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Dalmia Bharat Ltd. Q1FY25 consolidated volumes came in at 7.4mnt, down 15.9% QoQ but up 5.7% YoY. The QoQ decline was due to elections, heatwaves, water shortages, and floods in certain regions. Management anticipates that Dalmia Bharat's volumes will grow by 1.5 times the industry growth in FY25E. The consolidated revenue for Q1FY25 stands at INR36,210mn, down 15.9% QoQ and flattish YoY, impacted by lower volume and realization. For the quarter, EBITDA/t stands at INR904/t, up 21.6% QoQ and 3.7% YoY. The improvement in EBITDA/t is mainly attributed to lower cost. PAT for the quarter stood at INR1,449mn, down 54.7% QoQ but up 0.7% YoY. EPS for the quarter is INR7.5. Net Debt /EBITDA stood at 0.17x.

*  Total cost/t to reduce by 150-200/t: The total cos/t for the quarter was INR3,989/t, down 3.9% QoQ and 7.4% YoY. Management has projected a further reduction in total cost/t by INR150-200/t over the next two years. This cost reduction will be driven by a decrease in variable costs, largely due to an increased share of RE power. The company has entered into several renewable power agreements under the group captive arrangement, securing 127MW of renewable power through solar and wind energy. These renewable power plants are expected to be commissioned in FY25E and FY26E, with management aiming to achieve about a 50% share of RE power by Q4FY25E. Additionally, management is committed to reducing logistic costs by shortening lead distances and implementing other initiatives such as direct dispatches. They see potential for a reduction of INR50-100/t in logistic costs. Further cost reductions are anticipated from a decrease in fuel costs. Fuel costs for Q1 were INR 1.38/kcal, and it is expected to improve by an additional 1-2% in the coming year.

*  Near-term capacity expansion plans: For FY25E, management has outlined a capex plan ranging from INR35,000mn to INR40,000mn, primarily focused on organic expansion, efficiency improvements, land acquisition, and maintenance. The company has commissioned 1mnt of cement capacity each at Kadapa and Ariyalur, bringing its total capacity in the South to 17mnt. Additionally, they are in the advanced stages of completing a 2.9mnt cement expansion in Assam and Bihar. Dalmia Bharat aims to achieve a total capacity of 58.9mtpa by the end of FY25E. The company is committed to reaching a milestone of 75mtpa cement capacity by FY27E and is working towards a longterm goal of 110-130mtpa by FY31E, implying a CAGR of 14-17% in capacity addition.

* Realization is expected to remain soft: During the quarter, cement prices experienced a decline, leading management to anticipate continued pressure on prices. Realization for the quarter was INR4,893/t, remaining flat QoQ but down 5.5% YoY. Cement prices have shown continuous weakness over the past 7-8 quarters, with average Pan-India prices softer by 2% to 3% QoQ. Exit prices in June were another 3% lower compared to the Q1 average. Cement prices are expected to remain soft until the monsoon quarter, with an anticipated price increase in the industry starting from Q3FY25E

View and Valuation: The continuity of the incumbent government ensures stability in policies and an increased focus on infrastructure spending, which bodes well for the longterm prospects of the cement sector. The government's infrastructure initiatives are driving real estate growth and attracting private investment. This raises entry barriers, favoring established firms with strong supply chains and brand recognition. As a result, the industry is experiencing consolidation, with larger players solidifying their positions. Management expects the cement industry to grow by around 8% in FY25E, with Dalmia Bharat's volumes projected to grow at 1.5 times the industry rate. We expect Revenue/EBITDA/PAT to grow at a CAGR of 11%/15%/9% respectively over FY24-FY26E. Our target EV/EBITDA multiple remains unchanged at 12x, ascribing a target price of INR2,005, maintaining our rating to BUY.

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