Hold Birla Corporation Ltd For the Target Rs.1,295 by Choice Broking Ltd
Rising scale from capacity expansion and focus on cost reduction to further improve the pricing and profitability
* Q3FY25 consolidated revenues came at INR22,567 Mn, (vs CEBPL est. INR21,868 Mn), down 2.4% YoY and up 15.6% QoQ. Total volume for Q3 stood at 4.5mnt, (vs CEBPL est. 4.4mnt), up 7.1% YoY and 13.4% QoQ.
* Net sales realization for Q3FY25 stood at INR5,015/t, (vs CEBPL est. INR5,027/t) down 8.9% YoY and up 2.0% QoQ.
* Consolidated EBITDA for Q3FY25 was reported at INR2,479 Mn, (vs CEBPL est. INR2,610 Mn) down 34.5% YoY and up 39.9% QoQ. EBITDA/t for Q3 came at INR551/t, (vs CEBPL est. INR600/t), down 38.9% YoY and up 23.4% QoQ.
* PAT for Q3FY25 reported at INR312 Mn, (vs CEBPL est. INR334 Mn) down 71.5% YoY and a loss in Q2FY25 of INR252 Mn
Targeting 25 MTPA capacity by FY27 from 20 MTPA in FY24, is already 80% done: BCORP aims to expand capacity from 20MT to 25MT by FY27. The 1.4MT Kundangunj GU (Line 3) is set for commissioning in Q1FY26, along with a 1.4MT GU in Prayagraj, UP. Phase 2 expansion at Maihar is planned for FY27E, doubling clinker capacity from 10,000 TPD to 20,000 TPD. Management has given a capex guidance of INR5,000 Mn for FY25. We expect the volume growth to be driven by its robust expansion plan, expecting 20.8 MTPA of volume by FY27, with ~83% capacity utilization.
Relentless focus on cost optimization to drive profitability, pushed by Project Shikhar & Project Unnati: We expect a decline in total costs of ~INR 200/t by FY27, supported by Project Shikhar and Project Unnati. The company plans to increase its captive fuel procurement to 30-35% (up from the current 15%), which is 25-30% cheaper, and invest more in green power, targeting 35% green power usage within the next 1.5 years. These initiatives are projected to reduce power and fuel costs by over INR 100/t, while freight costs are expected to decrease by INR 60/t due to reduced lead distances and an optimized go-tomarket strategy. As a result, EBITDA/t is expected to increase to INR 820/t by FY27.
View & Valuation: We revise our FY26/27 EPS estimates by 6.1%/5.4% and maintain our rating to ‘HOLD’ with a revised TP of INR1,295, valuing it at 7.5x (unchanged) on FY27 EV/EBITDA. Management has guided for 7-8% volume growth in FY25. We anticipate strong growth for cement companies in Q4FY25, driven by the government’s continued focus on infrastructure development. As a result, we estimate Q4 volumes to reach 4.8 Mnt. Additionally, the management’s positive outlook on cement pricing is expected to support the company's profitability
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SEBI Registration no.: INZ 000160131
