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Birla Corp’s Q2FY24 consolidated EBITDA increased 3x YoY (down 3% QoQ) to Rs2.9bn, in-line with estimates. Blended EBITDA/ton improved by 2% QoQ to Rs691/ton (Q2FY23: Rs258). Volume growth was strong at 15% YoY to 4.2mt, aided by positive ramp-up in its Mukutban plant (achieved monthly run-rate of 1.5lakh ton; 45% utilization rate). Management has maintained its guidance of 15% YoY volume growth, with EBITDA/ton improvement of more than 75% YoY to Rs850 (incl. other income) in FY24. The board has approved the proposal for setting up 1.4mt of greenfield cement GU at Prayagraj, UP, at a capex of Rs4bn (USD34/ton) post which overall capacity will increase to 21.4mt by FY26E. We remain positive on the stock, given the gradual ramp-up of Mukutban plant. We broadly maintain our FY24E-26E estimates and BUY rating with a revised Sep-24E TP of Rs1,530 (based on 9x EV/E) post the quarterly roll-over.

Birla Corporation: Financial Snapshot (Consolidated)

Result Summary

Blended EBITDA/ton increased 2.7x YoY/2% QoQ to Rs691 (Emkay est.: Rs710), whereas the cement division’s reported EBITDA/ton (including other income) increased ~3x YoY/3% QoQ to Rs683. Reported cement realizations declined 2% QoQ to Rs5062/ton due to a soft pricing situation in central markets. Volumes enhanced by 15% YoY (declined 5% QoQ) to 4.2mt with capacity utilization improving by 900bps YoY to 83%. Total cost/ton declined 9% YoY/ flat QoQ to Rs4,777. Variable cost (RM+P&F+Freight) declined by Rs90/ton QoQ in Q2FY24. The Mukutban plant has been progressing well and has reached 45% utilization rates in Sep-23. Consolidated FCF generation stood at Rs2bn post working capital release of Rs1bn and capex spend of Rs2.9bn in H1FY24.

What we liked: Ramp-up of the Mukutban plant.

What we did not like: Flat pricing scenario in H2FY24.

Key Concall Takeaways: 1) Prices are expected to remain stable in Q3FY24 and demand in key markets of Madhya Pradesh and Rajasthan may be impaired by state elections. 2) The share of premium products improved by 300bps YoY to 54%, while the blended cement ratio stood at 86%. 3) The Mukutban plant produced close to 1.5 lakh ton p.m. in Sep-23 and volumes have further gone up in Oct-23. Out of 1.5 lakh ton sold, more than 1 lakh ton was sold in Maharashtra. The company is targeting a monthly run rate of 2 lakh ton in Mukutban before Mar-24 end. 4) The company has achieved Rs50/ton savings through Project Shikhar. 5) Management expects a flat pricing scenario for H2FY24. There is some slackening in prices in Nov-23, and the company expects prices to improve post Diwali. 6) The new greenfield grinding unit at Prayagraj, UP, will cater to the core markets of eastern UP. The unit will be eligible for tax incentives along with savings in logistics and fly ash costs. 7) The jute business continued to face headwinds with poor overseas demand for VAP products.

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