Buy Birla Corporation Ltd For Target Rs. 1,560 - Axis Securities Ltd
Healthy Operating Performance; Retain BUY
Est. Vs. Actual for Q2FY26: Revenue – BEAT; EBITDA Margin – BEAT; PAT – BEAT
Change in Estimates post Q2FY26 (Abs.)
FY26E/FY27E: Revenue: 1%/1%; EBITDA: -3%/0%; PAT: 0%/0%
Recommendation Rationale
* Capacity Expansion to Support Volume Growth: Total capacity is expected to rise to 27.6 mtpa from 20 mtpa by 2028–29. This will include the expansion of an integrated unit and the establishment of three new grinding units in Prayagraj (1.4 mtpa), Gaya (2.8 mtpa), and Aligarh (2 mtpa). Additionally, a clinker grinding unit of 3.7 mtpa will be set up at the existing facility in Maihar, MP. The ongoing Kundanganj expansion remains on track. We project a 7% volume CAGR over FY25–27E.
* Performance Improvement YoY: During the quarter, the company reported EBITDA/tonne of Rs 717, up 61% YoY, driven by higher volumes, better realisation, and lower costs. The cost of cement production remained flat YoY at Rs 4,400/tonne. Current prices are broadly in line with Q2FY26 exit levels in the trade segment. Consequently, we project EBITDA/tonne growth of 13% CAGR over FY25–FY27E to Rs 855/tonne.
* Robust Cement Demand in the Country: Cement demand in India is expected to remain healthy, supported by increased capital expenditure from the central government on roads, railways, and housing, along with sustained strength in the real estate sector. Additionally, higher infrastructure investments are likely to serve as a key catalyst for incremental demand. Overall, the industry is projected to grow at a 7-8% CAGR during FY24-27E.
Sector Outlook: Positive
Company Outlook & Guidance: Pricing is expected to remain dynamic in line with prevailing market conditions. The company anticipates cement demand to grow at a CAGR of 6–7% over the next few years and expects H2FY26 to witness stronger demand momentum
Current Valuation: 9x FY27E EV/EBITDA (Earlier Valuation: 9x FY27E EV/EBITDA). Current TP: Rs 1,560/share (Earlier TP: Rs 1,560/share)
Recommendation: We maintain our BUY recommendation on the stock
Alternative BUY Ideas from our Sector Coverage: UltraTech Cement Ltd (TP - 13,900/share), Dalmia Bharat (TP - 2,550/share), ACC Ltd (TP - 2,390/share), Star Cement (TP - 335/share), JK Lakshmi (TP - 1030/Share), Ambuja Cements (TP - 705/share), Shree Cement (TP - 31,655/Share)
Financial Performance
BCL reported a positive set of numbers, with Volume/Revenue/EBITDA growing at 7%/13%/72% YoY above expectations. The company reported a profit of Rs 90 Cr compared to Rs -25 Cr in the previous year. Cost/tonne remained largely flat YoY to Rs 4,474/tonne. BCL’s EBITDA/tonne stood at Rs 717, up 61% YoY. The company reported an EBITDA margin of 13.8%, compared to an estimated 12.8% and 9.1% YoY. Sales volumes for the quarter increased by 7% YoY to 4.25 mntpa. Blended realisation stood at Rs 5,192 per tonne, up 1%/6% QoQ /YoY.
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SEBI Registration number is INZ000161633
