IGI Logo

Cement demand and price to improve in 2HFY25

Dalmia Bharat Ltd. (DBL) is one of India’s largest cement companies, with a capacity of ~47MT; mainly focusing on South (17MT) and East & North East (29MT).

* Q2FY25 revenue declined by 2% YoY despite an increase in volumes of ~8% YoY due to a drop in realisation of 9% YoY. The cement prices declined during Q2 due to weak demand scenario owing to monsoons and an increase in the non-trade mix.

* EBITDA fell by ~26% YoY as EBITDA margin declined by 460bps YoY to 14.1% due to higher freight and other expenses.

* EBITDA/tonne fell by 32% YoY to Rs. 648. The company guides for Rs. 1,100- 1,200/tonne EBITDA over the long-term.

* DBL expects a reduction in costs of Rs. 150-200 per ton in the next 3 years by increasing renewable power, using captive coal mines, and reducing logistics costs.

* The acquisition of JP assets (9.4MT) has been halted due to JP’s insolvency proceedings under NCLT. This will delay the medium-term capacity target of 75MT by 1 year to FY28.

Outlook & Valuation

Demand outlook remains positive given the likely expedition in government infrastructure & housing projects in H2FY25. Moreover, the real estate cycle is on a multi-year upswing and private capex is gaining momentum. Sticking to its ambition of becoming a pan India player, Dalmia aims to reach 110-130 mtpa by FY31. The company has given guidance of growing at 1.5x the industry’s volume growth. This implies a double digit volume growth for the company in H2FY25. A gradual recovery in prices is expected in H2FY25, which is likely to aid improvement in margins. The stock currently trades at 1Yr Fwd EV/EBITDA of ~12x. We value at 12x Sept 2026E EV/EBITDA (2Yr avg=12x) and arrive at a target price of Rs. 2,080, maintain BUY rating considering expected improvement in cement price and recent correction in stock price.

For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer

SEBI Registration Number: INH200000345