Company Update : Birla Corporation Ltd By Motilal Oswal Financial Services Ltd
Earnings below estimate; EBITDA/t at INR551
* BCORP’s 3QFY25 operating performance was below our estimates due to lower-than-expected realization and higher-than-estimated variable cost/t. Although sales volume grew 7% YoY (+4% vs. our estimate), consol. EBITDA declined ~34% YoY to INR2.5b (est. INR2.7b). EBITDA/t declined ~39% YoY to INR551 (est. INR614). OPM dipped 5.4pp YoY to ~11% (est. ~12%). Adj PAT declined ~71% YoY to INR312m (est. INR444m).
* The company’s overall capacity utilization stood at ~92%, compared to ~85% in 3QFY24, aided by improved performance at its Chanderia plant (North). It is steadily increasing renewable energy (RE) usage, reaching 26% of total power consumption in 3QFY25 from ~25% in 2QFY25. In Jan’25, its Maihar unit secured a 12MW wind-solar hybrid power agreement, which is likely to increase the RE power % at this plant to ~45% by end-4QFY25.
* We have a BUY rating on the stock; we will review our assumptions after the conference call.
Volumes rise 7% YoY; opex/t declines 3% YoY
* Consol. revenue/EBITDA/Adj. PAT stood at INR22.6b/INR2.5b/INR312m (down 2%/34%/71% YoY and +3%/-7%/-30% vs. our estimates) in 3QFY25. Sales volumes increased 7% YoY to 4.5mt (+4% vs. our estimate). Cement realization declined 10% YoY and 1% QoQ to INR4,790 (-1% vs. estimate).
* Opex/t declined ~3% YoY (1% above our estimate), driven by a 6% decline in variable costs (+3% vs. our estimate). Employee cost/other expense per ton declined ~5%/1% YoY, whereas freight cost remained flat. OPM contracted 5.4pp YoY to ~11% and EBITDA/t decreased 39% YoY to INR551. Interest costs dipped 14% YoY, and ‘Other income’ declined 5% YoY. ETR stood at ~25% vs. 29% in 3QFY24.
* In 9MFY25, consol. revenue/EBITDA/PAT declined 9%/29%/83% YoY. Sales volume remained flat YoY and realization fell ~9% YoY. OPM contracted 3pp YoY to ~11% and EBITDA/t declined 30% YoY to INR532.
Highlights from management commentary
* Healthy rural demand and higher government spending boosted cement demand, enabling a December price hike sustained through January.
* The blended cement share declined to 79% from 83% in 3QFY24, and trade volume declined to 68% from 69% in 3QFY24. Premium cement share (as % of trade volume) increased to 59% vs. 52% in 3QFY24.
* Despite sluggish demand and depressed prices, the company boosted premium cement sales by 19% YoY to 1.8 MT, with Perfect Plus growing 23% YoY.
Valuation and View
* BCORP’s 3QFY25 operating performance was below our estimates due to lower retaliation and higher opex/t. However, volume growth was impressive with improved capacity utilization. The management is optimistic about the improvement in operations and profitability.
* We have a BUY rating on the stock. We will review our assumptions after the concall on 05th Feb’25 at 14:00 IST (Link for the Call).
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