Birla Corporation Is HDFC Securities’ Pick of The Week; 4 Reasons Explained Behind The Buy Call

The brokerage firm HDFC Securities has selected Birla Corporation as its pick of the week for investors. In a time horizon of 2-3 quarters, the brokerage sees healthy potential upside in the stock.

Birla Corporation Target Price

Buy in Rs. 1268-1293 band and add on dips in Rs. 1135-1160 band, Target Price: Rs. 1446, Base Case Fair Value: Rs.1382

"We estimate Birla Corporation to deliver 6% revenue CAGR during FY25-27E and EBITDA to grow at 21% during FY25-27E, supported by a stabilised pricing environment by FY26, and cost reduction initiatives. It has superior growth prospects, better market mix/profitability, and return ratios compared to its peers. We believe investors can buy the stock in Rs 1268-1293 band (7.7x FY27E EV/EBITDA) and add on dips in Rs 1135-1160 (7.1x FY27E EV/EBITDA) band for a base case fair value of Rs 1382 (8.2x FY27E EV/EBITDA) and bull case fair value of Rs 1446 (8.5x FY27E EV/EBITDA) over the next 2-3 quarters," said the research analysts of HDFC Securities in a report.

4 Fundamental Reasons To Buy Birla Corporation Shares

According to HDFC Securities, below are the key triggers behind the buy call rationale for Birla Corporation.

Expansion plans: With a total capital investment of Rs. 4,335 crore, Birla Corporation has outlined an ambitious growth strategy with the goal of substantially expanding its cement manufacturing capacity by FY2029. At an estimated cost of Rs. 860 crore, the proposal calls for the establishment of a greenfield grinding plant in Gaya, Bihar, with a 2.8 million tonnes per annum (MTPA) capacity. It is anticipated to be put into service by Q4 FY2029.

The company also plans to build a brownfield extension of its clinker facility in Maihar, Madhya Pradesh, with a 3.7 MTPA capacity, as well as two additional greenfield grinding units in Uttar Pradesh with a combined capacity of 3.4 MTPA. By FY2029, Birla Corp intends to have expanded its overall cement production capacity from the present 20 MTPA to 27.6 MTPA with these projects.

"Importantly, the management has guided that the capex will be funded in a balanced way, ensuring that the net debt-to-EBITDA ratio remains below 2x in FY26, thereby maintaining financial discipline while scaling operations," as per HDFC Securities.

Pan-India Geographic focus

HDFC Securities said, "Birla Corporation's expansion strategy is strongly aligned with its geographic focus on high-growth regions in Eastern, Northern, and Central India, where infrastructure development, urbanisation, and housing demand are projected to remain robust over the coming decade."

Cost competitiveness

"Birla Corporation Ltd. has significantly strengthened its resource security and cost competitiveness through strategic investments in captive limestone and coal mines, alongside enhanced power generation capabilities. In terms of power generation, Birla Corporation has implemented various initiatives to improve its energy efficiency. The company has commissioned a 5-megawatt solar power plant at Satna, increasing its total solar power generation to 41.2 megawatts, which accounts for 23% of its total power consumption. Furthermore, Birla Corporation operates air-cooled thermal power plants at Satna, Chanderia, and Mukutban, as well as Waste Heat Recovery Systems (WHRS) at Mukutban and Maihar, contributing to water conservation and energy efficiency," HDFC Securities highlighted.

Near its Satna, Chanderia, Maihar, and Mukutban facilities, the company operates limestone mines that supplied more than 80% of its total limestone needs in FY25. In FY25, the currently active coal mine delivered ~17% company's fuel demand in kiln. When the company's Bikram coal mines in Madhya Pradesh are completely operating, captive coal usage will rise to 30-32% of the kiln's fuel needs. Production is scheduled to begin in FY26.

Large distribution network and trade mix:

In order to serve its substantial cement retail mix, Birla Corporation keeps up a broad distribution network throughout India. The company serves both urban and rural markets with-roughly 3,500 outlets in urban areas and another 3,500 in rural regions-through more than 1,600 dealers and more than 7,000 retail outlets, guaranteeing that its brands, such as MP Birla Cement, are widely available across a variety of geographies. In keeping with its expanding export footprint, the corporation distributes to more than 27 states and sells to neighboring nations including Bangladesh, Nepal, and a few Middle Eastern markets.

"Complementing this reach, Birla Corporation's logistical infrastructure includes a robust dealer and distributor network, with estimates indicating over 2,300 dealers and about 1,000 distributors, which significantly enhances penetration and market access. Supported by advanced logistics management-featuring digital tracking systems and optimized delivery systems-the company achieves an average lead time of 72 hours within 500 km and an approximately 92% on-time delivery rate," as per HDFC Sec.

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