Buy Birla Corporation; target of Rs 695: Motilal Oswal

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Motilal Oswal 's research report on Birla Corporation

Birla Corp's (BCORP) 4QFY20 results missed estimate due to 14% YoY volume decline. EBITDA/t though was up 30% YoY (+22% QoQ), led by higher realization (+5% YoY). While FY21 would be adversely impacted due to COVID-19, the outlook for FY22E remains positive as upcoming capacities should drive market share gains. Our FY21/22E estimates are broadly unchanged and we maintain Buy.

Outlook

Valuation is attractive at 4.4x FY22E EV/EBITDA (30% discount to its 10-year average) and USD48/t of capacity (significant discount to replacement cost). We value BCORP at 6.5x FY22E EV/EBITDA to arrive at TP of INR695. Maintain Buy.

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