Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We are positive on Birla Corporation Ltd. (BCL) due to 1) Its exposure
to better performing markets 2) Upcoming capacity to drive volume
growth 3) Low gearing level 4) attractive valuations. Our FY13E target
price of Rs 311 values the Company at EV/tonne of US$50 which
implies 17% upside from the CMP. We initiate coverage on Birla
Corporation with a BUY rating.
Investment Theme
Expect 6% CAGR in volumes over FY11‐14E on the back of capacity
expansion
We expect volume growth to improve to 6% CAGR over FY11‐14E as
against 4% CAGR over FY08‐11. Volume growth would be driven by
2.7 million TPA cement expansion at Chanderia (Rajasthan) and 0.6
million TPA At Durgapur (West Bengal) by FY14E.
Exposure to better performing markets
BCL’s sales volume comes from North (35%), East (25%) and Central
(40%) regions. We expect the Company to benefit as these regions
will see substantial reduction in incremental supply from new &
existing players and improvement in demand in FY13E.
Expansion plans will be largely funded through internal accruals‐ No
dilution risk
We expect that the total capex for the expansion (3.3 million TPA
cement capacity + 102.5 MW thermal power plant) of Rs 16 bn to be
incurred by FY14E would be largely funded through internal cash
flows. In case any additional funding is required for further expansion,
considering its low gearing (FY 14E D/E at 0.5); we expect it to be
easily accommodated by the balance sheet.
Valuation
On EV/EBITDA basis, the Company is trading at 4.3x FY12E EBITDA and
3.6x FY13E EBITDA respectively. We have valued the business (FY13
capacity) at EV/ton of US$ 50 which is at 50% discount to the
replacement cost. Our FY13E end target price of the stock stands at Rs
311 which implies 17% return. We recommend “Buy” at current
market price.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We are positive on Birla Corporation Ltd. (BCL) due to 1) Its exposure
to better performing markets 2) Upcoming capacity to drive volume
growth 3) Low gearing level 4) attractive valuations. Our FY13E target
price of Rs 311 values the Company at EV/tonne of US$50 which
implies 17% upside from the CMP. We initiate coverage on Birla
Corporation with a BUY rating.
Investment Theme
Expect 6% CAGR in volumes over FY11‐14E on the back of capacity
expansion
We expect volume growth to improve to 6% CAGR over FY11‐14E as
against 4% CAGR over FY08‐11. Volume growth would be driven by
2.7 million TPA cement expansion at Chanderia (Rajasthan) and 0.6
million TPA At Durgapur (West Bengal) by FY14E.
Exposure to better performing markets
BCL’s sales volume comes from North (35%), East (25%) and Central
(40%) regions. We expect the Company to benefit as these regions
will see substantial reduction in incremental supply from new &
existing players and improvement in demand in FY13E.
Expansion plans will be largely funded through internal accruals‐ No
dilution risk
We expect that the total capex for the expansion (3.3 million TPA
cement capacity + 102.5 MW thermal power plant) of Rs 16 bn to be
incurred by FY14E would be largely funded through internal cash
flows. In case any additional funding is required for further expansion,
considering its low gearing (FY 14E D/E at 0.5); we expect it to be
easily accommodated by the balance sheet.
Valuation
On EV/EBITDA basis, the Company is trading at 4.3x FY12E EBITDA and
3.6x FY13E EBITDA respectively. We have valued the business (FY13
capacity) at EV/ton of US$ 50 which is at 50% discount to the
replacement cost. Our FY13E end target price of the stock stands at Rs
311 which implies 17% return. We recommend “Buy” at current
market price.
No comments:
Post a Comment