Item: Binani Industries Ltd.
Rating: 5
Author: Motilal Oswal

Demand outlook improving; Deleveraging key focus

Buy: Binani Industries Ltd.

Motilal Oswal

Strong FCF in Demand has picked up since Dec19, which gives hope of volume growth recovering to 6-7% YoY in FY21. Regionally, demand is currently doing best in the East (up >10% YoY) and the West, while it is the worst in the South (declining 8-10% YoY). Demand in the South is expected to recover as the Polavaram project has been re-tendered (which should drive demand in Telangana). UTCEM is currently falling short of grinding capacity in the East (given strong demand growth there), which should be addressed 12-15 months down the line when its planned 3.4mtpa capacities get commissioned. We estimate decline in net debt to ~INR125b (1.1x) in FY21 led by strong free cash flow (FCF) of INR70b (~6% yield) in FY21E (v/s INR20b in FY19). UTCEM is also looking to divest non-core assets associated with the Binani acquisition (China cement plant, UAE grinding unit and Europe fiberglass business), which is expected to fetch INR10b (5% of net debt).

Comment

Name	Companies Held
Hitesh Ramji Javeri	50
Mahendra Girdharilal	50
Sangeetha S	50
Dheeraj Kumar Lohia	45
Globe Capital Market Ltd	42

Name	Companies Held
Hdfc Trustee Company Limited	112
Reliance Capital Trustee C...	103
Birla Sun Life Trustee Com...	72
General Insurance Corporat...	60
President Of India	56

Name	Returns(%)
Name	Week	Month	Year
Quant Active Fund - Reg - G	-0.25%	0.77%	15.31%
UTI - Equity Fund. - Reg - G	-0.90%	3.94%	11.15%
HDFC Multi-Asset Fund - Reg - G	-1.68%	1.13%	9.35%
IDFC Focused Equity Fund - Reg - G	-1.07%	1.25%	7.32%
Edelweiss Equity Savings Fund - Reg - G	-0.39%	0.92%	6.81%

Name	Returns(%)
Name	Week	Month	Year
DHFL Pramerica Midcap Opportunities Fund - Reg - G	-2.21%	0.27%	27.98%
DSP Small Cap Fund - Reg - G	-0.70%	1.23%	17.54%
Union Small Cap Fund - Reg - G	-1.80%	-0.25%	15.20%
Kotak Small Cap Fund - Reg - G	-0.55%	1.63%	14.06%
UTI - Mid Cap Fund - Reg - G	-0.56%	0.41%	13.19%

Name	Returns(%)
Name	Week	Month	Year
Parag Parikh Long Term Equity Fund - Reg - G	-2.14%	-1.08%	18.67%
DHFL Pramerica Diversified Equity Fund - Reg - G	-1.63%	2.41%	13.69%
Quant Mid Cap Fund - Reg - G	0.05%	0.19%	13.41%
Taurus Ethical Fund - Reg - G	-0.75%	1.64%	12.87%
Baroda Mid-cap Fund - Reg - G	-0.71%	0.41%	12.16%

Demand outlook improving; Deleveraging key focus

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