Choice Institutional Equities has lowered its target price for Birla Corporation, citing higher energy costs and weak cement pricing in Central India. The brokerage anticipates profit margins will remain under pressure in the second quarter due to these rising expenses.
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Choice Institutional Equities has revised its target price for Birla Corporation downwards to ₹1,345 per share, down from the earlier ₹1,490. This adjustment follows a downward revision in the firm's earnings expectations, with estimates for the 2027 fiscal year reduced by 5.6% and by 2.6% for the 2028 fiscal year.
The core of this revision lies in rising operating costs. Analysts expect that energy costs for the company will increase by approximately ₹70 to ₹80 per tonne on a quarter-on-quarter basis during the second quarter of the 2027 fiscal year. This increase is largely tied to global geopolitical uncertainties that have affected fuel and energy pricing.
Birla Corporation faces a specific challenge in passing these higher costs on to customers. The company derives about 85% of its total volume from blended cement and roughly 80% of its sales from the trade segment. In the current market, where cement pricing in Central India remains weak, the company has limited flexibility to increase product prices without risking market share. Consequently, the brokerage estimates a net cost escalation of ₹55 per tonne for the second quarter, which is expected to keep EBITDA per tonne—a key measure of operating profitability—at approximately ₹675.
Investors may note that while the target price has been reduced, the firm maintains a positive long-term view on the company's prospects. However, the immediate focus for shareholders will be on how the company manages these cost pressures during the upcoming quarterly results. The ability to control expenses and any potential recovery in regional cement prices will be essential to watch as indicators of whether the company can improve its profitability per tonne in the coming months.