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Result Synopsis

Dalmia Bharat (DALBHARA) reported best in industry numbers with an EBITDA/te of Rs1022 (YSEC est. Rs855) up by +43% y/y (+56% q/q). This performance was largely driven by strong NSR growth of +11% y/y (+4% q/q), while total operating cost increased by +5% y/y (?4% q/q). Revenue came in?line with YSECe of Rs33.5bn on account of expected volume & NSR growth of +11% y/y each. While EBITDA/Adj. PAT beats YSECe by 20/63% to Rs6.4/2.1bn, registered a growth of +56% & +147% y/y (+70% & +357% q/q) translates EBITDA/PAT margins to 19.2% and 6.3%, respectively. Management indicated that the ongoing expansion is progressing as per schedule and will take the total capacity to 49MTPA by FY24E (excl. JAL acquisition) v/s 37MTPA in Q3FY23. With long term positive demand outlook and incremental capacities, we believe DALBHARA to clock a volume growth of +11/15/11% y/y for FY23/24/25E. Company signed definitive agreement for acquiring the JP Associate’s cement assets (5.2MTPAcement & 3.2MTPA clinker) at an EV of Rs32.3bn which is a part of interim expansion plan to achieve ~75MTPA by FY27E, while ~21MTPA is yet to be announced. Additionally, DALBHARA committed towards its PAN India aspiration with110? 130MTPA by FY31E. We believe the sustenance of cement prices & demand especially in east/south market will be vital for DALBHARA to offset the cost pressures, while huge capacity addition in the East will keep prices under check. We continue to like DALBHARA: 1) Stronghold in East/South key markets 2) Ventured in west and seeking entry in central 3) Strong Infra push in the East/South by govt. 4) Incremental volumes from new added capacities 4) Cost optimization measures (planned green power capacity to 328MW) set to improve the efficiency. We rolled forward the estimate to FY25 and arrived at TP of Rs2,723, valuing the stock at 15x EV/EBITDA on FY25E.

*Result Highlights

*Volume & NSR came in?line with our estimate of 6.3MT (+11% y/y and +9% q/q) & Rs5325/te (+11% y/y and +4% q/q) delivered as expected revenue of Rs33.55bn, registered a growth of +23% y/y and +13% q/q in Q3FY23

*Total cost/te came 4% lower?than?expected to Rs4.3bn up by +5% y/y (?4% q/q), beat our EBITDA estimate by 20% to Rs1022/te up by 42% y/y and 56% q/q

*EBITDA margins improved by 424bps y/y to 19.2% (v/s 16% YSECe) in Q3FY23 as compared to 12.8% in Q2FY23

*EBITDA/Adj. PAT came at Rs6.4/2.1bn (+20/63% above YSECe) increased by +56% & +147% y/y (+70% & +357% q/q) respectively

*Signed definitive agreement for acquiring the JP Associates cement assets at an EV of Rs32.3bn (includes Cement 5.2MTPA, Clinker of 3.3MTPA and Thermal Power capacity of 280MW in which 180MW in a SPV with stake of 57%)

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