Buy Dalmia Bharat Ltd For Target Rs.2,079 - Prabhudas Liladhar Capital Ltd
Steady quarter; growth outlook remains strong
Dalmia Bharat (DALBHARA) reported inline operating performance in Q1FY27, supported by strong 9% volume growth and better-than-expected realisations. Average NSR improved 6% QoQ driven by price hikes across key markets and continued increase in premium products share. Operating performance remained resilient despite higher power & fuel and packing costs, resulting in EBITDA/t of INR1,059 (PLe INR1,044). Mgmt. highlighted that price hikes and cost optimisation initiatives helped offset input cost inflation during the quarter, with efficiency measures mitigating nearly INR150/t of cost pressures. Further, its targeted cost savings of INR50-100/t remain on track.
Management expects a further INR70-80/t increase in input costs in Q2FY27, making sustenance of recent price hikes critical for margin protection. While ongoing cost optimisation initiatives should partially offset cost pressures, timely execution and ramp-up of the announced capacity additions, along with integration of the JAL assets, should drive higher than industry volume growth and support gaining market share over the medium term. DALBHARA's performance will hinge on its ability to integrate JAL assets and higher volumes to distribute incremental costs while continuing to execute its expansion pipeline efficiently. We tweak our FY27/28E EBITDA by +1.8%/-0.8% incorporating incentives and higher costs and expect 10% EBITDA CAGR over FY26- 28E. At CMP, the stock is trading at 9.8x EV of FY28E EBITDA. Maintain ‘BUY’ with revised TP of Rs2,079 (earlier Rs2,101) valuing at same 11x EV of Mar’28E EBITDA.
Higher volumes and strong NSR led to growth in revenue:
Cons revenue grew 7% YoY to INR38.9bn (-8.4% QoQ; PLe INR37.6bn) on strong volumes, which grew 9% YoY to 7.6mt (-13.6% QoQ; PLe 7.53mt). Average realisation grew 6% QoQ to INR5,118/t (-1.5% YoY; PLe of INR4,993/t) led by cement prices hikes in the Eastern region during the quarter and higher premium share.
Higher P&F and other expenses impacted EBITDA:
EBITDA de-grew 8.8% YoY to INR8.05bn (-10.8% QoQ; PLe INR7.85bn) mainly led by higher P&F and Other expenses. P&F costs/t grew 8% YoY to INR1,120 due to higher pet coke costs and other costs/t increased 8% YoY to INR832 due to increase in packing bag. Freight cost/t remained flat YoY to INR1,133 while RM costs per ton declined 2.2% YoY to INR653. Resultant, DALBHARA delivered EBITDA/t of INR1,059/t (-16% YoY/+3.3% QoQ) Vs PLe of INR1,044/t. PAT de-grew 53% YoY to INR1.88bn (-52% QoQ; PLe INR2.7bn) due to one-time charges of INR1.77bn towards the JAL cement business acquisition and INR50mn related to incremental employee benefit obligations under the new labour codes.
Key Matrices:
Trade share stood at 66% (67% QoQ; 68% YoY) while Premium product share improved to 25% (24% QoQ; 22% YoY). Lead distance declined to 277km (281km QoQ; 280km YoY). Direct dispatches were 65% (65% QoQ; 62% YoY). Blended Fuel cost stood at INR1.47/mcal (INR1.36/mcal QoQ; INR1.33/mcal YoY). Share of RE consumption stood at 48% (47% QoQ; 41% YoY). CC Ratio continues to remain flattish at 1.7x (1.6x QoQ; 1.7x YoY). Share of blended cement stood at 82% (83%QoQ; 85% YoY)
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SEBI Registration number is INH000000933
