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Profitability improves; capex unveiled

Birla Corp’s 4QFY25 consolidated EBITDA increased 13% YoY/ 2.2x QoQ to its highest ever at INR 5.3bn, sharply beating our and consensus estimates by >30% owing to better-thanexpected realisation (+7% QoQ vs. JMFe: +2.2% QoQ). It resulted in healthy increase in EBITDA/tn sequentially (+4% YoY/ +85% QoQ) to INR 1,017 (JMFe: INR 780). Net debt declined by ~INR 8bn YoY to INR 22.4bn as of Mar’25. With improving profitability and reduction in leverage, the company has announced new expansions to increase its cement capacity by 30% to 27.6mt by FY29 (~8% CAGR) at a capex of INR 43.3bn, addressing investors’ concerns on volume growth. The company has also entered into the business of ready mix concrete (RMC) in 4Q. Besides, the term of Mr Sandip Ghose, current MD & CEO, has been extended by another 3 years w.e.f. Jan’26. Factoring in 4Q beat and better profitability, we have increased our FY26-27E EBITDA estimates by 6-8%. We maintain BUY with a revised Mar’26 TP of INR 1,600/sh based on 9x FY27 P/E.

* Result summary: Cement EBITDA/tn increased 5% YoY/ 78% QoQ to INR 1,014/tn (+INR 445/tn QoQ), mainly driven by higher realisation sequentially. Reported cement realisation contracted 1% YoY/ grew 7% QoQ to INR 5,103/tn. Volume rose 8% YoY/ 17% QoQ to 5.25mt with capacity utilisation rates improving by 800bps YoY to 105% in 4Q. The company also entered into the business of ready mix concrete (RMC) in 4Q. The management mentioned that the initial experience in the Uttar Pradesh market was encouraging, and said the company was looking to further scale up the business. In FY25, it generated an FCF of INR 9.1bn post working capital release of INR 4.7bn and capex spend of INR 4.4bn. Post dividend payment, net debt declined by INR 7.5bn YoY to INR 22.4bn as of Mar’25.

* What we liked: Sharp improvement in profitability, decline in net debt, capex announcement.

* Earnings Call KTAs: 1) Change in geographical mix with higher share of North and East regions led to sequential improvement in realisation in 4Q. The management mentioned that average spot cement prices in its key markets are broadly similar to average price in 4Q; 2) Incentive income was broadly flat QoQ at INR 410mn. In FY25, incentive income was INR 1.03bn; 3) The management has guided for industry growth of 6-8% in FY26, and the company is expected to grow at least in line with the industry; 4) Capex guidance for FY26 stands at INR 11bn; 5) With capex announcement, absolute net debt level is likely to go up; however, net debt to EBITDA is still expected to be <2x in the next couple of years; 6) Blended fuel cost was INR 1.39/ Mcal in 4Q vs. INR 1.5/ Mcal in 3Q; 7) Volume from Mukutban plant was 0.75mt in 4Q (~75% utilisation) and 2.45mt in FY25. The management mentioned that it is targeting to end up with ~85% utilisation by Mar-26 end; 8) Lead distance for the quarter stood at 350kms in 4Q, broadly flat on sequential basis; 9) Current clinker capacity stands at ~13mt.

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SEBI Registration Number is INM000010361