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Buy Birla Corp; target of Rs 1455: HDFC Securities

November 23
16:41 2017

HDFC Securities’s research report on Birla Corp

Birla  Corp’s  (BCORP)  numbers  beat  estimates  (Rs  638/t,  Est  Rs 484, (1.0)/(10.9)%  YoY/QoQ).  The  beat was primarily on account of lower other operating  expenses (Rs 1.0bn vs Rs 1.5bn run-rate in previous 2 quarters).  Numbers  are  not  comparable  YoY, due to Acquired ops being included from August  22,  2016.  The  2QFY18  delivery  was  in spite of the severe sand shortages in UP and Bihar. Birla   Corp  remains  relatively  undervalued  (11.4/10.0x  EV/EBITDA  for FY19/20),  compared  to large cement companies which trade at 15/13x. It is the  best  play  on  Central  India,  which  is  not  expected  to  see any significant   capacity   additions   in   the  near  future,  driving  high utilizations.

Outlook
Higher leverage (FY18E Net Debt/EBITDA: 4.6x, Net D/E: 1.2x) vs  peers (mostly debt free) and lower profitability in the standalone ops, may  weigh on further rerating. We maintain BUY with and upgrade our TP (Rs 1,455, 12.0x Sep-19 EV/EBITDA US$ 138/t).

For all recommendations report, click here

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