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Expansion plans provide growth visibility

Reiterate Buy on attractive valuation

* BCORP’s 1QFY22 result was in line, with EBITDA growing by 47% YoY to INR3.4b, led by 39% growth in volume and EBITDA/t at INR1,026 (+6% YoY).

* The ongoing 3.9mtpa greenfield expansion at Mukutban (to be commissioned in 4QFY22) provides strong volume growth visibility in FY23.

* We expect a 14% EBITDA CAGR in FY21-23E, led by 14% volume CAGR, as it expands capacity by ~30% over the next 12 months. Valuation is also attractive at 7.4x FY23E EV/EBITDA. We reiterate our Buy rating.

EBITDA up 47% YoY driven by 39% volume growth

* Revenue/EBITDA/PAT stood at INR17.5b/INR3.4b/INR1.4b in 1QFY22, up 43%/47%/115% YoY and was 3%/5%/7% above our estimate.

* Cement volume grew 39% YoY to 3.35mt (est. 3.25mt)

* While blended realization rose 3% YoY to INR5,221/t due to higher jute revenue, cement realization was flat YoY at INR4,943/t (+2% QoQ).

* Cost per tonne increased 1% QoQ to INR4,196 (up 2% YoY) due to fuel and freight cost inflation and higher other expenses.

Highlights from the management commentary

* In sales volume, Blended Cement accounted for 92% in 1QFY22 v/s 94% in 1QFY21, and trade sales accounted for 83% (v/s 85% in 1QFY21). Premium Cement accounted for 51% of trade sales volume v/s 43% in 1QFY21.

* Share of green power in power consumption improved to 22% in 1QFY22 as against 20% in FY21, which should control power inflation. It is also taking steps to increase the usage of alternative fuel.

* Mukutban 3.9mtpa greenfield integrated plant commissioning has been delayed further due to labor availability issues, and is now expected to be commissioned by 4QFY22. Project cost has been revised up to INR27.4b (from INR24.5b) on revision of commencement schedule, augmentation of infrastructure, and other factors (including commodity price inflation).

Valuation and view

* BCORP plans to increase capacity by ~30% over the next 12 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.

* Valuation is reasonable at 7.4x FY23E EV/EBITDA (~10% discount to its 10- year average) and USD85/t of capacity (~15% discount to its replacement cost). We value BCORP at 8x Sep’23E EV/EBITDA to arrive at our TP of INR1,740. Buy.

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