IGI Logo

Expansion plans provide growth visibility

Reiterate Buy on attractive valuations

* Birla Corporation (BCORP)’s 4QFY21 result was in line, with EBITDA growing 14% YoY to INR3.9b, led by 24% growth in volumes. However, EBITDA/t at INR940 (-9% YoY) came in below our estimate, weighed by higher raw material and freight cost.

* Ongoing expansion at the 3.9mtpa greenfield integrated plant at Mukutban was delayed by a quarter, to the end of 3QFY22, due to the pandemic.

* We broadly maintain our FY22E/FY23E estimates and expect a 15% EBITDA CAGR over FY21–23E, led by a strong 14% volume CAGR – as it plans to expand capacity by ~30% over the next 15 months. The valuation is also attractive at 5.8x FY23E EV/EBITDA. Reiterate Buy.

EBITDA up 14% YoY on 24% YoY volume growth

* Revenue/EBITDA/PAT stood at INR21.3b/INR3.9b/INR1.8b (up 26%/14%/28% YoY) and was 11%/ 5%/ 0% above our estimate.

* While cement volumes grew 24% YoY to 4.17mt, EBITDA/t at INR940 (-9% YoY; -8% QoQ) was 3% below estimate on account of higher cost.

* Blended realization was largely in-line at INR5,114/t (+1% YoY; +2% QoQ). But total cost rose 4% YoY to INR4,174 (+5% QoQ) on cost inflation in raw materials and freight, partially neutralized by better fixed cost absorption.

* FY21 revenue/EBITDA/PAT stood at INR67.9b/INR13.7b/INR5.6b (- 2%/+2%/+11% YoY), and volumes were down 2% YoY to 13.39mt. Lower finance cost due to a reduction in debt / interest rate has helped PAT growth of 11% YoY. Finance cost stood at 7.83% p.a. v/s 9.26% in FY20.

* OCF/capex/FCF stood at INR13.3b/INR8.0b/INR5.3b in FY21 v/s INR13.4b/INR9.9b/INR3.6b in FY20.

* Gross debt declined to INR40.5b (from INR42.8b in Mar’20) despite ongoing capex. Net debt/EBITDA declined to 2.26x v/s 2.36x in Mar’20.

* The company announced dividend of INR10/sh (14% payout).

Highlights from management commentary

* In terms of sales volumes, blended cement accounted for 91%/92% in 4QFY21/FY21 and trade sales accounted for 78%/80%. Premium cement accounted for 53%/50% of trade sales volumes.

* The share of WHRS/solar in power consumption improved to 17.2%/2.8% in FY21 (v/s 14%/0.9% in FY20), which should control power inflation.

* The Mukutban 3.9mtpa greenfield integrated plant commissioning has been delayed further to end-3QFY22 due to labor availability concerns.

Valuation and view

* BCORP plans to increase capacity by ~30% over the next 15 months, which should support volume growth. Around 55% of its capacity is in central India (a preferred market), which bodes well for the margin outlook.

* The valuation is attractive at 5.8x FY23E EV/EBITDA (~15% discount to its 10- year average) and USD68/t of capacity (~30% discount to replacement cost). We value BCORP at 7x FY23E EV/EBITDA to arrive at TP of INR1,330. Buy.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer