MOSL: BIRLA CORPORATION (Buy)-Pricing weakness in east impacts margins
Birla Corporation: Pricing weakness in east impacts margins
(BCORP IN, Mkt Cap USD0.8b, CMP INR753, TP INR950, 26% Upside, Buy)
Capacity addition to drive growth
- EBITDA/ton was up 33% YoY (-12% QoQ) in 3QFY20, led by higher realizations (+4% YoY) and cost savings (+2% YoY). While BCORP witnessed some decline in trade sales due to seasonality, it remains focused on higher trade/premium cement sales and cost efficiencies over the longer term.
- Upcoming capacities bode well for volume/margin improvement, in our view. We maintain our FY20/21 estimates and Buy
EBITDA miss due to higher-than-estimated cost
- volumes were up ~7.2% YoY at 3.43mt (our estimate: 3.34mt).
- Cement realizations increased 4% YoY (-1.4% QoQ) to INR4,743/t. BCORP witnessed a sharp decline in prices in the eastern region.
- Net sales were up 10% YoY at INR17.2b (our estimate: INR16.6b).
- Total cost/ton was up 1% QoQ (-2% YoY) at INR4,141 (3% above our estimate of INR4,040). Note that consumption of higher-cost clinker inventory offset the benefit of lower power & fuel and freight costs.
- EBITDA/ton declined 12% QoQ (+33% YoY) to INR859 (9% below our estimate of INR946).
- EBITDA stood at INR2.9b (+42% YoY, -6% QoQ) v/s our estimate of INR3.2b.
- PAT stood at INR815m (3x of FY19), 10% below our estimate of INR903m.
Birla is engaged in the manufacture and sale of cement in India. Co.'s Cement division offers various cements, such as ordinary portland cement, 43 and 53 grades, portland pozzolana cement, fly ash – based PPC, low alkali portland cement, portland slag cement, low heat cement, and sulphate resistant cement. Its Jute division provides a range of products, including jute yarn, floor and wall covering, lino hessian, decorative fabrics, nursery cloth, scrim, jute carpets, non-woven jute felt, hydrocarbon-free bags/cloth, D.W. canvas, carpet backing cloth, hessian cloth/bags, and sacking bags/cloth.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.