Key takeaways
2% yoy revenue growth. Birla Corporation’s aggregate revenues grew 2% yoy
following 4% growth in cement. Cement volumes, at 1.71m tons, grew 5% yoy
(10% qoq), the highest in any quarter despite the ban on mining limestone at
the Chanderia facility. Realizations dipped 1% yoy (5% qoq) to `3,580 a ton due
to weak prices in the Centre and East regions during the quarter. The jute
division revenues, however, dropped 10% yoy due to production interruptions
early in the quarter.
EBITDA down 17%, PAT up 26% yoy. Despite better volumes, EBITDA fell
17%, driven by cost inflation in power & fuel (up 17% yoy), freight (up 29% yoy),
RM (up 36% yoy) and staff (up 25% yoy). EBITDA/ton at `375 (vs `505 yoy, `337
qoq) was lower than estimated. The jute division saw a turnaround with a positive
PBIT of `16m vs a `25m loss yoy and `17m qoq. Resumption of work, together
with machinery upgrading and manpower rationalization, could return it to
profitability. Management expects a similar performance in FY14. PAT was better
than estimated due to higher other income and lower interest and tax rate.
Update on projects. The company had filed a petition in the Supreme Court
challenging the High Court order prohibiting mining and blasting at its
Chanderia plant. It was permitted to carry on mining operations manually
(without blasting) between 18 Mar and 14 Apr’13 to enable the CBRI to study
the impact of mining on the Chittorgarh fort. The report is expected to be
submitted shortly, after which the court will take up the matter. The company
hopes for relief in the form of mining without blasting and will then pursue its
1.5m-ton expansion project.
Our take. The operating performance belied our estimates chiefly because of
mounting cost pressures even as profit surprised positively. During FY14, we
expect improvement. We maintain our Buy rating, with a target of `360 at
which, the stock would trade at 4.5x Jun’14e EV/EBITDA, and an EV per
ton of US$45. Risk: Decline in cement prices.
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2% yoy revenue growth. Birla Corporation’s aggregate revenues grew 2% yoy
following 4% growth in cement. Cement volumes, at 1.71m tons, grew 5% yoy
(10% qoq), the highest in any quarter despite the ban on mining limestone at
the Chanderia facility. Realizations dipped 1% yoy (5% qoq) to `3,580 a ton due
to weak prices in the Centre and East regions during the quarter. The jute
division revenues, however, dropped 10% yoy due to production interruptions
early in the quarter.
EBITDA down 17%, PAT up 26% yoy. Despite better volumes, EBITDA fell
17%, driven by cost inflation in power & fuel (up 17% yoy), freight (up 29% yoy),
RM (up 36% yoy) and staff (up 25% yoy). EBITDA/ton at `375 (vs `505 yoy, `337
qoq) was lower than estimated. The jute division saw a turnaround with a positive
PBIT of `16m vs a `25m loss yoy and `17m qoq. Resumption of work, together
with machinery upgrading and manpower rationalization, could return it to
profitability. Management expects a similar performance in FY14. PAT was better
than estimated due to higher other income and lower interest and tax rate.
Update on projects. The company had filed a petition in the Supreme Court
challenging the High Court order prohibiting mining and blasting at its
Chanderia plant. It was permitted to carry on mining operations manually
(without blasting) between 18 Mar and 14 Apr’13 to enable the CBRI to study
the impact of mining on the Chittorgarh fort. The report is expected to be
submitted shortly, after which the court will take up the matter. The company
hopes for relief in the form of mining without blasting and will then pursue its
1.5m-ton expansion project.
Our take. The operating performance belied our estimates chiefly because of
mounting cost pressures even as profit surprised positively. During FY14, we
expect improvement. We maintain our Buy rating, with a target of `360 at
which, the stock would trade at 4.5x Jun’14e EV/EBITDA, and an EV per
ton of US$45. Risk: Decline in cement prices.
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