Buy Birla Corporation Ltd - Motilal Oswal

Birla Corporation (BCORP IN; Mkt Cap USD0.6b, CMP Rs332, Buy)

Cement volumes were flat YoY (~7.3% QoQ) at 1.49mt. Realizations declined by 5% QoQ (~14% YoY) to Rs2,953/ton (against our estimate of Rs3,159/ton).

Net sales de-grew by 14% YoY (~1% QoQ) to Rs4.8b, impacted by a 13% YoY decline in cement revenues and 4% YoY de-growth in non-cement business.

EBITDA margins improved by 320bp QoQ (down ~10.1pp YoY) to 19% (against our estimate of 20.2%) and PAT de-grew by 38% YoY (flat QoQ) to Rs696m.

The company commissioned a 15MW WHRS based CPP in 3QFY11, with another 7.5MW WHRS unit to be commissioned in 4Q, driving savings of ~Rs70/ton.

An upgrade in our 4QFY11 pricing assumptions to Rs10/bag QoQ improvement (v/s Rs5/bag earlier) will drive a 7% upgrade in FY12 EPS to Rs59.8 and a 4% upgrade in FY13 to Rs72.5. The stock trades at 5.6x FY12E EPS and 4.6x FY13E EPS, and US$52/ton and US$37/ton respectively. Maintain Buy with a target price of Rs509 (~4x FY13E EV/EBITDA).

Source : Equity Bulls

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