Birla Corporation
BSE SENSEX
31,028
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
9,595
BCORP IN
Acquired subsidiary Reliance Cement reports strong profitability
77
Steady standalone performance for 4QFY17:
Standalone volumes fell 2% YoY to
57.4 / 0.8
2.15mt (est. of 2.25mt). However, BCORP reported a strong recovery sequentially
807 / 391
(revenues up 23%) post demonetization. Gross cement realizations rose 2.5% QoQ
-3/-2/73
67
to INR4,514/t (est. of INR4,446) due to price hikes in focus markets. Net sales stood
37.1
at INR9.3b (+6% YoY; +26% QoQ; est. of INR9.2b).
27 May 2017
4QFY17 Results Update | Sector: Cement
CMP: INR773
TP: INR998(+29%)
Buy
Financials & Valuations (INR b)
2017 2018E
Y/E Mar
Net Sales
43.5
64.6
EBITDA
6.2
10.8
PAT
2.3
3.2
EPS (INR)
29.4
40.9
Gr. (%)
13.7
39.5
BV/Sh (INR)
429.2 458.5
RoE (%)
7.5
9.2
RoCE (%)
7.9
8.3
P/E (x)
26.3
18.9
P/BV (x)
1.8
1.7
2019E
70.8
12.6
4.5
58.9
43.9
505.8
12.2
9.6
13.1
1.5
Estimate change
TP change
Rating change
Cost push offset by realization increase:
Total cost/t for standalone operations
increased 10% YoY (flat QoQ) to INR3,893 in 4QFY17 due to an increase in freight
costs (on higher diesel prices) and RM costs. Standalone EBITDA/t at INR477 (-17%
YoY,+16% QoQ) was impacted by cost push. Interest expense fell 29% QoQ to
INR358m and other income rose 129% QoQ to INR399m.
Strong performance by acquired subsidiary Reliance Cement:
BCORP reported
consol.
financials
for FY17, implying Reliance Cement for the period under
consideration operated at 80% utilization, clocking volumes of 2.2mt. Our
calculation suggests that EBITDA/t for Reliance Cement is at INR1,135 for the
period under consideration v/s BCORP’s standalone EBITDA/t at INR477 for
4QFY17. Higher profitability for Reliance Cement is due to sales tax benefits and
cost efficiencies.
Valuation view:
BCORP’s consol. operations with capacity of 15.5mt are among the
largest in the Satna cluster, with ~22% market share. Also, it could expand into
other geographies as Reliance Cement has mineral concessions in multiple states.
Blended EBITDA/t profile for consol. operations improved substantially due to
significantly higher profitability of Reliance Cement. BCORP, given its size and
profitability, is trading at a significant discount to peers (both on EV/tonne and EV/
EBITDA) and has strong potential for multiple re-rating, given its exposure to the
lucrative markets of central India. However, the key risk would be lower
profitability from its Chanderia operations on a sustained basis.
The stock trades at 6.6x/7.5x FY18/19E EV/EBITDA and EV/tonne of USD79 on
FY19E capacity. We conservatively value BCORP at INR998 at 8.5x FY19E
EV/EBITDA, a discount of 15%-20% to peers (implies FY19 EV/tonne of USD98).
Maintain
Buy.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Abhishek Ghosh
(Abhishek.Ghosh@motilaloswal.com); +91 22 3982 5436
Pradnya Ganar
(Pradnya.Ganar@MotilalOswal.com); +91 22 3980 4322

Birla Corporation
Exhibit 1: Sequential improvement in realisations
Realization (INR/ton)
Volume (m ton)
2.2 2.2
2.2
2.1
1.9 1.8 1.9 2.0 2.0 2.0
1.9
1.9 1.8
1.8 1.7
1.7 1.8
1.5 1.4 1.4 1.6 1.6 1.6 1.6
Source: Company, MOSL
Exhibit 2: OPM increased QoQ due to realization increase
EBITDA (INR m)
EBITDA Margins (%)
Exhibit 3: Trend in EBITDA (INR/ton)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 4: Trend in revenue mix (INR m)
INR M
Cement
Contribution (%)
Jute
Contribution (%)
Others
Contribution (%)
Net sales
4QFY17
9,706
91.1
925
8.7
20
0.2
10,651
4QFY16
8,995
89.1
1,064
10.5
31
0.3
10,091
YoY (%)
7.9
-13.0
-37.3
5.6
3QFY17
7,703
90.7
763
9.0
24
0.3
8,489
QoQ (%)
26.0
21.4
-18.6
25.5
Source: Company, MOSL
Exhibit 5: Trend in PBIT mix (INR m)
Cement
Contribution (%)
Jute
Contribution (%)
Others
Contribution (%)
Total
4QFY17
672
98.0
26
3.8
-12
-1.8
686
4QFY16
889
90.7
93
9.5
-2
-0.2
980
YoY (%)
-24.4
-72.0
656.3
-30.0
3QFY17
352
103.1
45
13.2
-5
-1.6
342
QoQ (%)
90.7
-42.1
128.3
100.8
Source: Company, MOSL
27 May 2017
2

Birla Corporation
Exhibit 6: Operating at above ~80% utilization
Capacity (mt)
91
91
93
87
79
76
70
79
82
85
Dispatch (mt)
Utilization (%)
89
94
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E FY18E FY19E
Source: MOSL, Company
Exhibit 7: Trend in Profitability (INR/tonne)
Cement EBITDA/ton
Exhibit 8: Trend in capital efficiencies (%)
60
48
36
24
RoE
RoCE
1089 819 1236 696 528 570 292 329 268 396 589 701
12
0
Source: MOSL, Company
Source: MOSL, Company
Exhibit 9: Market mix (%)
North
37
25
40
Capacity mix
South
East
West
Central
40
3
19
38
Volume mix
Source: MOSL, Company
Exhibit 10: Balance sheet strength aided Reliance Cement
acquisition
Net debt (INR b)
CWIP as % CE
DER (x)
-0.3 -0.2 -0.1 -0.3 -0.2 -0.2 -0.4 -0.4
-0.4 -0.5 -0.4
-0.4
9.4 8.6
12.7
15.3 14.6 5.9
-3.6 -3.2
-7.0 -5.4 -5.8
-11.4 -13.1
-14.9
2.6 3.6
0.0
4.5 4.4 4.2
-3.9 -6.0 -7.7
-5.2
Source: MOSL, Company
27 May 2017
3

Birla Corporation
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Total Expenditure
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income - Rec.
PBT
Change (%)
Tax
Tax Rate (%)
PAT
Extra Ordinary Expenses
PAT Adj for EO Items
Change (%)
Margin (%)
2012
22,469
5.8
19,345
3,124
13.9
800
2,324
525
1,662
3,461
-20.9
1,068
30.9
2,392
0
2,392
-25.2
10.6
2013
25,638
14.1
22,101
3,536
13.8
1,044
2,493
649
1,663
3,507
1.3
809
23.1
2,698
0
2,698
12.8
10.5
2014
29,705
15.9
27,599
2,107
7.1
1,326
781
856
1,598
1,523
-56.6
225
14.8
1,298
0
1,298
-51.9
4.4
2015
31,523
6.1
29,083
2,440
7.7
1,535
905
784
2,007
2,129
39.8
374
17.6
1,754
0
1,754
35.2
5.6
2016
32,682
3.7
29,823
2,859
8.7
1,485
1,374
823
1,772
2,324
9.2
335
14.4
1,989
0
1,989
13.3
6.1
2017
43,477
33.0
37,248
6,229
14.3
2,555
3,674
2,768
1,465
2,371
2.0
131
5.5
2,240
0
2,261
13.7
5.2
(INR Million)
2018E
64,601
48.6
53,752
10,848
16.8
3,584
7,264
4,694
1,501
4,071
71.7
918
22.5
3,153
0
3,153
39.5
4.9
2019E
70,751
9.5
58,113
12,638
17.9
3,646
8,991
4,633
1,581
5,940
45.9
1,401
23.6
4,539
0
4,539
43.9
6.4
Balance Sheet
Y/E March
Equity Share Capital
Reserves
Net Worth
Loans
Deferred Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liability & Prov.
Account Payables
Provisions
Net Current Assets
Misc Expenditure
Appl. of Funds
2012
770
21,664
22,434
11,243
1533
35,210
21968
8486
13,482
5139
10448
11,526
4171
372
4386
2597
5,386
4,744
642
6,140
0
35,210
2013
770
23,731
24,501
12,261
2,117
38,878
26,803
9,475
17,328
2,286
12,707
12,934
5,701
750
2,786
3,696
6,377
5,427
950
6,557
0
38,878
2014
770
24,491
25,261
11,302
2,342
38,905
29,866
10,801
18,614
1,000
13,340
15,266
5,151
747
5,011
4,357
9,315
8,357
958
5,951
0
38,905
2015
770
25,471
26,241
12,426
2,429
41,097
31,288
12,335
18,953
1,500
13,179
16,281
5,521
881
4,668
5,211
8,816
7,767
1,049
7,465
0
41,097
2016
770
26,322
27,092
12,377
2,726
42,195
34,702
13,820
20,882
0
14,574
16,085
5,671
942
3,622
5,849
9,346
8,273
1,073
6,739
0
42,195
2017
770
32,280
33,050
41,705
5,645
80,399
79,984
16,375
63,609
8,053
6,669
19,653
6,302
1,325
3,125
8,901
17,585
17,034
551
2,068
0
80,400
(INR Million)
2018E
770
34,538
35,308
41,705
5,645
82,658
84,037
19,959
64,078
6,500
6,669
25,916
7,752
1,615
6,477
10,072
20,504
19,380
1,124
5,411
0
82,658
2019E
770
38,182
38,952
41,705
5,645
86,302
86,537
23,605
62,932
6,500
6,669
31,964
11,320
1,698
4,676
14,270
21,763
20,518
1,245
10,201
0
86,302
27 May 2017
4

Birla Corporation
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
EV/Ton - Cap (USD)
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Inventory (Days)
Debtor (Days)
Wkg. Capital Turnover (Days)
Leverage Ratio
Current ratio
Debt/Equity (x)
2012
31.1
41.5
291.3
6.0
22.6
2013
35.0
48.6
318.2
7.5
24.9
2014
16.9
34.1
328.0
6.0
55.5
2015
22.8
42.7
340.8
9.0
45.9
2016
25.8
45.1
351.8
10.0
45.0
2017
29.4
62.5
429.2
10.0
39.9
2018E
40.9
87.5
458.5
10.0
28.4
2019E
58.9
106.3
505.8
10.0
19.7
24.9
18.6
2.7
2.3
16.3
96
0.8
22.1
15.9
2.4
2.1
15.3
85
1.0
45.9
22.7
2.4
1.7
24.4
81
0.8
33.9
18.1
2.3
1.7
21.6
83
1.2
29.9
17.1
2.2
1.6
18.8
85
1.3
26.3
12.4
1.8
1.9
13.4
79
1.3
18.9
8.8
1.7
1.3
7.5
78
1.3
13.1
7.3
1.5
1.2
6.6
79
1.3
11.1
8.2
12.0
68
6
0.6
11.5
8.6
10.6
81
11
0.7
5.2
5.2
3.3
63
9
0.8
6.8
6.0
3.6
64
10
0.8
7.5
6.5
5.1
63
11
0.8
7.5
7.9
8.0
53
11
0.5
9.2
8.3
9.0
44
9
0.8
12.2
9.6
10.5
58
9
0.8
2.1
0.5
2.0
0.5
1.6
0.4
1.8
0.5
1.7
0.5
1.1
1.3
1.3
1.2
1.5
1.1
Cash Flow Statement
Y/E March
Op.Profit/(Loss) before Tax
Interest/Dividends Recd.
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
CF from Oper. incl EO Items
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
2012
3,124
1,662
-1,068
62
3,779
3,779
-4,778
-999
1,244
-3,534
3
1,085
-525
-541
23
268
3,711
4,385
2013
3,536
1,663
-809
-2,016
2,375
2,375
-2,036
338
-2,259
-4,296
40
1,017
-649
-671
-263
-2,184
4,386
2,786
2014
2,107
1,598
-225
3,507
6,986
6,986
-1,777
5,209
-633
-2,410
183
-959
-856
-721
-2,352
2,224
2,786
5,011
2015
2,440
2,007
-374
-2,222
1,851
1,851
-1,922
-71
161
-1,761
31
1,124
-784
-805
-434
-343
5,011
4,667
2016
2,859
1,772
-5
-319
4,306
4,306
-1,914
2,392
-1,395
-3,309
-243
-49
-823
-895
-2,009
-1,012
4,668
3,656
2017
6,229
1,465
-131
4,173
11,736
11,736
-53,335
-41,599
7,905
-45,431
4,591
29,328
-2,768
-895
30,257
-3,438
3,622
185
(INR Million)
2018E
10,848
1,501
-918
9
11,441
11,441
-2,500
8,941
0
-2,500
0
0
-4,694
-895
-5,589
3,352
3,125
6,477
2019E
12,638
1,581
-1,401
-6,591
6,226
6,226
-2,500
3,726
0
-2,500
0
0
-4,633
-895
-5,527
-1,801
6,477
4,676
27 May 2017
5

Birla Corporation
Corporate profile
Company description
Birla Corporation (BCORP), established in 1919, is
part of the MP Birla group. It manufactures cement,
jute products, synthetic viscose and cotton yarn.
Cement constitutes about 85% of its revenue. It has
cement plants in Rajasthan, Madhya Pradesh, Uttar
Pradesh and West Bengal.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Mar-17
Promoter
DII
FII
Others
62.9
17.1
2.3
17.7
Dec-16
62.9
17.0
2.7
17.5
Mar-16
62.9
19.0
1.2
16.9
Source: Capitaline
Exhibit 3: Top holders
Holder Name
RELIANCE CAPITAL TRUSTEE COMPANY
LIMITED (Shares held in their various
Schemes under 6 Demat A/cs.)
LIFE INSURANCE CORPORATION OF INDIA
ICICI PRUDENTIAL VALUE DISCOVERY FUND
MERLIN SECURITIES PVT LTD
L AND T MUTUAL FUND TRUSTEE LTD
(Shares held in their various Schemes under
7 Demat A/cs.)
% Holding
6.4
3.5
3.1
1.5
1.4
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Harsh V Lodha
B R Nahar
Girish Sharma
Designation
Chairman
Managing Director
Company Secretary
Exhibit 5: Directors
Name
Anand Bordia
D N Ghosh
Vikram Swarup
Pracheta Majumdar
Name
B B Tandon
Deepak Nayyar
Shailaja Chandra
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
H P Khandelwal & Co
Type
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
MOSL
forecast
40.9
58.9
Consensus
forecast
34.7
44.9
Variation (%)
18.0
31.2
Source: Bloomberg
Source: Capitaline
27 May 2017
6

Birla Corporation
NOTES
27 May 2017
7

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and adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have
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Birla Corporation
Disclosure of Interest Statement
Analyst ownership of the stock
No
Served as an officer, director or employee -
No
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For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures
Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has
an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of
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conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is
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This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors
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interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
Varun.kumar@motilaloswal.com
Contact : (+65) 68189232
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
BIRLA CORP
27 May 2017
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
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