Motilal Oswal - Birla (BIRLACORPN) MOSL: BIRLA CORPORATION (Buy)-Higher costs impact margins

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Motilal Oswal

MOSL: BIRLA CORPORATION (Buy)-Higher costs impact margins

Birla Corporation: Higher costs impact margins

(BCORP IN, Mkt Cap USD1.1b, CMP INR1002, TP INR1234, 23% Upside, Buy)

Ramp up of acquired assets resulted in strong volume growth: Consolidated volumes rose 22% YoY to 3.03mt (our estimate: 3.0mt) due to ramp up of Reliance operations from 55% to 81% utilization. Consolidated realizations declined 2% QoQ to INR4,585/t (our estimate: INR,4642/t) due to weaker pricing in the North. Net sales were INR13.89b (+29% YoY, +12% QoQ; our estimate: INR14.28b).
Margins impacted by cost push: Total cost/t for consolidated operations increased 5% YoY (3% QoQ) to INR4,127 due to higher shutdown and maintenance expenses. Power and fuel cost/t increased 21% YoY due to increase in petcoke prices. Raw material cost increased 19% QoQ due to increase in slag prices for eastern operations. Consolidated EBITDA/t was INR458 (-6% YoY, -31% QoQ), and EBITDA was INR1.38b (+15% YoY, -22% QoQ; our estimate: INR1.8b). Acquired assets reported EBITDA/t of INR913 (-15% QoQ) due to lower realizations while standalone operations reported EBITDA/t of INR199 (-40%YoY, -55%QoQ). Margins were at 10% (-1.23pp YoY, -4.33pp QoQ). Interest expense fell 17% YoY (and 9% QoQ) to INR958m due to refinancing of debt. Reported loss was INR218m (our estimate: profit INR44m).
Key points from management press release: (1) Premium brand contributes 25% of company's sales (both in terms of volumes and value); (2) Realizations impacted due to lower demand in Rajasthan, Haryana and Delhi; (3) Freight cost increased due to non-availability of railway rakes.

12/02/2018 8 EN

Underlying

Birla

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.

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INE340A01012 National Stock Exchange of India India

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Motilal Oswal

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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MOSL: BIRLA CORPORATION (Buy)-Higher costs impact margins

MOSL: BIRLA CORPORATION: Higher volume and realization drive EBITDA beat

BIRLA CORPORATION sees its risk increased and a downgrade to Neutral

MOSL: BIRLA CORPORATION (Buy)-Expansion plans provide growth visibility

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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