23 May 2020
4QFY20 Results Update | Sector: Cement
Birla Corporation
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
CMP: INR406
TP: INR695 (+71%)
Buy
Volumes disappoint but margin remains strong
BCORP IN
77
31.2 / 0.4
808 / 373
-2/-12/-9
67
Capacity addition to drive market share gains in FY22E
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.
Financial Snapshot (INR bn)
Y/E MARCH
Sales
EBITDA
Adj. PAT
EBITDA Margin (%)
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
Net D:E
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA(x)
EV/ton (USD)
Div. Yield (%)
2020 2021E 2022E
69.2
60.3
75.8
Miss on estimates due to lower volumes
13.4
11.3
14.7
Consol. volumes were down ~14.3% YoY to 3.3mt (v/s est. 3.52mt).
5.1
3.0
4.7
Cement realizations increased 5.7% YoY (+3.1% QoQ) to INR4,889/t.
19.3
18.7
19.5
Net sales declined 9.8% YoY at INR16.9b (v/s est. INR18.21b).
65.6
38.4
60.5
97.6 (41.5)
57.6
Total cost/t was down 2% QoQ (flat YoY) to INR4,077 (0.7% above est.
624.1 654.4 703.2
INR4,047) on account of lower fuel costs and BCORP’s sustained investments
0.7
10.9
8.7
13.3
6.2
0.7
4.3
53
1.8
0.9
6.0
6.1
21.2
10.6
0.6
5.9
61
1.7
0.8
8.9
7.6
19.2
6.7
0.6
4.4
48
2.5
to improve efficiency and cost rationalization.
Consol. EBITDA/t increased 22% QoQ (+30% YoY) to INR1,044 (8% below est.
INR1,132).
EBITDA was up 11% YoY/17% QoQ to INR3.44b (v/s est. INR3.98b).
PAT stood at INR1.95b (+52% YoY), 18% above est. 1.66 bn.
While tax was lower in the quarter, RCCPL Pvt. Ltd’s migration to the new tax
regime has contributed significantly to PAT growth.
FY20 revenue/ EBITDA/ PAT at INR69.2b/INR13.4b/INR5.1b was up 6%/41%/
98% YoY.
Utilization stood at 93% (-5pp YoY) in 4QFY20 and at 91% in FY20.
Share of premium products grew 8% in FY20 and accounted for 41% of trade
sales. Share of blended cement in total sales was up to 93% in FY20.
Gross debt stood at INR42.26b in FY20 (up from INR40.49b in FY19), while
Net Debt stood at INR35b.
Capex of INR2.5b for Kundanganj grinding unit has been put on hold.
Mukutban integrated plant of 3.9mt and Chanderia clinker expansion of
0.4mt are expected to be commissioned by Jun’21 and Mar’21, respectively.
BCORP plans to increase capacity by 25% over the next 15 months, which
should support volume growth beyond FY22E. BCORP’s 55% capacity is in
Central India (our preferred market), which should aid pricing and margin.
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.
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-20 Dec-19 Mar-19
62.9
62.9
62.9
15.3
15.5
16.0
4.2
3.9
2.1
17.6
17.8
19.0
Highlights from management commentary
FII Includes depository receipts
Valuation and view
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com) +91 22 7199 2309
Basant Joshi - Research analyst
(Basant.Joshi@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
29 January 2020
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.