Birla Corp's brownfield SGU expansion (line-3) in Kundanganj is on track and should be operational by the end of Q1 FY26. The company remains committed to expanding its cement capacity to 25 mmt by 2027. This includes 3 mmt brownfield clinker expansion at Maihar (MP) and two SGUs in UP and MP (~1.5 mmt each). Birla Corp is spending Rs 5 billion on Capex in FY25E (Rs 3 billion spent during 9M FY25). The brokerage expects capex to accelerate FY26 onwards.
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HDFC Securities Institutional Equities
We maintain a Buy rating on Birla Corporation Ltd. with an unchanged target price of Rs 1,490/share (eight times its FY27E consolidated Ebitda). In our recent interactions, the management noted that cement demand has firmed up in Q4 FY25 and Birla Corp is on track to deliver 6-8% YoY volume growth in H2 FY25, as per its recent guidance.
We estimate the company will deliver 7% YoY volume growth (+15% QoQ) in Q4 FY25 as against -3/7% growth in H1/Q3 FY25. Even its margin expansion (by Rs 150/metric tonne in H2 over H1 FY25) is also on track, led by better pricing QoQ in Q4 FY25.
We estimate Birla Corp's operating costs will reduce by ~Rs 200/mt during FY24-27E, aided by fuel cost moderation, gradual rise in green power consumption, rise in captive coal mining, and logistics cost savings. These, along with expected improvement in cement prices, should drive unit Ebitda recovery to Rs 857 per mt in FY27E, from Rs 616 per mt in FY25E. As Birla Corp has slowed down its expansion plans, we estimate net debt to Ebitda will peak out in FY25E at 2.6x and will gradually cool off to 1.6x in FY27E. The management has maintained its target of expanding capacity to 25 million metric tonne by 2027.
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