Buy Birla Corporation, target price Rs 1337: HDFC Securities

HDFC Securities has buy call on Birla Corporation with a target price of Rs 1337. The current market price of Birla Corporation Ltd. is Rs 973.45. Time period given by analyst is one year when Birla Corporation Ltd. price can reach defined target.

Birla Corporation Ltd., incorporated in the year 1919, is a Mid Cap company (having a market cap of Rs 7635.08 Crore) operating in Cement sector.

Birla Corporation Ltd. key Products/Revenue Segments include Cement, Jute Goods, Royalty Income, Other Operating Revenue, Export Incentives and Others for the year ending 31-Mar-2021.


Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 2218.06 Crore, down -4.95 % from last quarter Total Income of Rs 2333.54 Crore and up 26.14 % from last year same quarter Total Income of Rs 1758.41 Crore. Company reported net profit after tax of Rs 61.92 Crore in latest quarter.

Investment Rationale
The brokerage maintains BUY rating on Birla Corporation (BCORP), with an unchanged target price of INR 1,337/share (9x Mar-24E consolidated EBITDA). Healthy pricing in north and central regions buoyed pricing by 5% QoQ. High fuel prices (+20% QoQ), low utilisation, and stabilisation expenses of Mukutban drove up unitary opex by 6% QoQ. Adjusted unitary EBITDA (ex-Mukutban) recovered 15% QoQ to INR 744 per MT. Operating losses amid ramp-up of Mukutban during FY23 should drag down its FY23 EBITDA by ~10% (15% impact in Q1). BCORP has guided this plant to become EBITDA break-even by FY23 end. With major Capex done, it expects gearing to cool off during FY23- 24E.

Promoter/FII Holdings
Promoters held 62.9 per cent stake in the company as of 30-Jun-2022, while FIIs owned 4.34 per cent, DIIs 16.05 per cent.