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Operational Beat and Expansion Initiatives Reinforce Growth Outlook.

Est. vs. Actual for Q1FY26: Revenue – MISS ; EBITDA Margin – BEAT; PAT – BEAT

Change in Estimates post Q1FY26

FY26E/FY27E: Revenue: -1%/0%; EBITDA: 8%/7%; PAT: 14%/12%

Recommendation Rationale

• Strategic Capacity Addition to Fuel Growth The company’s total grinding capacity has reached 49.5 MTPA following the commissionin The company’s total grinding capacity has reached 49.5 MTPA following the commissioning of new plants in Assam and Bihar. It has now announced a fresh capacity expansion plan involving a 6 MTPA cement unit and 3.5 MTPA clinker unit at Kadapa and a 3 MTPA bulk terminal in Chennai, with a capital outlay of Rs 3,287 crore, targeted to be operational by Q2FY28. Additionally, the earlier announced 6 MTPA capacity addition (3 MTPA each in Pune and Belgaum) aimed at catering to the western region is progressing well and is expected to be commissioned by Q4FY27 . These expansion initiatives are expected to drive future volume growth, supported by the company’s current capacity utilisation of 60%, which provides significant headroom for operating leverage. With improved utilisation and incremental capacity coming onstream, the company is projected to deliver an 7% volume CAGR over FY25–27E.

• Improved Realizations and Cost Efficiency to Support Margins: The company’s quarterly performance was aided by a 6% YoY and 9% QoQ increase in realizations, reaching Rs 5,195/tonne. With cement prices remaining stable, margins are expected to stay robust in FY26. In parallel, the company is actively pursuing cost-saving initiatives, targeting a reduction of Rs 150–200/tonne over the next two years through enhanced operational efficiency and process optimization. These efforts are expected to sustain profitability and drive margin expansion going forward. We pencil in higher EBITDA margins in the range of 21-22% over FY26-27E

• Higher consolidation and profitable growth strategy to benefit company: The Indian cement industry is witnessing a wave of consolidation, with larger players acquiring regional or mid-sized firms to enhance market presence, optimize logistics, and achieve cost synergies. This consolidation trend is expected to reduce competitive intensity, enabling better price discipline and margin stability across the sector. The company, with its strategic focus on profitable growth — through selective capacity expansion, focus on high-margin regions, improved product mix (e.g., blended cement), and disciplined capital allocation — is wellpositioned to capitalize on this industry shift.

Sector Outlook: Positive

Company Outlook & Guidance: Management expects FY26 to witness 6-7% volume growth at the industry level. Cement prices are projected to trend higher while operating efficiency is expected to contribute Rs 150-200 in cost savings over the next two years.

Current Valuation: 13x FY27E EV/EBITDA (Earlier Valuation: 12.5x FY27E EV/EBITDA).

Current TP: Rs 2,550/share (Earlier TP: Rs 2,260/share)

Recommendation: We maintain our BUY recommendation on the stock.

Alternative BUY Ideas from our Sector Coverage:

UltraTech Cement (TP – 13,840/share)

Financial Performance DBL reported strong operating performance during the quarter due to higher realization and lower cost YoY. Its Volume/Revenue/EBITDA/APAT grew by -5%/-0%/32%/179% YoY. The company reported a profit of Rs 393 Cr against an estimate of Rs 244Cr owing to better operating performance and higher realization. It recorded an EBITDA margin of 24.3% (compared to the estimate of 21.2%), up from 18.5% YoY. The quarter’s volume stood at 7 MnTPA, reflecting a 5% YoY decline. DBL’s EBITDA/tonne was Rs 1261, up by 40%/37% YoY/QoQ; the company reported a blended realisation of Rs 5,194/tonne, up 9%/6% YoY/ QoQ. The company’s cost/tonne decreased by 1% YoY to Rs 3,933, driven by adjustment in RM cost.

Outlook:

The company is undertaking strategic capacity additions to capitalize on strong demand and improve market presence. These expansions are expected to enhance volume growth, capture incremental market share, and support long-term revenue and EBITDA growth. Timely commissioning of new capacity will be key to sustaining competitive advantage amid sector consolidation. We remain positive on the company's growth prospects and expect it to deliver a Volume/Revenue/EBITDA/PAT CAGR of 7%12%/27%/47% over FY25-FY27E. Capacity expansion, market share gains, and operational efficiencies will drive this growth.. Pricing remains a key factor to monitor closely.

Valuation & Recommendation

The stock is currently trading at 13x and 12x FY26E/FY27E EV/EBITDA and EV/tonne of $104 and $95. The valuation remains attractive compared to other larger peers. We maintain our BUY rating on the stock with a TP of Rs 2,550/share, implying an upside of 12% from the CMP.

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