Beat led by lower-than-estimated costs

* Margin improvement driven by realizations: Consol. volumes increased 4% YoY to 3.2mt (our estimate: 3.13mt). Cement realizations were up 6% YoY to INR4,810/t (in-line). Net sales grew 11% YoY to INR16.3b (our estimate: INR15.8b). Total cost/t was down 1% YoY to INR4,109 versus our estimate of INR4,204. Thus, EBITDA/t increased 61% YoY to INR975. Accordingly, EBITDA grew 68% YoY to INR3.1b (our estimate: INR2.6b). PAT grew 5x YoY to INR883m (our estimate: INR614m).

* 1HFY20 performance: Sales/EBITDA/PAT increased 13%/ 61%/2.3x YoY. Operating cash flows post working capital and taxes declined 5% YoY to INR4.1b, led by an increase in working capital due to higher receivables (+2 days) and lower payables (-3 days). We expect sales/EBITDA/PAT to increase by 6%/34%/41% YoY in 2HFY20.

* Key highlights:

(1) Premium cement accounted for 41 % of sales through the trade channel, as against 37% in the same period last year.

(2) The share of blended cement in total sales scaled up to 93% from 87% in the quarter.

(3) BCORP is engaging with a global consultancy to streamline systems and processes for both inbound and outbound logistics.

* Valuation view: We raise our

(a) EBITDA estimate by 12% for FY20 and by 5% for FY21 to factor in lower costs and

(b) PAT estimate by 20% for FY20 and by 5% for FY21. Ongoing capex plans will also keep debt at elevated levels over the medium term. We value BCORP at 6.5x FY21E EV/EBITDA to arrive at a TP of ~INR815 (implied EV/tonne of USD80 on FY21E capacity). Maintain Buy

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