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Strategic expansion to meet rising demand

We upgrade BCORP from HOLD to BUY as we revise our Volume, Realisation/t EBITDA/t and EBITDA assumptions higher (Exhibit 2) mostly due to sector tailwinds and also due to company specific reasons like a) Cost savings initiatives that would drive opex lower by ~INR 200/t over the next couple of years and b) Premiumization efforts which would help keep realisations strong. Consequently, RoCE (ex-CWIP) expands by 680 bps, from 6.2% in FY25 to 13.0% in FY28E.

We forecast BCORP EBITDA to grow at a CAGR of 23.7% over FY25-28E based on our volume growth assumptions of 6%/7%/7%, and realisation growth of 4.0%/1.5%/0.0% in FY26E/27E/28E, respectively. We are positive on BCORP’s premiumization strategy and its strong cost-saving initiatives, including plans to increase the share of renewable energy from 25% in FY25 to 36% over the next 2–3 years, and a focus on cost reduction of INR 200/t by FY27E through Project Unnati and Shikhar.

BCORP is also executing an aggressive capacity expansion plan, which is expected to increase capacity by ~38% from 20 Mtpa in FY25 to ~27.5 Mtpa by FY29E at a reasonable capital cost of USD 67/t, while maintaining leverage under control (net debt to EBITDA to be maintained below 2x). This further strengthens the company’s long-term growth outlook. We have also factored in volumes from this expansion program into our operational assumptions, as 5 Mtpa of capacity is expected to be commissioned in FY28

We incorporate a robust EV to CE (Enterprise Value to Capital Employed) based valuation framework (Exhibit 3), which gives us the flexibility to assign a commensurate valuation multiple basis an objective assessment of the quantifiable forecast financial performance of the company.

We arrive at a 1-year forward TP of INR 1,620/share for BCORP. We now value BCORP on our EV/CE framework – we assign an EV/CE multiple of 1.15x/1.15x for FY27E/28E, which we believe is conservative given the doubling of ROCE (exCWIP) from 6.2% in FY25 to 13.0% in FY28E under reasonable operational assumptions. We do a sanity check of our EV/CE TP using the implied EV/EBITDA multiple. On our TP of INR 1,620, FY28E implied EV/EBITDA multiple is 7.1x, which is reasonable.

Q4FY25 Results: Strong EBITDA beat driven by better-than-expected realizations and lower cost to an extent

BCORP reported Q4FY25 consolidated Revenue and EBITDA of INR28,149 Mn (+6.0% YoY, 24.7% QoQ) and INR5,338 Mn (+13.0% YoY, +115.3% QoQ) vs CEBPL estimates of INR26,757 Mn and INR4,324 Mn, respectively. In our view, the market expectation of Q4FY25 EBITDA was INR 3,900-4,600 Mn, so the reported numbers are well ahead of street expectations. Total volume for Q4 stood at 5.3 Mnt (vs CEBPL est. 5.2 Mnt), up 8.2% YoY and 16.7% QoQ.

Realization/t came in at INR5,362/t (-2.1% YoY and +6.9% QoQ), which is better than CEBPL’s est of INR5,115/t. Total cost/t came at INR4,345/t (-3.5% YoY and - 2.7% QoQ). As a result, EBITDA/t came in at INR 1,017/t, which is an expansion of ~INR466/t QoQ, which is well ahead of the market expectations.

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