Stellar show continues
Dalmia Bharat (DBEL) reported a strong 2QFY21 quarter. Consolidated revenue/EBITDA rose 8/48% YoY to Rs 24.1/7.0bn respectively on strong volume growth, healthy realisation and robust cost controls. On a low base of last year, APAT jumped 7.5x YoY to Rs 2.32bn. Robust OCF generation and investment sell-off in 1HFY21 helped DBEL reduce gross/net debt by 13/9% vs Mar’20 despite the ongoing Capex (including Murli acquisition) and spends on equity buyback. We maintain BUY with a revised target price of Rs 1,220/share (10x Sep’22E consolidated EBITDA).
* Solid 2QFY21: DBEL’s market share gain continues as it reported a 7% YoY volume growth qtr. Unitary EBITDA soared 38% YoY to Rs 1,463/MT, supported by stable NSR, continued variable cost reduction, and fixed cost controls. A strong 2Q drove up 1HFY21 EBITDA by 15% YoY. This, along with working capital reduction and net tax credit, buoyed 1H OCF by 60% YoY to Rs 16.3bn. DBEL also liquidated Rs 4.5bn worth of investments. Of these 21bn, DBEL spent Rs 3.7bn on Capex, Rs 4bn on Murli acquisitions, Rs 2bn on interest payments, Rs 4bn towards equity buyback and Rs 7.5bn bn to reduce debt. Gross/net debt thus reduced by ~13/9% vs Mar’20.
* Outlook: Dalmia expects to continue market share gains owing to its strong distribution and on-track capacity expansions in the east. DBEL also continues to remain upbeat on its cost controls, thus bolstering margin outlook. We upgrade consolidated FY21/22/23E EBITDA estimates by 15/6/6% respectively to factor-in the same. The company has also initiated divestment process of the non-core refractory business and will evaluate selling off investments in IEX, in-case a better return project comes on board. We maintain BUY rating on the stock with a revised target price of Rs 1,220/share (10x Sep’22E consolidated EBITDA).
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