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Performance beat on all front

Result Synopsis

Dalmia Bharat (DALBHARA) reported performance beat on all parameters, EBITDA/te witnessed sequential growth of +44% (+43% higher than YSEC est.) aided by volume growth of +16% and healthy NSR of +7% in Q4FY22 along with flat sequential total cost/te. While PAT grew 5x q/q on account of the tax credits in Q4FY22. For FY22, DALBHARA posted a record volume of 22.2MT (+7% y/y; YSEC est. 21.8MT) along with healthy NSR (+1% y/y) translate in +3% revenue growth to Rs112.9bn (All time high) but EBITDA decline to Rs24bn (-13%y/y) due to operating cost increase by +16% y/y in FY22. The ongoing capacity additions will lead the total capacity to 48.5MTPA by FY24E v/s 35.9MTPA in FY22. Therefore, with the robust demand and the production ramp-up, we expect strong volume growth of +10/15% y/y in FY23/24E. The inflating fuel/diesel cost is major concern but likely to get offset largely with a potential price hike. Therefore, we reduce our EBITDA/PAT est. by 10/22% for FY23E, while lower marginally by 1/2% for FY24E envisaging cost normalization. Additionally, the increasing WHRS/green power to 170MW set to improve the efficiency and lower the power cost. We expect DALBHARA to generate CFO of Rs55bn that would help funds it ongoing CAPEX of Rs62.5bn over FY23-24E. We retain our BUY recommendation with a TP of Rs2565, valuing the stock at 15x EV/EBITDA on the FY24E

Result Highlights

* Reported better-than-expected volume growth of +16% q/q and +3% y/y to 6.6MT against YSEC est. of 6.1MMT and NSR grew by +7% q/q (flat y/y) against YSEC est. +3% q/q translated in the revenue beat of +12% to YSEC est. to Rs33.8bn (+24% q/q and +3% y/y) in Q4FY22.

* Despite surge in power & freight cost per tonne by +13% q/q (+50% y/y) and +8% q/q (+7% y/y) respectively, DALBHARA manage to maintain its Opex/te flat sequentially (+5% y/y; YSEC est. +4% q/q and +8% y/y), thus EBITDA/te up by +43% to YSEC est. to Rs1035/te in Q4FY22.

* EBITDA grew by +67% q/q (-12% y/y) to Rs6.8bn v/s YSEC est. of Rs4.4bn revived EBITDA Margin to 20% (+523bps q/q) but remained lower by -344bps y/y in Q4FY22. Tax reversal of Rs2.4bn drives PAT growth by 5x q/q (decline by 6% y/y) beat YSEC est. of Rs0.8bn in Q4FY22.

* In FY22, Volume grew by +7% y/y with the flat NSR translate in reported revenue increase +7% y/y (+3% higher than YSEC est.). EBITDA/PAT decline by 13/7% y/y to Rs24.2/11.4bn led by jump in total cost increase by +16% y/y, whereas EBITDA margin decline by 495bps y/y to 21.5% in FY22

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