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Revenue growth driven by volumes: Dalmia’s Q4FY23 revenue was at Rs 3,912cr, up by 16.6% QoQ and 15.7% YoY which was largely driven by volume growth while realization was muted QoQ. Sales volume came in at 7.4MnT, up by 13.3% YoY and
18.1% QoQ while realization saw improvement of 2.1% YoY and witnessed a decline of 1.3% QoQ to Rs 5,258. For FY23, revenue stood at Rs 13,540 with a growth of 20% YoY wherein volume grew by 15.6% YoY to 25.7MnT and realization was up by 3.7% to Rs 5,260/ton.

EBITDA margins below estimates: The company’s EBITDA growth was up by 9.6% QoQ and 3.2% YoY to Rs 707cr while margins came in at 18.1% which witnessed a de-growth of 115 bps QoQ and 210bps YoY. For FY23 as well the EBITDA declined by
4.7% YoY with margin down by 444bps to 17.1%. The impact was due to high cost inventories as well as increase in variable cost and price of coal and petcoke. EBITDA/ton for Q4FY23 was at Rs 950 down by 7.2% QoQ and 8.5% YoY while for FY23,
EBITDA/ton came in at Rs 900 as compared to Rs 1,092 in FY22, a dip of 17.6% YoY.

Expansion plan intact: Dalmia has intention to become a pan India player and has plans to expand its capacity to 100-130MnT by FY27-31. Further, by FY24 it will reach a cement capacity of 46.6MTPA by growing organically and expanding in regions like
south (4.9MnT) and in east (0.6MnT). Also, its clinker capacity is expected to reach 23.7MnT by FY24. Further, its recent plant acquisition of JP associates with ~9.4 MnT in central India will aid in increasing its total capacity to 56MnT by FY24.

Valuation: We believe government focus on the sector along with strong demand from housing and infrastructure coupled with capacity expansion and improving utilization will drive growth for the companies in the cement sector. Further, Dalmia
will continue to benefit as it has focused on becoming a pan-India player and currently has a strong presence in east, south and central India. Further, its focus on using green fuels as steps towards becoming carbon negative and increasing
utilization will help margin improvement. Meanwhile, the company is adding capacity organically and has acquired a JP associates plant which will aid in future expansion. On the financial front, we expect its revenue and profits to improve by
20-30% CAGR over FY23-25E and have maintained a buy rating with a target price of Rs 2,291 valuing the company at EV/EBITDA of 11x FY25E.

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