Birla Corporation down 7%; stock hits 52-week low on growth worries

Shares of Birla Corporation slipped 7 per cent to hit a 52-week low of Rs 895.30 on the BSE in Thursday’s trade on growth concern. The management remained cautious over profitability of cement companies in the near future as it does not anticipate any relief in cost pressure. Birla Corporation is the flagship company of the MP Birla Croup.

At 02:55 pm; the stock traded 4 per cent lower at Rs 918.90, as compared to 2 per cent decline in the S&P BSE Sensex.
According to analysts at CRISIL, cement demand in India is expected to remain stable and grow between 5 per cent-7 per cent in the current financial year, if capital expenditure by state and union governments is unchanged.

However, rising inflationary pressure adds to the government's woes. "Cement companies have recently been able to raise prices to partially mitigate the cost pressure, but it isn't immediately clear if the price hike would sustain in the face of inflationary pressure and slow recovery in private consumption," the company said.

Meanwhile, for January-March quarter (Q4FY22), Birla Corp’s consolidated EBITDA declined 29 per cent year-on-year (YoY) but increased 24 per cent quarter-on-quarter (QoQ) to Rs 280 crore owing to higher-than-expected cost inflation. EBITDA margins broadly remained flat QoQ at 12.2 per cent with EBITDA/t of Rs 653/t.

Besides that, the company’s net revenues grew 29.4 per cent QoQ to Rs 2,264 crore (up 6.2 per cent YoY), led by commissioning of Mukutban cement plant and Profit after tax improved sequentially by 84 per cent, down 55 per cent YoY to Rs 111 crore.

"Despite healthy growth in sales by volume in almost every segment and market, Birla Corp's profitability was hugely impaired by at least 40 per cent increase in fuel cost and 8 per cent increase in cost of delivery," the company added.

Analysts at Emkay Global Financial Services believe that company's aim to achieve 30 metric ton (mt) capacity by FY27E dispels concern about long-term growth. "Birla Corp commenced cement production at the 3.9mt Mukutban plant in April 2022 and management expects its operating parameters to reach optimum levels by FY23-end. The new plant is expected to support volume growth and help maintain the company’s volume market share," the brokerage firm added.