10 February 2014
3QFY14 Results Update | Sector:
Cement
Birla Corporation
BSE SENSEX
20,377
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
6,063
BCORP IN
77.0
18.1/0.3
294/191
-11/-4/-17
Financials & Valuation (INR Billion)
Y/E Mah
Sales
EBITDA
NP
EPS Gr. (%)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA
( )
EV/Ton (x)
6.7
0.7
3.5
22
8.1
0.7
4.6
22
6.0
0.6
2.9
21
2014E 2015E 2016E
25.6
3.5
2.7
12.8
11.0
10.7
24.9
30.1
2.8
2.2
29.1
-17.0
8.6
7.6
32.2
33.6
4.2
3.0
39.0
34.0
10.6
10.7
26.8
CMP: INR235
TP: INR302
Buy
Adj EPS (INR) 35.0
BV/Sh. (INR) 318.2 337.9 366.4
Birla Corp's (BCORP) 3QFY14 performance was below estimates, with EBITDA/ton
of INR279/ton (v/s est. INR376/ton).
Net sales grew by 16% YoY (flat QoQ) to INR7.1b (v/s est. INR7.2b) and EBITDA de-
grew by 42% YoY (-49% QoQ) to INR299m (v/s est. INR516m). However, tax write-
back boosted PAT to INR160m (v/s est. INR357m).
Cement volumes grew 16.5% YoY (-2.4% QoQ) to 1.81mt (v/s est. 1.86mt),
benefiting from commencement of mechanized mining at Rajasthan plant from
Aug-13. Cement realizations declined ~INR200/YoY (flat QoQ) to INR3,579/ton (v/s
est. INR3,591/ton).
Cement business EBITDA/ton was at INR279 (v/s est. INR376/ton v/s INR344/ton
in 2QFY14 v/s INR451/ton in 3QFY13), impacted by pricing pressure in key markets
of North and East India, and cost push on energy, freight and negative operating
leverage. This is despite the savings due to commencement of supply of captive
limestone at Rajasthan, although ~30% of Rajasthan plant’s requirement is still
met through open market limestone.
The Ministry of Coal de-allocated BCORP’s Bikram Coal Block due to lack of
development as per milestones. Company is in the process of taking appropriate
legal recourse.
We lower the estimates by 2%/9% to ~INR29/39 to factor the a) higher energy and
freight cost, b) lower tax and c) deferred capex at Rajasthan.
The stock trades at 8.1x/6x FY14E/FY15E EPS, EV/EBITDA of 4.6/2.9x and EV/ton of
USD22/21. Maintain
Buy
with a target price of ~INR302 (~4x FY15E EV/EBITDA or
~USD30/ton).
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.

Birla Corporation
Strong cement volume growth drives revenues
Net sales grew by 16%YoY (flat QoQ) to INR7.1b (v/s est INR7.2b).
Cement volumes grew 16.5% YoY (-2.4% QoQ) to 1.81m (v/s est 1.86mt),
benefitting from commencement of mechanized mining at Rajasthan plant from
Aug-13. Cement realizations declined ~INR200/YoY (flat QoQ) to INR3,579/ton
(v/s est INR3,591/ton), as result cement revenues grew by 10%YoY (-1% QoQ).
Jute business, which was under suspension in till part of 3QFY13, contributed
~8% to revenue.
Trend in revenue mix
1.9
1.9
1.8
Trend in volumes and realizations
Realization (INR/ton)
Volume (m ton)
1.7
1.5
1.5 1.5
1.4 1.4
1.6 1.6
1.6 1.6
Source: Company, MOSL
Source: Company, MOSL
Weak realizations, cost push hurts profitability
EBITDA de-grew by 42%YoY (-49% QoQ) to INR299m (v/s est. INR516m)
impacted by higher energy, freight and negative operating leverage (QoQ).
However, tax write back boosted PAT to INR160m (v/s est. INR357m).
Cement business EBITDA/ton was at INR279 (v/s est. INR376/ton v/s INR344/ton
in 2QFY14 v/s INR451/ton in 3QFY13), impacted by pricing pressure in key
markets of North and East, and cost push on energy, freight and negative
operating leverage. This is despite savings due to commencement of supply of
captive limestone at Rajasthan, although ~30% of Rajasthan plant requirement
is still met through open-market limestone.
Also, disruption at Durgapur grinding units due to tornado for 10 days,
impacting volumes and resulting in loss of ~INR10m .
Non-cement businesses reported PBIT loss of ~INR21m (v/s profit of ~INR7m in
2QFY14 v/s loss of INR24m in 3QFY13).
Trend in EBITDA
Trend in EBITDA
Source: Company, MOSL
10 February 2014
Source: Company, MOSL
2

Birla Corporation
Trend in PBIT mix
INR M
Cement
Contribution (%)
Jute
Contribution (%)
Others
Contribution (%)
Total
3QFY14
185
113.3
-10
-6.4
-11
-6.9
163
3QFY13
415
106.2
-17
-4.4
-7
-1.7
391
YoY (%)
-55.4
-39.9
66.2
-58.3
2QFY14
327
100.1
7
2.2
0
-0.1
327
QoQ (%)
-43.5
-242.5
5550.0
-50.1
Source: Company, MOSL
Other highlights
The Ministry of Coal de-allocated BCORP’s Bikram Coal Block due to lack of
development as per milestones. BCORP is in the process of taking appropriate
legal recourse.
The board of directors had earlier approved setting-up of 3 grinding/ blending
units in MP, 1 grinding unit in Bihar, 1 blending unit each in UP and Jharkhand,
having aggregate capacity of ~4.5mt with estimated investment of ~INR9.5b.
These split grinding/blending units are expected to drive logistic cost savings,
improve quality and increase competitiveness in eastern market for BCORP.
However, it is going slow on its capacity expansion at Rajasthan till final verdict
on mining ban is out.
As of Dec-13, BCORP’s had net cash of ~INR3.8b.
Valuation and view
We are revising our estimates downwards by 2%/9% to ~INR29/39, to factor in
for a) higher cost push on energy and freight, b) lower tax rate and c) slower
capex on Rajasthan plant.
Favorable market mix (North, East and Central), coupled with efficient
operations has potential to offers strong resilience to operating performances if
demand weakens further.
Balance sheet remains strong with net cash of INR3.8b (as of Dec-13) and aids
visibility to free cash flow generation.
The stock trades at 8.1x/6x FY14/FY15 EPS, EV/EBITDA of 4.6/2.9x and EV/Ton of
USD22/21. Maintain
Buy
with target price of ~INR302 (~4x FY15 EV/EBITDA or
~USD30/ton).
Revised Forecast
(INR M)
Net Sales
EBITDA
Net Profit
EPS (INR)
Rev
30,057
2,790
2,240
29.1
FY14E
Old
30,028
3,054
2,283
29.6
Chg (%)
0.1
-8.6
-1.9
-1.9
Rev
33,555
4,177
3,002
39.0
FY15E
Old
33,691
4,645
3,298
42.8
Chg (%)
-0.4
-10.1
-9.0
-9.0
Source: MOSL
10 February 2014
3

Birla Corporation
Birla Corporation: an investment profile
Company description
Birla Corporation (Bloomberg: 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.
Recent developments
The Ministry of Coal de-allocated BCORP’s Bikram
Coal Block due to lack of development as per
milestones. BCORP is in the process of taking
appropriate legal recourse.
Key investment arguments
Valuation and view
Among the key cement producers with a capacity of
9.3mt with strong presence in north, east and
central India.
Strong balance sheet, with net cash, provides good
platform to grow organically as well as inorganically.
On-going capacity/efficiency improvement program
drive volume growth/profitability improvement
from FY15 onwards.
We are revising our estimates downwards by 2%/9%
to ~INR29/39, to factor in for a) higher cost push on
energy and freight, b) lower tax rate and c) slower
capex on Rajasthan plant.
The stock trades at 8.1x/6x FY14/FY15 EPS,
EV/EBITDA of 4.6/2.9x and EV/Ton of USD22/21.
Maintain
Buy
with target price of ~INR302 (~4x FY15
EV/EBITDA or ~USD30/ton).
Key investment risks
Delay in capacity expansion would result in time
and cost overrun, as well as muted volumes growth
Increase in energy cost would impact over
profitability.
Resolution of on-going court cases key to future
capacity expansion at Rajasthan (brownfield) and
MP (Greenfield).
Comparative valuations
P/E(x)
P/BV(x)
EV/Ton (USD)
EV/EBITDA(x)
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
BCORP
8.1
6.0
0.7
0.6
22
21
4.6
2.9
JKLC
7.2
7.3
0.6
0.5
44
42
6.3
4.6
DBEL
20.8
10.6
0.4
0.4
46
43
8.1
5.6
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
29.1
39.0
Consensus
Forecast
26.1
37.4
Variation
(%)
11.6
4.3
Target price and recommendation
Current
Price (INR)
235
Target
Price (INR)
302
Upside
(%)
28.5
Reco.
Buy
Shareholding pattern (%)
Dec-13
Promoter
Domestic Inst
Foreign
Others
62.9
16.1
4.8
16.2
Sep-13
62.9
15.9
5.1
16.1
Dec-12
62.9
16.0
4.8
16.2
Stock performance (1-year)
10 February 2014
4

Birla Corporation
Financials and valuation
10 February 2014
5

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Birla Corporation
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BIRLA CORP LTD
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