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Healthy realization uphold performance

Our view

Slower capacity addition aided higher capacity utilization of +90% for BCORP while that restricted production headroom over time. To strengthen the capacity/market share, BCORP plans to take total capacity to 30MTPA by FY27E, while currently BCORP is in process of commissioning new 5.1MTPA capacities (Kundanganj 1.2MTPA GU and Mukutban 3.9MTPA IU) that would drive volume growth of +13/15/9% y/y in FY22/23/24E. The subsequent price hikes will help the industry to pass on the inflated cost further in the supply chain and maintain its EBITDA/te level of Rs1000/te over FY22/23/24E.

Result Highlights

* BCORP reported a flat y/y (decline by 2% q/q) volume growth of 3.27MMT v/s YSEC est. of 3.5MMT in Q2FY22, led by the extended monsoon and shortage of sand in the Uttar Pradesh and Bihar - key important markets for BCORP.

* While realization was up by 2% y/y (flat q/q due to monsoon impact) in Q2FY22 led BCORP to report revenue at Rs17bn up by 3% y/y (decline by 3% q/q) v/s YSEC est. of Rs17.9bn in Q2FY22 at capacity utilization of 84%.

* The EBITDA declined by 22% q/q and 30% y/y to Rs2.7bn v/s YSEC est. of Rs2.9bn led by inflating total cost/te by 4% q/q and 12% y/y in Q2FY22.

* While on sequential basis, the increase in RM cost by 61% q/q impacted the EBITDA/te by 20% q/q to Rs817/te v/s YSEC est. of Rs841/te for this quarter.

* PAT decline by 49% y/y and 40% q/q to Rs856mn v/s YSEC est. of Rs1.07bn in Q2FY22, led by the decline in EBITDA level and increase in tax.

* Blending ratio for Q2FY22 was at 91% and trade to non-trade mix came in at 79:21. Premium cement accounted for 53% of total trade channel sales.

Valuation

As the major CAPEX of its ongoing capacities had already peaked its Net Debt/EBITDA to 2.2x in FY21, thus robust operating cash flow of Rs42bn over FY22-24E would help to deleverage its B/S and fund its future CAPEX through internal accruals. At CMP, the stock is trading at 10.4/8.5/8x EV/EBITDA on FY22/23/24E. On a 5year average, BCORP trades on 9x EV/EBITDA. Thus, we retain our BUY recommendation with a TP of Rs1830 (unchanged), valuing the stock at 9x (unchanged) EV/EBITDA on the FY24E.

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