Buy Birla Corporation; target of Rs 1125: Choice Institutional Equities

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Increasing captive coal usage and renewable energy penetration are expected to ease cost pressure and provide a structural advantage.
  • Planned 6.2 Mnt capacity expansion by FY29E provides a clear runway for volume growth, projected to expand at a 6.0% CAGR over FY26–FY29E.
  • Focus on premiumisation and improving market mix should support realisations and drive gradual improvement in profitability.
  • EBITDA is expected to expand at an 8.0% CAGR over FY26–FY29E, supported by volume growth and realisation growth.

Thesis Validation Checklist

  • Observable signals to validate the thesis include: sustained price hikes, improvement in demand conditions, successful ramp-up of captive coal usage, and progress in the planned capacity expansion.
  • Investors should watch for the company's ability to sustain further price increases, the impact of fuel cost inflation on margin, and the progress of the Vikram coal mine and alternative fuel initiatives.
  • The current valuation of 5.6x FY28E EV/EBITDA is considered to adequately factor in near-term challenges, while the medium-term growth potential remains underappreciated.