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For Q3FY24, Dalmia Bharat (Dalmia) reported in-line EBITDA of Rs7.7bn, which grew 20% YoY/32% QoQ. Volume rose 8% YoY (vs. our estimate: 2% YoY) to 6.8mt (includes 0.4mt volumes under tolling arrangement with JPA). Excluding JPA’s tolling volumes, growth stood at 2% YoY. EBITDA/t increased by Rs183 QoQ to Rs1,138, which was mainly driven by higher realizations (up 4% QoQ to Rs5,286/t). Total cost/t remained flattish QoQ at Rs4,148. Management indicated that the deal with JPA may likely be finalized by Q4FY24-end (delay mainly on account of receiving lender approvals). Company has recapitulated its capacity growth target to 47mt/75mt/110-130mt by FY24/FY27/FY31. Factoring-in the Q3 operational performance and some delay in completion of cement assets of JPA, we revise down our EBITDA estimate 5-6% for FY25-26. We maintain ADD on the stock, and review our TP to Rs2,500/share now (based on 12.5x Dec-25E EV-EBITDA).

Result Summary

Dalmia’s volumes rose 8% YoY/10% QoQ to 6.8mt (includes 0.4mt volumes under tolling arrangement with JPA). Company indicated that it has grown faster in key markets, given the subdued demand in the East. Considering the strong uptick in cement prices in the southern and eastern markets, realizations improved by Rs183/t QoQ to Rs5,286. However currently, spot prices have corrected to the Q2FY24 exit levels. Overall cost/t declined 4% YoY (flattish QoQ) to Rs4,148, with freight cost increasing 7% QoQ to Rs1,091. EBITDA/t increased 11% YoY/20% QoQ to Rs1,138. The management expects profitability to remain in the Rs1,100-1,200/t range in FY25. In 9MFY24, volumes grew 9% YoY. We expect volume growth to pick up pace from FY25E, as we incorporate JPA’s assets acquisition and capacity expansion. Accordingly, we bake-in a volume CAGR of 13% during FY24E-26E.

What we liked: Better than expected volumes; initiatives to gain market share

What we did not like: Possibility of delay in acquisition of JPA’s assets, in our view

Earnings call KTAs:

i) Over the medium term, Company targets mid-teen volume growth (15-16%) over the next few years. ii) Fuel prices stood at USD115-120/t in Q3 and spot prices are broadly tracking similar levels. On Kcal basis, fuel cost stood at Rs1.5/Kcal (vs Rs1.58/Kcal in Q2). Mgmt expects marginal reduction (~3%) in fuel cost on sequential basis in Q4FY24. iv) As of 9MFY24, Dalmia has incurred capex of Rs21.4bn. FY24 and FY25 capex guidance at Rs30-35bn (additional cash outflow for JPA’s assets acquisition to be Rs33bn). v) Management expects cement demand to grow at 1.3x (~8-8.5%) of GDP over the next 4-5 years. Increasing consolidation may lead to better pricing for the sector and a likely 1.5-2% CAGR over the long term. Vi) Others: Trade sales: up 300bps YoY to 63% in Q3; blended cement share: marginally lower at 84% and targets 100% in coming 3 years; lead distance: increased by 6km QoQ to 283km, which it is likely to maintain.

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