Birla Corporation shares closed at Rs 1542.65, 3.14% higher on Wednesday. Market cap of the firm rose to Rs 11,879 crore.
Shares of cement maker Birla Corporation have gained merely 3% in 2024. The cement stock rallied 68% in a year, clocking a majority of gains in 2023. The stock of the MP Birla Group has earned a buy call from brokerage Asit C Mehta with a target price of Rs 2055. The brokerage house cited an improvement in profitability, return ratios & balance sheet and a continued focus on capacity addition as primary factors for initiating coverage on the cement stock.
“The stock trades at 11x/8x/6x FY24E/25E/26E EV/EBITDA and USD 85/84/74 EV/ton. It has traded at an average EV/EBITDA of 10x in the last 10 years. With an improvement in profitability, return ratios & balance sheet and a continued focus on capacity addition, we expect it to trade at higher-than-historical multiples going forward. We value the company at 8x FY26E EV/EBITDA to arrive at a target price of Rs 2055 (an upside of 36% from the CMP) and initiate coverage with a BUY rating. While, delay in capex plan, slower than expected demand, regional pricing pressure from new entrant are key downside risks to our call,” said the brokerage.
The stock of the cement maker closed at Rs 1542.65, 3.14% higher on Wednesday. Market cap of the firm rose to Rs 11,879 crore. The cement stock stands higher than the 10 day, 20 day, 30 day, 100 day, 150 day and 200 day moving averages signaling the stock is trading in bullish zone.
In the last one month, the Birla Corporation stock has fallen 0.20% on BSE. 11.54%. Market cap of the firm rose to Rs 11,879 crore. Birla Corporation shares have a one-year beta of 0.9, indicating low volatility during the period.
In terms of technicals, the relative strength index (RSI) of Birla Corporation stands at 55.7, signaling the stock is trading neither in the oversold nor in the overbought territory.
Axis Securities has assigned a target of Rs 1,665 on the Birla Corporation stock.
“Ramping up new Greenfield units in Maharashtra would significantly support the company’s revenue and volume growth going ahead. Furthermore, we expect the company to grow sales/EBITDA/APAT at a CAGR of 10%15%/43% during FY24-FY26E on the back of its strong position in the high-demand central region, higher sales of premium products, cost optimization measures, and increased cement demand. The stock is currently trading on 8x and 7x FY25E/FY26E EV/EBITDA and EV/tonne of 90$ and 85$ which is attractive compared to other similar peers in the industry,” said the brokerage.
Birla Corporation Limited primarily operates in cement manufacturing, which constitutes its core business activity. The company's cement division encompasses 11 plants located at 8 different locations. Currently, Birla Corporation boasts a total cement manufacturing capacity of 20 million tonnes per annum (mtpa), positioning itself as one of the leading players in the Central India region with an estimated market share of 12%.
