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Performance in-line across all parameters

Dalmia Bharat (DALBHARA) reported in-line performance across all parameters, EBITDA/te witnessed sequential degrowth of 9% to Rs945 (YSEC est. of 997) due to rise in cost/te by +7% q/q for Q1FY23. Despite volume declined by 6% q/q to 6.2MT (+27% y/y; YSEC est. of 6.25MT), the NSR increased by +4% q/q (flat y/y; ~1% lower than YSEC est.) translates in-line revenues of Rs33bn in Q1FY23. DALBHARA reported in-line PAT of Rs2bn, degrew by 66% q/q and 29% y/y as tax credits reported in Q4FY22. Management indicated that ongoing expansion progressing on schedule and will drive the total capacity to 49MTPA by FY24E v/s 37MTPA in Q1FY23. Management is positive on near to long term cement demand and with increasing utilization of recently added capacities, we believe volume to grow by +11/15% y/y for FY23/24E. However, we expectthe power cost to remain elevated in H1FY23 and will continue to pose challenges, but gradual moderation is expected from H2FY23 onwards. Most of the new capacities for sector will be commissioned in Eastern region, hence cement prices & demand sustenance will be the key monitorable (as out of 13.2MTPA DALBHARA’s ongoing expansion ~63% is in East). We continue to like DALBHARA: 1) Stronghold in East/South key markets and set to be 2 nd largest player in east by FY24E with ~15% capacity share 2) ventured in the west and seeking new markets with target expansion of 110-130MTPA by FY31 3) Strong Infra push in the East/South by govt. 3) Increasing utilization of new added capacities 4) Cost optimization measures (WHRS/green power to 170MW) set to improve the efficiency. We reiterate our BUY rating with a TP of Rs2565, valuing the stock at 15x EV/EBITDA on the FY24E.

Result Highlights

Reported in-line Net profit of Rs2.05bn decline by 66% q/q and 29% y/y in Q1FY23 as tax credits reported in Q4FY22.

DALBHARA reported volume of 6.2MT (v/s YSEC est. 6.25MT) declined by 6% q/q (+27% y/y) due to higher base and volatile demand. While NSR stood at Rs5326/te (~1% lower than YSEC est.) up by 4% q/q and flat y/y translates in revenue of Rs33bn (v/s YSEC est. Rs33.6bn) in Q1FY23

Operating Cost/te stood in-line with our est. to Rs4381 (v/s YSEC est. Rs4377) increase of 7% q/q (+14% y/y) resulted in EBITDA/te of Rs945 (v/s YSEC of Rs997) in Q1FY23

EBITDA margin stood at 17.7% in Q1FY23 v/s 20.2% in Q4FY22 and 27.6% in Q1FY22.

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