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Banking on incentive from Mukutban unit

In-line revenue, EBITDA above estimates

Birla Corporation (BCORP IN) reported a mixed performance, with in-line revenue but better EBITDA, primarily aided by lower-than-expected operating cost. Thus, EBITDA rose ~162% YoY and ~31% QoQ to ~INR 3.8bn, slightly ahead of our and Consensus estimates of ~INR 3.4bn each. Net sales grew ~15% YoY and 1% QoQ to ~INR 23bn, in line with our estimates of ~INR 22bn and Consensus’ INR 23bn. Adjusted PAT stood at ~INR 1.1bn vs a loss of INR 499mn in Q3FY23 and PAT of INR 585mn in Q2FY24.

Cement EBITDA per tonne up ~140% YoY and ~32% QoQ

Cement sales volume was up ~13% YoY but remains flat QoQ at 4.2mn tonne, ~5% ahead of our estimates, primarily led by the ramp-up of Maharashtra-based Mukutban unit. The Mukutban unit consistently achieved positive EBITDA throughout Q3FY24 and surpassed sales of 0.2mn tonne in January, ahead of management’s expectations of achieving this milestone by March 2024. Cement realization rose ~2% YoY and 4% QoQ to INR 5,278/tonne, in line with our expectations. Blended operating cost fell ~9% YoY and 4% QoQ to INR 4,604/tonne, ~2% below our estimates, led by the rising share of the captive power plant to 60% in Q3FY24 vs 12% in Q3FY23 and savings from increased operational efficiency under the Project Shikhar, leading to cost savings of INR 55/tonne. Thus, cement EBITDA/tonne rose ~140% YoY and 32% QoQ to INR 903.

Valuation: reiterate Accumulate with a higher TP of INR 1,740

We expect performance to remain healthy, led by further ramp-up of Maharashtra-based Mukutban unit and its incentive income is likely to accrue from Q4FY24. Also, focus on premiumization and cost savings measures, such as: 1) fall in operating cost of the Mukutban unit with further stabilization, 2) continued focus on increasing captive coal use which will meet 60% of BCORP’s fuel requirement and is likely to be available >INR 1.25/kcal vs Q3FY24 blended fuel cost of INR 1.58/kcal, and 3) higher share of renewable power should bolster margin. Thus, we reiterate Accumulate. We cut our EBITDA ~3% for FY24E but retain it for FY25E and raise it ~8% for FY26E. We rollover to December from September 2025E. We raise our TP to INR 1,740 from INR 1,457 on 8x (unchanged) December 2025E EV/EBITDA.

Please refer disclaimer at Report
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