Maintain BUY on Birla Corporation - Superior performance - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities

Birla Corp (BCORP)'s 2QFY21 consolidated revenue/EBITDA/APAT surged 2/23/89% YoY to Rs 16.54/3.83/1.67bn respectively on buoyant realisation and opex reduction. Healthy OCF generation in 1HFY21 supported the ongoing Capex and kept its net debt stable. BCORP remains our top-pick in the midcap space. We like the company for its large retail presence in the lucrative north/central markets and ongoing opex reductions. We maintain BUY with a higher target price of Rs 1,297 (8.5x Sep'22E consolidated EBITDA).

Results highlights: Sales volume rose 2% YoY to 3.26mn MT, supported by higher sales in UP, MP and Bihar. NSR firmed up 1% YoY on a high base. Continued cost reduction supported margin further as opex fell 4% YoY. Thus, unitary EBITDA buoyed 20% YoY to Rs 1,153/MT (20% beat led by lower than estimated costs), boosting EBITDA/APAT. During 1HFY21, strong OCF growth and lower Capex spend helped BCORP reduce its gross debt by 5% vs Mar'20. Net debt remained flat at Rs 34bn.

Capex updates and outlook: BCORP's 0.6mn MT clinker expansion in Rajasthan is nearing completion. Its 4mn MT Greenfield plant in Maharashtra is expected by Sep'21. Enthused by better cash flow, BCORP has revised its 1.2mn MT SGU expansion in UP. BCORP remains our top- pick in the mid-cap space. We like the company for its extensive retail presence in the lucrative north/central regions, substantial ongoing cost reduction and healthy balance sheet despite significant expansions. We have increased our EBITDA estimates for FY21/22/23E by 9/6/6% respectively factoring-in robust opex trends. We maintain BUY with a higher target price of Rs 1,297/share (8.5x Sep'22E consolidated EBITDA).

Shares of BIRLA CORPORATION LTD. was last trading in BSE at Rs.668.75 as compared to the previous close of Rs. 643.5. The total number of shares traded during the day was 64086 in over 4157 trades.

The stock hit an intraday high of Rs. 700.5 and intraday low of 665.65. The net turnover during the day was Rs. 43451173.

Source : Equity Bulls

Keywords