MOSL: BIRLA CORPORATION (Buy)-In-line volumes, margins miss led by lower-than-estimated realizations
Birla Corporation: In-line volumes, margins miss led by lower-than-estimated realizations
(BCORP IN, Mkt Cap USD0.9b, CMP INR793, TP INR1030, 30% Upside, Buy)
- Acquired assets report healthy volume growth: volumes increased 7% YoY to 3.52mt (est. of 3.54mt), led by ramp-up of Reliance assets. Cement realizations declined 1% QoQ to INR4,499/t (est. of INR4,604) due to weaker pricing in north, partially offset by better pricing in central markets. Thus, net sales stood at INR16.6b (est. of INR17b; +13.5%YoY, flat QoQ).
- Cost curve impacted: Total cost/t increased 8% YoY (-2% QoQ) to INR4,007, led by higher freight cost/t (+20% YoY) and higher other expenses/t (+9% YoY). Increase in freight cost/t was driven by higher diesel prices. Power & fuel cost/t increased 9% QoQ due to higher petcoke and coal prices. Thus, consol. EBITDA/t stood at INR701 (est. of INR744; -4% YoY, -5% QoQ), leading to EBITDA of INR2.5b (est. of INR2.6b; +3% YoY; -2% QoQ). Adj. PAT increased 44% YoY to INR803m.
- Capacity expansion announced: The board approved greenfield capacity expansion of ~3.9mt in Maharashtra at a total capex of INR24b, which translates into EV/t of USD93. The capacity is likely to get commissioned by FY22, which indicates that net debt is unlikely to increase meaningfully from current levels and capex requirement would be met through internal accruals.
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.
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