Buy Birla Corporation share; target of Rs 1,750: AXIS SECURITIES

Axis Securities has come up with their 2022 new picks which are quite interesting. This article emphasizes on the Birla corporation share which is been analyzed by the brokerage firm in a very apt form.

BRIEF SUMMARY OF AXIS SECURITIES RESEARCH REPORT ON BIRLA CORPORATION SHARE 

Birla corporation share is a flagship company of M.P. Birla group which primarily focuses on cement manufacturing. 

The company has also built its footprint in Jute Goods industry. 

Birla corporation share has 10 plants at seven locations for its cement division. 

The company’s total cement manufacturing capacity stands at 15.6 million tonnes per annum. 

The company has emerged as a dominant player in the Central India region. 

INVESTMENT RATIONALE BY AXIS SECURITIES 

To enhance growth, the company is focusing on capacity expansion: 

Birla corporation share is developing a greenfield facility in Mukutban, Maharashtra with a capacity of 3.9 mtpa which would get operational by Q4FY22. 

New growth avenues would open up once this facility would be commercialized. 

Axis securities expects the company to deliver healthy volume growth of 12% CAGR over FY21-FY23E once the new facility is operational. 

Spotlight would be on sale of premium products: 

In the recent past, the company is focusing more on the sale of its premium cement products which has paid off well and is evident from the popularity which MP Birla Cement Perfect Plus and MP Birla Cement Samrat Advanced has attained in IHB (Independent home builders) segment. 

There has been an improvement in the premium cement’s share which has achieved an overall trade sale of 50% from 40% last year. 

Birla corporation share is focusing more on selling blended cement which forms 92% share of its overall cement sales. 

It also increased its trade sales by over 80% which helped to enhance its valuation. 

This a great strategical move by the company as blended cement requires lower utilization of natural resources such as limestone. 

It helps the company in optimizing its costs as well as blended cement requires lower utilization of natural resources such as limestone.  

Presence in demand-accretive Central region:  

Birla corporation share is a prominent player in the demand accretive central India region. 

The region’s overall cement consumption might increase at 6-7% CAGR due to the government’s keen attention on developing more infrastructure. 

Company’s margin profile is consistent as the cement prices in this region tend to be less volatile as compared to other regions. 

Valuation:  

Birla corporation share is on a right track to expand its capacity by 25% which will reduce its concerns over volume growth. 

Axis securities expects the company to register Revenue/EBITDA/APAT growth of around 15%/16%/21% CAGR over FY21-FY23E, and also a volume CAGR of 12%. 

Birla corporation share is currently trading at 10x and 7.5 x of FY22E and FY23E EV/EBITDA. Axis Securities find it attractive as compared to other similar peers in the industry. 

QUARTERLY RESULTS 

Figures in Cr 

Quarterly Results Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 
Sales  1,627 1,715 1,690 1,222 1,654 1,777 2,133 1,749 1,698 
Expenses  1,315 1,420 1,345 989 1,272 1,447 1,741 1,406 1,431 
Operating Profit 312 295 345 233 383 330 392 344 267 
OPM % 19% 17% 20% 19% 23% 19% 18% 20% 16% 
Other Income 20 20 28 19 21 46 -44 13 
Interest 103 98 91 80 76 73 67 64 63 
Depreciation 88 88 89 88 92 91 101 98 98 
Profit before tax 141 129 192 85 236 212 180 191 119 
Tax % 37% 37% -1% 22% 29% 30% -39% 26% 28% 
Net Profit 88 81 195 66 167 148 249 142 86 
EPS in Rs 11.47 10.58 25.29 8.54 21.64 19.27 32.38 18.38 11.11 

BALANCE SHEET 

Figures in Cr 

Balance Sheet Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Sep-21 
Share Capital  77 77 77 77 77 77 77 77 
Reserves 2,550 2,848 3,209 4,203 4,418 4,729 5,409 5,678 
Borrowings 1,302 1,281 4,255 4,130 4,049 4,282 4,046 4,082 
Other Liabilities  1,066 1,023 2,157 2,664 2,787 3,087 3,368 3,367 
Total Liabilities 4,995 5,229 9,698 11,075 11,332 12,175 12,900 13,204 
Fixed Assets  1,928 2,033 6,362 7,368 7,263 7,325 7,323 7,236 
CWIP 123 63 805 762 914 1,604 2,105 2,374 
Investments 1,309 1,690 564 672 877 836 752 809 
Other Assets  1,636 1,443 1,966 2,272 2,277 2,411 2,720 2,786 
Total Assets 4,995 5,229 9,698 11,075 11,332 12,175 12,900 13,204 

SHARE HOLDING 

Share Holding Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 
Promoters  62.9 62.9 62.9 62.9 62.9 62.9 62.9 62.9 62.9 
FIIs  2.61 3.85 4.17 3.62 3.38 3.8 3.61 3.96 3.68 
DIIs  16.45 15.5 15.31 14.61 15.15 13.59 13.77 13.76 15.35 
Public  18.05 17.76 17.63 18.87 18.57 19.72 19.72 19.39 18.07 

Axis Securities recommend a BUYING opportunity with a target price of ₹ 1750/ share. 

Disclaimer  

This stock has been analyzed and recommended in the brokerage report of Motilal Oswal. Equity investing can cause a risk of financial losses. Due caution should be exercised by the Investors while dealing in equities. LearnTwoTrade as well as the author are not liable for any losses caused as a result of decisions based on the article. 

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