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Higher realization drives earnings beat

Volume growth at ~8-9% YoY in FY25E; EBITDA/t to grow ~8-10% YoY

* Birla Corporation (BCORP)’s 4QFY24 consol. EBITDA increased 72% YoY to INR4.7b (vs. estimated INR4.0b), while EBITDA/t grew 58% YoY to INR974 (est. INR801). OPM surged 6.6pp YoY to 17.8% (est. ~15.0%) for the quarter. Adj. PAT stood at INR1.9b vs. estimated INR1.4b for 4QFY24.

* Mukutban unit’s capacity utilization improved to ~68% in 4QFY24 and ~77% in Mar’24. It targets 2.7mt of volume from the Mukutban plant (~70% utilization) in FY25. Management guided a volume growth of ~8-9% YoY in FY25 and ~8-10% improvement in EBITDA/t. Currently, BCORP is focusing on expanding the grinding capacity, while clinker expansion is likely by FY27.

* We retain our earnings estimates for FY25/26. However, we raise our TP to INR1,800 (from INR1,700) due to a higher-than-estimated CFO in FY24 and a lower capex in FY24/FY25E. We value the stock at 9x FY26E EV/EBITDA to arrive at our TP. Reiterate BUY.

Volume up 9% YoY; Opex/t down 9% YoY

* Consolidated revenue/EBITDA/Adj. PAT stood at INR26.6b/INR4.7b/INR1.9b (up 8%/72%/165% YoY and in line/up 19%/31% vs. our estimates) in 4QFY24. Sales volume grew 9% YoY to 4.85mt (2% below our estimate). Cement realization declined 1%/2% YoY/QoQ to INR5,218 (3% above estimates).

* Opex/t dipped 9% YoY (1% below estimate), led by a 15% decline in variable costs, and a 4% decline in freight costs. Other expenses/t remained flat YoY. OPM jumped 6.6pp YoY to 17.8%, and EBITDA/t was up 58% YoY to INR974.

* In FY24, revenue grew 11% YoY to INR97b, largely led by 12% YoY volume growth. EBITDA rose 86% YoY to INR14.4b, while OPM surged 6pp YoY to ~15%. EBITDA/t rose 66% YoY to INR815. Net profit surged 11.5x YoY to INR4.2b.

* The company’s OCF doubled YoY to INR16.2b in FY24. BCORP’s capex stood at INR5.3b vs. INR6.3b in FY23. FCF stood at INR11.0b vs. INR1.8b in FY23.

Highlights from the management commentary

* The company expects state incentives for the Mukutban plant to accrue from the beginning of FY25 (vs. previous estimate of 4QFY24). The total incentive accrual is estimated at INR1.1b in FY25, largely from the Mukutban plant.

* Fuel consumption costs stood at INR1.56/Kcal vs. INR1.58/Kcal in 3QFY24. Operations at the Bikram coal mine are likely to commence from 2QFY25.

* Capex is pegged at INR8b in FY25E, of which INR4b is for maintenance and other projects, INR2b for coal mine development, and INR2b for the Kundanganj line-3.

Valuations attractive; reiterate BUY

* We estimate a consol. revenue/EBITDA/PAT CAGR of 7%/11%/28% over FY24- 26. We further estimate BCORP’s net debt to decline to INR21b in FY26 from INR30b in FY24 and net debt-to-EBITDA to improve to 1.2x from 2.1x in FY24.

* BCORP currently trades at 8.6x/7.5x FY25E/26E EV/EBITDA, at a lower valuation than its similar-sized peers. We reiterate our BUY rating with a revised TP of INR1,800 (vs. 1,700), based on 9x FY26E EV/EBITDA.

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