IGI Logo

Multiple Tailwinds in the Long Term

We maintain our BUY rating on BCORP with a TP of INR 1,650/share (vs earlier 1,620). We maintain our Volume, Realisation, EBITDA/t and EBITDA assumptions (Exhibit 2). We continue to be constructive on BCORP due to sector tailwinds like 6-8% expected demand growth for the industry, healthy pricing and also due to company specific reasons like: 1) Expansion drive to increase capacity by 7.5mtpa to 27.5mtpa by FY29, 2) Focus towards increasing blended cement share, 3) Sharpening focus on premium products and trade sales to lift realizations, and 4) Cost savings initiatives that would drive opex lower by ~INR 200/t over the next couple of years. Consequently, RoCE (exCWIP) expands by 709 bps, from 6.2% in FY25 to 13.3% in FY28E.

We forecast BCORP EBITDA to grow at a CAGR of 24.0% 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 arrive at a 1-year forward TP of INR 1,650/share for BCORP. We value BCORP on our EV/CE framework – we assign an EV/CE multiple of 1.1x/1.1x for FY27E/28E, which we believe is conservative given the doubling of RoCE (ex-CWIP) from 6.2% in FY25 to 13.3% 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 1,650, the FY28E implied EV/EBITDA multiple is 7.2x, which is reasonable.

Q1FY26 Results: Sharp QoQ drop in realization impacted overall result

BCORP reported Q1FY26 consolidated Revenue and EBITDA of INR 24,542Mn (+12.0% YoY, -12.8% QoQ) and INR 3,467Mn (+34.3% YoY, - 35.0% QoQ) vs Choice Institutional Equities (CIE) estimates of INR 24,329Mn and INR 3,730Mn, respectively. Total volume for Q1 stood at 4.8 Mnt (vs CIE est. 4.5 Mnt), up 9.4% YoY and down 8.8% QoQ.

Blended realization/t came in at INR 5,124/t (+2.5% YoY and -4.4% QoQ), which is below CIE est. of INR 5,389 /t. Total cost/t came in at INR 4,400/t (-0.3% YoY and +1.3% QoQ). As a result, EBITDA/t came in at INR 724/t, which is a decline of ~INR 293/t QoQ.

Capacity expansion with prudent leverage to drive long-term growth:

BCORP is undertaking a robust capacity expansion plan, aiming to increase its cement capacity by ~38%, from 20 MTPA in FY25 to ~27.5 MTPA by FY29E. This expansion is being pursued at a competitive capital cost of USD 67/tonne, while maintaining financial discipline with net debt-to-EBITDA expected to remain below 2x. This positions the company well for sustained long-term growth. Our operational assumptions already incorporate this capacity addition, with 5 MTPA slated for commissioning in FY28.

Key Risks:

* The company faces a risk of future profitability impact if unforeseen operational issues necessitate costly external clinker purchases again, as seen in Q1FY26 due to shortages.

* Despite a focus on 'value share,' the company's limited immediate capacity expansion before 2027 could hinder its ability to grow volume market share against larger, aggressively expanding competitors.

Better-than-expected volume print

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131