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Result Synopsis

Dalmia Bharat (DALBHARA) delivered a revenue beat of +5% to Rs39.1bn (+16% y/y), largely driven by strong volume growth (+12% y/y) and healthy NSR (+3% y/y) in Q4FY23. Due to sharp rise in RM cost/te by +55% y/y resulted in total cost/te increase of +6% y/y, despite power cost/te correcting by -11% y/y in Q4FY23. Therefore, EBITDA came 7% below YSECe at Rs955/te (-8% y/y). Reported PAT came at Rs6bn (v/s YSECe Rs3bn) on account of adjustment for associate “DBRL” of Rs5.29bn profit and exceptional item of Rs1.44bn as loss in Q4FY23. Management deferred the 2.5MTPA GU expansion in Bihar due to JP Associates inorganic opportunity, changed the original capacity target to 46.6MTPA by FY24E (excl. 9.4MTPA of JP Associates). As a result, our revenue/ EBITDA/PAT estimate moderated by 3/5/2% respectively for FY25E. With long term positive demand outlook and incremental capacities, we believe DALBHARA to clock a volume growth of +11/7% y/y for FY24/25E. Company signed a definitive agreement for acquiring the JP Associate’s cement assets (9.4MTPAcement & 6.7MTPA clinker) at an EV of Rs56.7bn (additional Rs8bn for refurbishment). Furthermore, with JPAssociates assets, DALBHARA will make breakthroughs in the central market fulfilling its PAN India aspiration. 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  India, 3) Strong Infra push in the East/South by govt., 4) Incremental volumes from new added capacities, 5) Cost optimization measures (plans to reach 324MW of green power capacity) set to improve the efficiency. We maintain our BUY rating with a TP of Rs2,582 valuing the stock at 15x EV/EBITDA on the FY25E.

Result Highlights

* DALBHARA reported revenue of Rs39.1bn came +5% higher than YSECe, up by 16% y/y and +17% q/q driven by strong volume growth of 12% y/y and 18% q/q to 7.4MT (v/s YSECe 7MT). NSR corrected by 1% q/q (+3% y/y) due to muted
  pricing in the southern market in Q4FY23
* Delivered power cost of Rs1177/te (-11% y/y & -23% q/q) came 17% below than YSECe. While a sharp rise in RM cost/te by +55% y/y (+73% q/q) led total operating cost up by 6% y/y (flat q/q). As a result, the muted NSR & elevated cost led to an EBITDA    miss of Rs136/te to Rs955/te (-8% y/y & -7% q/q) in Q4FY23.
* Absolute EBITDA came at Rs7bn (+4% y/y & +10% q/q) lead to EBITDA margin of 18.1% (v/s YSECe 20.3%) corrected by 213bps y/y and 112bps q/q in Q4FY23.
* Reported PAT came at Rs6bn (v/s YSECe Rs3bn) up by 1% y/y and 184% q/q on account of adjustment for associate “DBRL” of Rs5.29bn profit and exceptional item of Rs1.44bn as loss in Q4FY23

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