Buy Birla Corporation Ltd for Target Rs.1,650 by Choice Institutional Equities
* Outlook:
We maintain our BUY rating on BCORP with a TP of INR 1,650/share. Our Volume, Realisation, EBITDA/t and EBITDA assumptions remain unchanged. We continue to be constructive on BCORP owing to sector tailwinds, such as 6–8% expected demand growth in the industry and healthy pricing. We are optimistic based on: 1) Expansion drive to increase capacity by 7.5mtpa to 27.5mtpa by FY29E, 2) Strategy towards increasing blended cement share, 3) Sharpening focus on premium products and trade sales to lift realisation and 4) Cost-saving initiative which would drive opex lower by ~INR 200/t over the next couple of years. Hence, ROCE (ex-CWIP) expands by 713 bps, from 6.2% in FY25 to 13.3% in FY28E.
* We forecast BCORP EBITDA to expand 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.
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