Buy Birla Corporation Ltd for the Target Rs. 1,490 by Choice Institutional Equities
Near-term pain, long-term positives
We maintain our BUY rating on BCORP, while revising our target price downward to INR 1,490/share (earlier INR 1,650), factoring in earnings downgrades of ~6.4% for FY27E and ~2.7% for FY28E amid elevated input cost pressures arising from geopolitical uncertainty.
We expect a cost increase of INR 150–170/t in Q1FY27 versus Q4FY26, primarily due to higher power and fuel expenses (~INR 100/t), with the balance attributable to logistics and PP bag cost. Although the company has initiated price hikes and further increases are anticipated, we estimate a net cost escalation of ~INR 50/t, which is likely to keep FY27E EBITDA/t at ~INR 808/t.
Despite near-term margin pressures, we remain constructive on BCORP, supported by:
1) Improving industry pricing outlook and sector tailwinds
2) Capacity expansion plans to increase capacity by 6.2 Mnt to 27.5 Mnt by FY29E
3) Continued focus on increasing blended cement share
4) Higher contribution from premium products and trade sales to improve realisations.
We expect BCORP’s EBITDA to expand at a CAGR of 12.8% over FY26–29E, driven by volume growth assumptions of 6.0%/7.0%/8.0% and realisation growth of 1.5%/1.0%/0.5% for FY27E/FY28E/FY29E, respectively.
We derive our 1-year forward target price of INR 1,490/share using the EV/CE valuation framework and assign an EV/CE multiple of 1.1x on FY28E estimates.
Q4FY26 result: Earnings outperform street estimates
BCORP reported Q4FY26 consolidated revenue and EBITDA of INR 28,361 Mn (+0.8% YoY, +31.4% QoQ) and INR 5,103 Mn (-4.4% YoY, +74.4% QoQ) vs CIE estimate of INR 27,542 Mn and INR 4,517 Mn, respectively. Total volume for Q4 stood at 5.5 Mnt (vs CIE estimate 5.3 Mnt), up 3.8% YoY and up 28.8% QoQ.
Blended Realisation/t came in at INR 5,204/t (-2.9% YoY and +2.0% QoQ), which is higher than the CIE estimate of INR 5,169/t. Total Cost/t came in at INR 4,268/t (-1.8% YoY and -3.3% QoQ). As a result, EBITDA/t came in at INR 936/t, which is an increase of ~INR 245/t QoQ.
Key Risks:
Geopolitical volatility risk: Possible prolonged geopolitical disruption could lead to an increase in petcoke price, resulting in higher input cost and margin pressure.
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