Add Dalmia Bharat Ltd For Target Rs 2,000 By Emkay Global Financial Services Ltd
Dalmia Bharat (Dalmia) reported consolidated EBITDA of Rs9bn (up 14%/62% YoY/QoQ), in line with our estimate. Dalmia’s focus on value maximization resulted in 3% YoY volume growth, implying market share loss for the quarter. However, disciplined cost management ensured a strong finish on margins. Total unit operating costs decreased ~1.5%/4.5% YoY/QoQ, led by ~3%/1% YoY/QoQ decline in unit variable costs. This resulted in EBITDA/t clocking at Rs1,023 (Emkay: Rs975) vs Rs925 YoY and Rs760 QoQ. Further, the management highlighted an incremental cost impact of Rs125-150/t (~60% contributed by expensive packing bags) owing to the US-Iran conflict which was offset by the requisite price improvements in April. On the capacity front, Dalmia reiterated guidance of achieving 72-75mtpa by FY28-end, with capex details beyond ~62mtpa to be shared shortly. Our view: The stock is up ~10% in the past 1M, given its positive response to the April price improvements. However, at CMP, the stock trades at ~11x FY28E EV/EBITDA and the riskreward ratio appears balanced. Spread improvement remains a key monitorable, for any positive momentum in the stock. Nonetheless, factoring in the strong Q4 finish, we raise FY27E/28E EBITDA by ~6/4%, respectively. We continue to value Dalmia at 11x EV/EBITDA on FY28E, while revising up our TP by 5.3% to Rs2,000 from Rs1,900; maintain ADD.
Disciplined cost measures offset the below-par volume growth
Dalmia’s consolidated revenue stood 4% below our estimates, owing to below-par volume growth. Clinker capacity utilization in FY26 stood at ~75% (adjusting for the new capacity), which was flat YoY. Realization improved 1.8% QoQ (base adjusted via one-off incentives) led by higher trade share (up 67% vs 62% QoQ) and improvement (~1pp) in premium share. On costs, Dalmia reported its lowest quarterly total cost/t since the past 5Y, at ~Rs3,790, down by Rs60/t YoY, largely owing to RM+P&F savings. Other expenses rose 4% YoY due to price escalation in packing bags. Consequently, EBITDA came in at Rs9bn, up 14% YoY and 62% QoQ, marking its highest-ever quarterly EBITDA with EBITDA/t of Rs1,023 (vs Rs925 YoY and Rs760 QoQ). The company reported another quarter of exceptional expense of Rs100mn, based on impact of the new labor codes. Adjusting for this, PAT stood at ~Rs4bn, down ~11% YoY. Dalmia announced final dividend of Rs5/share, totaling Rs9/share, including the interim dividend
Medium-term capacity target (72-75mtpa) intact; balance sheet supportive
The mgmt targets reaching ~62mtpa cement capacity by Q2/Q3FY28. The blueprint for the next 10-12mtpa shall be shared in ensuing quarters. Dalmia has committed to Rs33- 35bnpa capex for FY27 and FY28 (announced capacities only); we expect it to generate cumulative operating cashflow of Rs42bn in the next 2Y. Despite higher leverage, we expect FY28E net debt-to-EBITDA to stay at comfortable levels of ~1x.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
