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Dalmia Bharat’s Q1FY24 EBITDA increased 4% YoY/decreased 14% QoQ to Rs6.1bn, coming in 7-8% below our/Consensus estimates owing to lower realization and higher cost. Accordingly, EBITDA/ton declined 7-8% YoY and QoQ to Rs872 (Emkay: Rs950). With delay in receipt of regulatory approvals, we factor-in the acquisition of JPA’s various cement assets, from FY25. Company has recapitulated its capacity growth target to 47mt/75mt/110- 130mt by FY24/FY27/FY31, respectively (from 41.7mt currently). Building-in the Q1FY24 miss, we cut FY24E EBITDA by 7%, but maintain FY25E EBITDA. Given Company’s growth visibility, strong balance sheet and recent divestment of non-core assets, we raise our target EV/E by one notch to 11x (earlier 10x) and revise Jun-24E TP to Rs2,125/sh, post quarterly roll-over; maintain HOLD.

Result Summary

Dalmia’s consolidated volumes rose 12% YoY/declined 6% QoQ to 7mt, while cement realization/ton fell ~2% QoQ to Rs5,178. EBITDA/ton dropped 7-8% YoY and QoQ to Rs872 (Emkay: Rs950). Dalmia’s total cost/ton slipped 1% YoY/remained flat QoQ at Rs4,306, owing to higher than expected freight cost. Raw material/power & fuel cost/ton declined 5% YoY/4% QoQ. Net debt increased by Rs5.5bn QoQ to Rs12bn (incl. MTM investment of Rs17bn) as of Jun-23, with net debt-to-EBITDA at 0.52x in Jun-23 vs 0.29x in Mar-23. Capex spent stood at Rs9bn in Q1FY24. Dalmia maintained FY24 capex guidance at Rs63bn (incl. cement assets from the JP acquisition at Rs35bn) and Rs35bn for FY25.

What we liked: Double-digit volume growth

What we did not like: Delay in acquisition of JPA’s cement assets; lower than expected realization and higher than expected cost

Earnings-call KTAs: 1) Company reiterated its target of achieving cement capacity of 46.6mt by Mar-24 vs 41.7mt in Jul-23, with commissioning of plants in the South. YTDFY24, Company has announced: commencement of the Bokaro (Jharkhand) plant, which has capacity of 2.5mt; debottlenecking of 0.6mt capacity at its Midnapore plant (WB); and commencement of the trial run of the greenfield split GU at Sattur (TN), with 2mt capacity. 2) Cement prices have marginally weakened (~Rs5/bag) since Jun-23 in the East and in some pockets in the southern region. 3) In eastern India, Company tested improving the pricing discipline and hence lost market share in the region, in Q1FY24. Company is likely to take corrective measures to recover market share in coming quarters. 4) Renewable energy capacity increased by 4MW QoQ to 170MW; Management targets increasing this to 328MW by FY24. 5) Dalmia expects a USD20/ton decline in petcoke consumption cost in Q2FY24. 6) Dalmia received the first tranch of the Rs1.6bn from the sale of its stake in Dalmia Bharat Refractories. 5) Trade mix declined by 100bps QoQ to 63%, premium product share rose by 200bps QoQ to 21%; lead distance stood at 284km in Q1FY24

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