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* Birla Corporation reported consolidated volumes of 4.4mnt for Q1FY25, reflecting a decline of 9.7% QoQ and 0.7% YoY. The drop in sales volume was attributed to disruptions caused by general elections and extreme weather conditions in some of its key markets. Revenue for the quarter amounted to INR21,903mn, marking a decrease of 17.5% QoQ and 9.1% YoY. The company achieved a utilization rate of 91% for Q1FY25, consistent with the 91% recorded in Q1FY24. EBITDA/t for the quarter stood at INR589/t, down 39.5% QoQ and 12.7% YoY, largely due to lower realizations and higher costs. PAT for Q1FY25 was INR326mn, compared to INR1,933mn in Q4 FY24. EPS for the quarter was INR 4.2.

* Expansion Plan: The management has reaffirmed its Capex guidance of INR 8,000mn for FY25E, with INR 2,000mn allocated for the development of coal mines and another INR2,000mn dedicated to the Kundalgunj expansion, where the management has approved an investment to increase capacity by 1.4 million tons. Additionally, approval has been granted for a new grinding unit in Prayagraj, Uttar Pradesh, with a capacity of 1.4 million tons, expected to be commissioned after Kundalgunj. A phase 2 expansion of the clinker line at Maihar is also planned to begin in FY27E, aiming to double capacity from 10,000 TPD to 20,000 TPD. Further, the company has plans for additional grinding units in Bihar and Uttar Pradesh, as well as one in the western region. In Bihar, the company is in the final stages of land acquisition. The goal is to achieve a cement production capacity of 25 million tons by FY27E.

* Total cost dropped to INR4,411/t: In Q1FY25, the company successfully reduced its total cost per ton by 2.0% QoQ and 7.8% YoY. The power and fuel cost per ton was recorded at INR 1,004/t, which represents a slight increase of 0.5% QoQ but a significant decrease of 12.9% YoY. This notable YoY reduction in fuel costs is largely attributed to lower power and fuel expenses, as well as a strategic shift in the composition of fuel used by the company. Specifically, in the Q1, the fuel cost stood at INR 1.48 per kcal. Management is optimistic about further reductions in fuel costs moving forward. Freight and handling expenses were reported at INR 1,322/t, marking a 2.9% increase QoQ, but showing flattish YoY. The company has implemented two major initiatives, Project Shikar and Project Unnati, with a strong focus on further reducing the total cost per ton. These projects are aimed at optimizing operational efficiencies and cutting expenses across the board. Additionally, the company is working on reducing lead distance.

* Jute Division: Birla Jute Mills reported a cash loss of INR39mn in the Q1, down from a cash profit of INR64mn in Q1FY24. The jute industry faces challenges, including reduced government orders, leading to inventory build up and partial capacity operations. Additionally, cottage-sized mills with cost advantages are capturing government orders. Despite efforts to boost exports of value-added jute products, revenue from shopping bags dropped 26% To INR119mn due to container shortages and rising freight costs.

View & Valuation:

Cement demand in Q2FY25 is expected to be impacted by the monsoon. The company will continue to improve operations at the Mukutban facility, with a focus on the Maharashtra market to leverage tax incentives. The strategy is to increase market share for premium products in Maharashtra, Gujarat, and Rajasthan, where there is significant growth potential. Additionally, management anticipates growth in line with the industry's overall expansion. We expect Revenue/EBITDA to grow at a CAGR of 7.2%/11.5% respectively over FY24-FY26E. Our target EV/EBITDA multiple is 8.5x on FY26E EBITDA, hence we ascribe a target price of INR1,480, maintaining our rating to BUY.

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