QFY22 result highlights the impact of energy cost inflation, as variable cost of production increased 14% QoQ. The EBITDA margin declined 7.4pp YoY to 15.7% and EBITDA/t 30% YoY to INR817/t. Volumes remained flat YoY at 3.27mt v/s the est. of 3.39mt. The ongoing 3.9mtpa greenfield expansion at Mukutban (to be commissioned in 4QFY22) provides volume growth visibility for FY23E/FY24E. It also completed debottlenecking at the Chanderiya plant, which led to an increase of 0.63mtpa in clinker capacity (5,500tpd from 3,600tpd). We raise our FY24E EBITDA estimates by 5%, factoring in better realization and lower costs (considering decline in energy costs). Valuations are attractive at 10.4x/8.4x FY23/FY24E EV/EBITDA. We reiterate our Buy rating.
Outlook
At 10.4x/8.4x FY23/24E EV/EBITDA, BCORP trades at a much lower valuation than the average for companies with similar capacities in our Coverage Universe. The stock traded at average one-year forward EV/EBITDA of 8x over FY14–21. We value BCORP at 10.5x Sep’23E EV/EBITDA to arrive at our Target Price of INR1,835 and maintain a Buy rating.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More