Birla Corporation - Q1FY21 Result Update - YES SECURITIES

Birla Corporation - Q1FY21 - BUY (Target Rs943, Upside 44%)

BCORP posted volume de-growth of ~34% for Q1FY21 - which was in-line with industry de-growth. NSR of BCORP witnessed marginal decline of 0.5% y/y due to soft prices in East. Peer companies have delivered strong increase in NSR sequentially owing to pricing tailwinds in operating markets and higher share of trade mix (+10-15% shift in mix towards trade segment). However, operating markets of BCORP witnessed stable pricing while trade mix has been high historically for the company (80-85% of sales), leaving less scope for incremental improvement. Cost optimization measures and stable pricing translated into EBITDA/te of Rs 981 (-5% y/y). Absolute EBITDA stood at Rs 2,331 mn (-39.4% y/y) vs. our estimates of Rs 2,445 mn. We have upgraded EBITDA estimates by 5%/1.9% for FY21E/FY22E respectively due to better than anticipated demand and pricing in May-June combined with cost optimization measures. Accordingly, we expect peak net debt/EBITDA for BCORP at 3.3x in FY21E (despite factoring in that BCORP will not receive any subsidies in FY21E) vs previous est. of 3.6x. Currently BCORP is trading at EV/EBITDA of ~6.4x and EV/te of $62 on FY22E. Taking an average of EV/EBITDA and DCF derived values, we have a target of Rs 943/share (implied EV/EBITDA multiple of 8x on FY22E).

Shares of BIRLA CORPORATION LTD. was last trading in BSE at Rs.593.4 as compared to the previous close of Rs. 603.6. The total number of shares traded during the day was 30302 in over 1772 trades.

The stock hit an intraday high of Rs. 618 and intraday low of 590.4. The net turnover during the day was Rs. 18223671.

Source : Equity Bulls

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