IGI Logo

Rapid expansion plan, cost-saving efforts to boost profitability

DALBHARA in its FY23 annual report highlighted: a) long-term expansion plans – grinding capacity of 75mtpa/110-130mtpa by FY27/FY31; b) sustainability initiatives to improve profitability – reduction in clinker factor to 58.5%, rise in blended cement mix to 84%, increase in thermal substitution rate (TSR) to 17% and increase in renewable energy (RE) share to 29% (including RE share of grid electricity consumed); c) initiatives toward logistics optimization; and d) maintaining leverage at a comfortable level – net debt-toEBITDA below 2x.

Aims to become pan-India cement player through rapid expansion

* DALBHARA commissioned clinker/cement capacity of 2.8mtpa/2.7mtpa through debottlenecking at various plants in FY23. In Apr’23-end, the company commissioned grinding capacity of 2.5mtpa at Bokaro, Jharkhand (line-II), taking its total grinding capacity to 41.1mtpa.

* In FY23, it signed a definitive agreement with Jaiprakash Associates (JPA) to acquire JPA’s cement assets located in central India. Further, recently the company announced its plan to set up clinker/cement capacity of 3.6mtpa/ 2.4mtpa at its northeast plant at a total capex of INR36.4b.

* The company has set an aggressive target of increasing its grinding capacity to 75mtpa/110-130mtpa by FY27/FY31 through organic and inorganic routes. Currently, it has a major presence in east and south India. It intends to establish its presence in the west, central and north India by FY24-end. In a recent article, the management indicated that the company is doing its largest capex ever

Strong volume growth; but high energy cost hits profitability in FY23

* DALBHARA’s consolidated revenue grew 20% YoY to INR135.4b, aided by an increase in sales volume/realization by ~16%/4% YoY. However, consolidated EBITDA declined 5% YoY to INR23.2b and OPM dropped 4.4pp YoY to 17% due to significant cost pressures. EBITDA/t declined 17.5% YoY to INR901.

* Operating cost/t increased 9.4% YoY to INR4,367/t due to a sharp increase in raw material costs and energy prices, higher diesel prices, and re-imposition of busy season surcharge on railway freight, which was partly offset by cost reduction initiatives and higher volume.

* The company has taken several initiatives to reduce operating costs. The key cost-saving measures include: 1) increase in green power share to 29% vs. 17% in FY22, 2) increase in TSR to 17% vs. 13% in FY22, 3) reduction in clinker factor and increase in blended cement in product mix, and 4) savings in logistics costs through a digital bidding platform for transporters and the use of heavy-duty electric trucks for transportation of raw materials. It also secured two coal blocks, namely Brinda Sesai (East) and Mandala North (Central), which will provide fuel security and cost optimization for kilns.

* Earnings before tax and exceptional items declined 20% YoY to INR9.15b and adjusted PAT (adjusted for share of exceptional profit on sale of investment by an associate) declined 12% YoY to INR7.2b.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer