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Birla Corporation - Strong Q4 FY17; acquisition reporting strong numbers; Buy - Anand Rathi
Posted On : 2017-06-09 23:48:50( TIMEZONE : IST )
Aided by cost efficiencies, Birla Corp's strong volumes and realisations helped it report a good Q4 FY17, with revenue growing 6% yoy. Its recent acquisition of Reliance Cement would offer synergies and propel it to a higher league. Based on 11x Mar'19e EV/EBITDA and an EV/ton of $108, our fair price is Rs. 1,050 (earlier Rs. 819).
Revenues jump 6% yoy. Birla Corp's cement revenue rose 6% yoy in Q4 FY17 (more than we estimated), driven by better realisations, up 11% yoy to Rs. 4,514 a ton, while volumes slipped 3% yoy to Rs. 2.15m tons. Revenue of the jute division declined 13% yoy.
EBITDA flat yoy. EBITDA was Rs. 949m, down ~8% yoy chiefly due to the cement division's lower-than-expected EBIT margin. Cost per ton rose 14% yoy; of this, freight cost rose 12% yoy, and power & fuel was up 2% yoy. Lower volumes and higher other expenditure led to EBITDA/ton of Rs. 343 (Rs. 426 a year ago, Rs. 255 the previous quarter). The jute division also disappointed on the margin front and reported a PBIT of Rs. 26m (Rs. 93m a year ago, Rs. 45m the quarter prior).
Reliance acquisition. Consolidated figures have been strong following the greater synergies from the acquisition of Reliance Cement. Consolidated EBITDA/ton for the year came at ~Rs. 590/ton (helped by the strong Rs. 1,175/ton from Reliance Cement).
Balance sheet at peak leverage. As the Reliance Cement acquisition was completely funded by debt, the gross debt has risen to Rs. 46bn, while net D/E was 1.1x. However, given the synergies and cash-flows from the acquisition, we expect the net D/E to decline to 0.8x by FY19.
Valuations. We retain our Buy recommendation, with a revised price target of Rs. 1,050 (earlier Rs. 819), based on 11x Mar'19e consolidated EV/EBITDA and $108 EV/ton.
Risk. Cement-price drop.
Shares of BIRLA CORPORATION LTD. was last trading in BSE at Rs.915 as compared to the previous close of Rs. 908.4. The total number of shares traded during the day was 86501 in over 229 trades.
The stock hit an intraday high of Rs. 922 and intraday low of 902.1. The net turnover during the day was Rs. 79369768.
