Buy Dalmia Bharat Ltd For Target Rs. 2,278 By Geojit Financial Services Ltd
Volumes Drive Growth, Margins Remain Soft
* Robust volume growth drove a 7% YoY increase in revenue, reflecting strong demand and sustained momentum across key business segments.
* EBITDA fell by 9% YoY with EBITDA margins declining by 360bps owing to cost pressures remaining elevated, with both power and fuel expenses and other expenses increasing 17% YoY.
* Management expects cost pressures to remain elevated in Q2FY27, with input costs projected to rise by ~Rs.70-80 per ton sequentially.
* Reported PAT declined 52% YoY due to JAL acquisition-related expenses of Rs.182cr, while Adjusted PAT fell 15% YoY, primarily due to higher interest and depreciation costs following the debt-funded acquisition. Despite gross debt increasing to Rs.9,108cr, management expects net debt-to-EBITDA to remain comfortably below 2x threshold.
* Incentive accruals stood at Rs.45 crore during the quarter. The company reiterated its FY27 incentive guidance of Rs.200 crore.
* On the acquired JAL assets, management expects meaningful volume contribution from Q3 FY27, with the assets turning EBITDA-neutral within a couple of quarters and achieving EBITDA/ton in line with Dalmia's average over the next 7-8 quarters.
Outlook & Valuation
Management expects a meaningful ramp-up from Q3FY27 onwards, supported by the contribution from the acquired JAL assets, which should drive topline growth in H2FY27. The company has also guided for volume growth to outperform the industry by 200-250bps. Margin performance remained resilient despite elevated input costs, aided by price hikes, which helped offset cost inflation. The geographical expansion into central region and the company’s target towards becoming a pan India player will support valuation re-rating. We value DBL at 12x EV/EBITDA to arrive at a target price of Rs. 2,278 and maintain our BUY rating
Key Highlights
* DBL has maintained its FY27 capex guidance at Rs 3,200-3,400cr comprising around Rs 2,200cr towards ongoing expansion projects, Rs 200cr for Jaypee asset improvement/efficiency capex, and the balance towards maintenance capex and other high-ROI investments .
* Furthermore, following the Jaypee acquisition and the ongoing capacity expansions at Belgaum, Kadapa and Pune, DBL expects its cement capacity to increase to ~67MT by Q3FY28. Over the longer term, the company remains focused on becoming a pan-India player, with a directional capacity target of 110-130MTby FY31, while maintaining flexibility based on industry conditions and capital allocation discipline.
* DBL has guided for depreciation to increase by Rs.100cr in FY27, driven by the commissioning of the acquired Jaypee assets and the Belgaum expansion. Depreciation is expected to rise further by Rs.100-250cr in FY28, supported by the commissioning of the Kadapa and Pune projects.
* DBL outperformed the industry in Q1FY27 on a sales volume basis , reporting 9% YoY volume growth versus estimated industry demand growth of 7-8% YoY. Going forward, management expects organic volume growth to be at least in line with industry growth, with an ambition to exceed the industry's growth trajectory
* The company noted that cement demand strengthened in June, driven by the return of labour to construction sites following the conclusion of state elections
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SEBI Registration Number: INH200000345
