Expect double-digit volume growth in FY22E – BIRLACORPN
Update on the Indian Equity Market:
On Friday, Nifty closed 0.2% higher at 14,924. Within NIFTY50, SBIN (+11.3%), TATASTEEL (+4.9%), and DIVISLAB (+4.5%) were the top gainers, while AXISBANK (-3.1%), BHARTIARTL (-2.7%), and TATAMOTORS (-2.4%) were the top losing stocks. Among the sectoral indices, PSU BANK (+3.6%), PHARMA (+1.7%), and METAL (+1.0%) were the top gainers while MEDIA (-4.5%), AUTO (-1.3%), and IT (-0.9%) were the top losing sectors.
Expect double-digit volume growth in FY22E – BIRLACORPN
Excerpts of an interview with Mr. Aditya Saraogi, CFO, Birla Corporation, aired on CNBC-TV18 on 4th February 2021:
- BIRLACORPN management expects volumes of 13 mn ton in FY21 as compared to 13.6 mn ton in FY20. Lower volumes in 1QFY21 due to the pandemic have impacted FY21 full year volumes to be marginally lower YoY.
- In FY22, management expects demand for cement to be strong on back of Government’s focus on growth and investments. Management expects double digit volume growth for BIRLACORPN in FY22.
- Growth in demand is primarily coming from rural and infrastructure segments. Tier 2 & 3 cities are also going well.
- In 4QFY21, management expects double digit YoY growth in volumes. Realizations have come off a bit and there is increase in cost due to fuel price inflation. As a result, margins may be under pressure in 4QFY21E and EBITDA per ton may come down by ~Rs 100 or so.
- Going ahead, given the robust demand environment, management expects no difficulty in passing on increased costs and expects to maintain EBITDA margins in coming quarters.
- BIRLACORPN is in the process of adding 4 mn ton capacity by Sep-2021. They also have an ambitious target of achieving 25 mn ton capacity by FY25 from current capacity of 15 mn ton.
- BIRLACORPN’s current net debt position is Rs 35 bn and peak net debt is expected to be below Rs 40 bn. Cost of capital for BIRLACORPN has come down by 150-170 bps.
Consensus Estimate (Source: market screener website)
- The closing price of BIRLACORPN was ₹ 831 as of 05-February-2021. It traded at 12x/ 12x/ 10x the consensus EPS estimate of ₹ 67.0/69.3/84.2 for FY21E/ FY22E/ FY23E respectively.
- The consensus target price of ₹ 973/- implies a PE multiple of 12x on FY23E EPS of ₹ 84.2/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”