Risk reward is now favorable Birla Corp ::HDFC Sec, report

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Birla Corp (2QFY15) : Clinker addition required. NEUTRAL :: HDFC Securities, PDF link

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Birla Corporation Core disappoints; PAT higher; FY14 to be better; Buy :: Anand Rathi

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.

Birla Sun Life Equity - SWITCH ::Business Line

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Birla Sun Life Monthly Income Fund: Invest ::Business Line

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The equity exposure is well diversified, with the fund holding around 30 stocks in its portfolio

Birla Corporation Ltd. Strong Cement play marred by temporary hiccups :Networth Research

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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.

Hold Birla Corporation; Target :Rs 242 ::ICICI Securities

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H i g h e r   c o s t s   h u r t   m a r g i n s …
Birla Corporation reported net sales of | 538 crore (up ~12% YoY, ~4%
QoQ) and PAT of | 44 crore (down ~37% YoY, up ~67% QoQ), which
were below our respective estimates  of | 626 crore and | 59 crore on
account of lower-than-expected cement volume and realisation. Cement
volumes declined ~7% YoY (flat QoQ) due to limestone mining ban in the
Chittorgarh area, which hampered the production at the Chanderia plant.
Cement EBIT/tonne declined ~29% YoY as the increase in raw material
cost, due to higher clinker purchase, negated the impact of increase in
realisations. For FY12E, we expect cement sales volumes to decline ~2%
YoY to 5.83 million tonnes per annum (MTPA) but volume is expected to
increase to 6.5 MTPA (12% YoY up) in FY13E on account of improvement
in utilisation rates and commissioning of 1.8 MTPA of grinding capacities.

ƒ Cement realisation up ~19% YoY, volume declines ~7% QoQ
Cement sales volumes declined ~7% YoY (flat QoQ) to 1.39 MTPA
as the production was hampered in its Chanderia plant after the
limestone mining ban imposed by the Jodhpur High Court. Cement
realisation increased ~19% YoY and ~8% QoQ to | 3518/tonne as
prices were increased during the quarter on anticipation of demand
pick-up after the monsoon season.
ƒ Cement EBIT/tonne down 29% YoY
Cement EBIT/tonne declined ~29% YoY to | 428/tonne on the back
of higher raw material cost that  increased due to an increase in
clinker purchase after the limestone mining ban in Chanderia unit.
V a l u a t i o n
At the CMP of | 254, the stock is trading at an EV/EBITDA of 6.2x and 4.3x
FY12E and FY13E EBITDA, respectively. On an EV/tonne basis, the stock
is trading at $46 and $35 its FY12E and FY13E capacities, respectively. On
account of margin pressure due to the mining ban, we are revising down
the EV/tonne multiple to $30/tonne to value its FY13E capacity of 9.3
MTPA. We have cut our target price to | 242/share with a HOLD rating.

Buy Birla Corporation; Target : Rs 357 ::ICICI Securities,

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H i g h e r   c o s t s   h u r t   m a r g i n s …
Birla Corporation reported net sales of | 515 crore (up ~6% YoY, down
~8% QoQ), in line with our estimate of | 496 crore. However, the EBITDA
margin of 6.1% and net profit of | 26 crore were below our respective
estimates of 9.4% and | 36 crore on account of higher-than-expected
input costs, mainly power & fuel,  raw material cost and other cost.
Average cement realisation for Q2FY12 declined sequentially led by a
correction in prices during July-August 2011. Also, cement volumes
remained muted during the quarter on low demand due to a slowdown in
construction activities. Cement EBIT declined sharply ~82% QoQ to |
172/tonne due to low realisation and higher costs.

ƒ Cement realisation declines ~5% QoQ, volume declines ~8% QoQ
Cement sales volumes remained flat YoY at 1.4 MTPA. However,
they declined ~8% QoQ on the back of muted demand during the
quarter. Cement realisation increased ~4% YoY to | 3246/tonne but
declined ~5% QoQ on account of  a correction in cement prices
during the quarter.
ƒ Cement EBIT/tonne down 82% QoQ
Cement EBIT/tonne declined significantly by ~66% YoY and ~82%
QoQ to | 172/tonne on the back of low realisation and higher input
costs. Raw material cost increased due to an increase in clinker
purchase after limestone mining ban in the Chanderia unit. Other
cost increased as it includes ~| 14 crore of forex fluctuation loss.
V a l u a t i o n
At the CMP of | 321, the stock is trading at 11.7x and 9.4x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 8.5x
and 5.8x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $60 and $47 its FY12E and FY13E capacities,
respectively. We have valued the  cement business at $50/tonne (60%
discount to the current replacement cost of $130/tonne) at its FY13E
capacity of 9.3 MTPA. We have assigned a BUY rating to the stock with a
revised target price of | 357/share.

Buy Birla Corporation; Target : Rs 379 :: ICICI Securities

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M a r g i n s   s p u r t   o n   h i g h e r  c e m e n t   r e a l i s a t i o n …
Birla Corporation reported net sales of | 558 crore (decline of ~3% YoY,
~5% QoQ), in line with our estimate of | 537 crore. However, cement sales
were higher than our estimate on higher than expected cement realisation,
which came at | 3423 per tonne (our estimate: | 3243 per tonne). Increase
in cement realisations was led by rise in prices during March-April 2011.
Cement volumes remained muted during Q1FY12, increase of ~2% YoY
(decline of ~3% QoQ). EBITDA and reported net profit of | 148 crore and |
112 crore were ahead of our respective estimates of | 63 crore and | 48
crore, driven by lower than expected input cost coupled with higher cement
realisations. Cement EBIT margins improved ~1000 bps QoQ to 23%.
However, going forward, we expect margins to remain under pressure on
the back of rising input costs coupled with a fall in cement realisations.
ƒ Cement realisation gains ~4% QoQ, EBIT/tonne up ~82% QoQ
Cement sales volumes increased ~2% YoY to 1.52 MTPA. However,
they declined ~3% QoQ on the back of muted demand during the
quarter. Cement realisation increased ~4% QoQ to | 3423/tonne on
account of a sharp increase in cement prices during March-April 2011.
The cement EBIT/tonne improved significantly ~82% QoQ to |
788/tonne on the back of higher realisations.
ƒ Jute sales declines ~29% YoY, ~49% QoQ, loss at EBIT level
The jute division reported sales decline of ~29% YoY (49% QoQ) to
| 35.5 crore. At the EBIT level, the company reported loss of | 1.3
crore as against profit of | 2.2 crore in Q4FY11 on higher RM cost.
V a l u a t i o n
At the CMP of | 321, the stock is trading at 9x and 6.8x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 5.9x
and 3.5x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $57 and $42 its FY12E and FY13E capacities,
respectively. We have valued the cement business at $50 per tonne (60%
discount to the current replacement cost of $125 per tonne) at its FY13E
capacity of 9.3 MTPA. We have assigned a BUY rating to the stock with a
revised target price of | 379 per share.

Higher other cost dents bottomline for Birla Corporation : Target : Rs 379:: ICICI Securities,

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Higher other cost dents bottomline…
Birla Corporation reported net sales of | 589 crore, in line with our estimate
of | 580 crore, increasing ~23% QoQ on account of a better sequential
performance in the cement and jute segments. The EBITDA and reported
net profit of | 86 crore and | 63 crore was below our respective estimates of
| 145 crore and | 102 crore. This was on account of higher than expected
expenditure primarily due to one-time provision in other cost. During the
quarter, cement sales increased ~18% QoQ to | 516 crore aided by a 9%
QoQ increase in realisation and ~8% increase in sales volume. Cement
EBIT margin declined 120 bps QoQ as the increase in costs negated the
impact of a rise in realisation. Going forward, we expect margins to remain
under pressure on the back of rising input costs. We estimate EBIT per
tonne of | 460 per tonne in FY12E and | 549 per tonne in FY13E.

Birla Corp: Good market mix at great value; Buy; target Rs452 (Motilal oswal).

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Birla Corp: Good market mix at great value; maintain Buy
Volume growth
 We expect volume growth to improve to
10.8% CAGR over FY11-13, as against 6.5%
CAGR over FY09-11.
 Volume growth over the next two years would
be driven by ramp-up at the 1.7m-ton
expanded capacities.
 The company is adding a further 2.7m-ton
capacity through the brownfield route in
Rajasthan, which would be fully operational
by 2QFY13.
Market/business mix
 Birla Corp is a regional player focused on
North, Central and East India.
 Incremental volumes are expected to be driven
by the North and Central regions. These
markets have seen the highest price
increases on QoQ basis.
 We expect 4QFY11 realization to improve by
Rs22/bag QoQ.
 Its non-cement business contribution is
expected to remain stable at 7.7% of revenues.
Cost and profitability
 Birla Corp has high dependence on domestic
coal at ~70%, with linkage coal contributing
~65% of its total fuel requirement.
 We estimate Rs4-5/bag increase in energy
cost due to increase in prices of domestic
linkage coal by Coal India.
 We expect EBITDA/ton to improve by Rs440
QoQ in 4QFY11 to Rs1,159 and by Rs124
in FY12 to Rs1,055.

Birla Corporation:: Well placed in high growth markets…:ICICI Securities

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Well placed in high growth markets…
We recently met the management of Birla Corporation to understand the
company’s business and future plans. Birla Corp (BCL) is promoted by the
MP Birla group and has two major segments viz. cement and Jute which
contributes ~93% and 6% of the total revenue respectively. The
company has also presence in other segments like Auto trim parts, PVC
goods and Iron & Steel casting, however these segments has minimal
contribution to the total revenue. BCL has installed cement capacity of 6.0
million tonnes (mtpa) and having presence in northern, central and
eastern region. The company is expanding its cement capacity to 9.3
mtpa by FY12E by adding 1.5 mtpa in FY11E and 1.8 mtpa in FY12E. It
has also captive power capacity of 56.8 MW and expanding it by ~108
MW to reach ~164 MW by FY13E.
Capacity expansion to 9.3 mtpa by FY12E
BCL has two integrated cement units at Satna (MP) and Chanderia (RAJ)
and grinding units at Durgapur (WB) and Raebareli (UP). The total cement
capacity was 6.0 mtpa at the end of FY10. The company is expanding its
cement capacity of Satna (MP) unit by 1.5 mtpa which has already been
commissioned and under trial stages. This will take the total capacity to
7.5 mtpa by FY11E. Further the company is expanding the capacity of
Chanderia (RAJ) unit by 1.2 mtpa and Durgapur-I (WB) unit by 0.6 mtpa
which are expected to be commissioned by Q2FY12. The total cement
capacity will reach to 9.3 mtpa by FY12E after completion of the
expansion projects.
Power capacity addition of ~108 MW by FY13E
BCL had captive power capacity of 56.8 MW at the end of FY10, which
sources ~70% of the total power requirement by the cement business.
The company has recently commissioned 15 MW of waste heat recovery
power plants (WHRP) in Q2FY11 taking captive power capacity to ~72
MW. Further it is adding 7.5 MW of WHRP which is likely to be
commissioned by Q3FY11. Also, the company is planning to add 85 MW
of thermal power capacity, of which 35 MW at Satna (MP) and 50 MW at
Chanderia (RAJ), which is likely to come on stream by Q2FY13E. The total
power capacity will reach to ~164 MW by FY13E.
De-leveraged balance sheet
The company had net cash & equivalents of | 771.7 crores at the end of
FY10. The strong balance sheet would help the company to meet its
capital expenditure plans.
Outlook
The company has better market mix as it has presence in high growth
regions like north, central and east. We believe that the cement prices
would remain firm on account of favourable demand supply scenario in
these regions. However, we don’t have any rating on the stock.


Valuation
The company has better market mix as it has presence in high growth
regions like north, central and east. We believe that the cement prices
would remain firm on account of favourable demand supply scenario in
these regions. However, we don’t have any rating on the stock.
At the CMP of | 380 per share, the stock is trading at 5.3x its FY10
earnings and 3.1x its FY10 EBITDA. On EV/Tonne basis, it is trading at $78
per tonne on FY10 cement capacity.

Birla Corporation: Well placed in high growth markets…ICICI Sec

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Well placed in high growth markets…
We recently met the management of Birla Corporation to understand the
company’s business and future plans. Birla Corp (BCL) is promoted by the
MP Birla group and has two major segments viz. cement and Jute which
contributes ~93% and 6% of the total revenue respectively. The
company has also presence in other segments like Auto trim parts, PVC
goods and Iron & Steel casting, however these segments has minimal
contribution to the total revenue. BCL has installed cement capacity of 6.0
million tonnes (mtpa) and having presence in northern, central and
eastern region. The company is expanding its cement capacity to 9.3
mtpa by FY12E by adding 1.5 mtpa in FY11E and 1.8 mtpa in FY12E. It
has also captive power capacity of 56.8 MW and expanding it by ~108
MW to reach ~164 MW by FY13E.

Birla Corp -- Subdued performance; 2HFY11 to be better; Buy :: Anand Rathi

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Birla Corp.
Subdued performance; 2HFY11 to be better; Buy


 2QFY11 results. Birla Corp.’s 2QFY11 profits matched estimates
though EBITDA came lower. We estimate an improvement in
2HFY11 based on price recovery, volume growth and cost savings.
We maintain our target price of `490 and re-iterate a Buy.
 Realisations drop 14% yoy. Cement volumes rose 7.5% yoy to
1.38m tons (down 6.6% qoq). At `3,123/ton, realizations dropped
14% yoy and 12% qoq. Jute division recovery continued with yoy
growth of 36% (`497m) in revenue and 298% (`47m) in PBIT.
 EBITDA/ton drops to `510. Realisation pressures and increase in
costs led to a drop in EBITDA/ton, to ~`510 (`1,485 yoy, `1,090
qoq). We expect a recovery in 2HFY11 driven by higher realisations
(uptick in cement prices), better volumes and lower cost. With the
Satna unit expansion (1.5m tons) during the quarter and recovery in
industry demand, volumes are expected to rise. Overall, costs went
up mainly due to pet coke and freight. Higher costs due to clinker
outsourcing also led to lower profitability. On the stabilization of the
Satna kiln, clinker costs would come down.
 Expansion. The Satna clinker and grinding unit was commissioned
during the quarter adding 1.5m tons to earlier 6m tons. Waste heat
recovery power plants of 15MW also got on-stream in Oct ’10. Work
on an additional 1.8m tons of cement and 68 MW is progressing as
per schedule and commissioning is slated for Mar ’12.
 Valuation. Our target of `490 is based on 4x FY12e EV/EBITDA,
~50% discount to our target multiple for large-cap cement
companies, in line with its eight-year average. The target price implies
a PE of 6.7x and an EV per ton of US$70.

BIRLA CORP 2QFY11: Below est; Maintain Buy:: Motilal oswal,

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BIRLA CORP 2QFY11: Below est; Lower realizations, higher cost push; Downgrading EPS; Maintain Buy

Birla Corp's (BCORP IN, Mkt Cap US$705m, CMP Rs406, Buy) 2QFY11 performance was below estimates, with EBITDA of Rs766m (vs est 1.2b). However, higher other income and lower tax boosted reported PAT to Rs690m (vs est Rs843m). Key highlights:

-          Cement volumes grew 7.6% to 1.39mt (vs est 1.3mt). Realizations declined by 11% QoQ (~13.9% YoY) to Rs3,119/ton (vs est Rs3,310/ton).

-          Net sales de-grew 4% to Rs4.8b (vs est Rs4.7b), with cement revenues de-growing 7% YoY (~17% QoQ).

-          EBITDA margin declined 12.8pp QoQ (~22.8pp YoY) to 15.8% and EBITDA declined 53% QoQ (~60% YoY) to Rs766m (vs est Rs1.2b).

-          Higher other income and lower taxation boosted PAT to Rs690m (vs est Rs843m), de-growth of 55% YoY (~42% QoQ).

-          The company declared interim dividend of Rs2.5/share.

Higher volumes and higher jute revenues restrict revenue de-growth to 4%

-          Net sales de-grew 4% YoY to Rs4.84b (vs est Rs4.68b).

-          Cement volumes grew by 7.6% to 1.39mt (vs est 1.3mt). Volume growth was driven by ramp-up of new capacity at Rajasthan and purchased clinker (due to shutdown at Satna plant).

-          However, realizations declined by 11% QoQ (~13.9% YoY) to Rs3,119/ton (vs est Rs3,310/ton). As a result cement revenues de-grew 7% YoY to Rs4.3b (vs est Rs4.3b).

-          Jute business revenues grew 36% YoY to Rs497m (vs est Rs350m), boosting overall revenues.