Stock To Buy: This Stock Can Give Return Upto 48%, Company Reported The Highest Sales

In a recent report, brokerage firm Anand Rathi has suggested buying the stocks of Birla Corporation to investors. Despite fluctuating demand, the company has reported the highest sales of 4.24m tonnes, up 1.7% YoY. Operating at 92% capacity (one of the highest in the industry), the recently commissioned Mukutban unit is expected to boost sales volume growth.

Target Price and company performance

The Current Market Price (CMP) of Birla Corporation is Rs. 1019. Anand Rathi has estimated a Target Price for the stock at Rs. 1514. The stock is anticipated to offer a 48.57% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 1019
Target Price	Rs. 1514
1 year return	48.57%

Birla Corporation's Q4 revenue grew 6.2% y/y to Rs22.6bn, aided by 4.4% y/y realization growth. The cement division's revenue grew 6.2% y/y (30% q/q) to Rs. 21.5bn. Price hike stability is a concern despite high input costs. With 79% trade sales, the company will focus more on non-trade sales in FY23 to an anticipated greater demand.

Comments by Anand Rathi: advantages and risks

Retaining a buy rating on this stock, Anand Rathi stated, "With industry-leading capacity utilization, Birla Corp reported its highest quarterly and yearly sales in Q4 FY22 and FY22, though profitability was hit on high input cost. It is aiming at 30m tpa cement capacity by FY27. The expansion will keep leverage high; we believe, however, its net debt would be in check with greater profitability on various cost optimizations and higher volume growth on the ramping up of capacities at the newly commissioned Mukutban unit."

"Optimum levels are expected at the 3.9m-tonne Mukutban unit by end-FY23. Despite fresh borrowings of Rs. 4.32bn for the Mukutban project, gross debt was held at Rs. 43.08bn (40.46bn in FY21). With 20m tpa now, it aims at 30m tpa by FY27 where it may expand capacity at Maihar and set up GUs at Bihar/North. We expect 10%/11%/26% CAGRs over FY22-24 in volume/revenue/EBITDA," Anand Rathi added.

However, stating the risks the firm mentioned high pet-coke and diesel prices, and demand slowdown.

About the company

According to the company profile, its installed capacity for Cement is 19.5 Million Tons, its installed capacity for Jute Goods is 52,631 Metric Tons, and its installed capacity for Iron & Steel Casting is 3,750 Metric Tons. Mostly, the company has footfalls in the jute and cement industries. However, high costs have pulled down the company's EBITDA by 29% y/y to Rs. 2.8bn and EBITDA/ton, 32.6% y/y to Rs. 619. Various cost optimizations - Sial Ghori production ramped up to 30,000 tonnes p.m. developing the Bikram coal mine, a rising share of renewable power, adding 8MW solar power plants at Chanderia, Satna and Kundanganj, savings from the 9MW WHRS at Mukutban, scaling up the alternative fuel share to 12% (7% in FY22), etc.

Disclaimer

The above stock was picked from the brokerage report of Anand Rathi. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.