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JPA acquisition key for PAN India aspiration

Result Synopsis

Dalmia Bharat (DALBHARA) reported healthy Revenue/EBITDA/PAT growth of +7/20/32% y/y on account of +8% y/y volume growth and 3% y/y eased total cost, while NSR dipped marginally y/y in Q3FY24. RM/te surged by +57% y/y on account of rising flyash & slag prices over demand supply mismatch. Despite that, the total cost/te decline by 4% y/y, mainly on account of eased power cost/te by 30% y/y in Q3FY24. As a result, the EBITDA came in at Rs1140/te (YSECe Rs1092/te) improved by +12% y/y translating the EBITDA margin to 21.5% in Q3FY24. With 0.9MTPA of debottlenecking expansion at Belgaum, the DALBHARA reached 44.6MTPA in Q3FY24 and will reach to 46.6 MTPA by FY24 end. Additionally, DALBHARA will add another 2.9MTPA in the east taking the total capacity to 49.5MTPA (excl. JPA assets) by FY25E.

With JPA assets, DALBHARA will make breakthrough in the central market, fulfilling its PAN India aspiration of 110-130MTPA. We believe the sustenance of cement prices (east/south) will be vital for DALBHARA for better profitability and lower its dependence on borrowing as the ongoing CAPEX + JPA acquisition will peak its net debt/ EBITDA >2x by FY24 end. We trimmed our volume estimate by 9/3% for FY24/25E, on account of market share loss in the east during Q1FY24. However, we believe double-digit organic volume growth of +10/18/12% y/y in FY24/25/26E owing to robust demand outlook and ramping up of incremental capacities. We continue to like DALBHARA for its stronghold in the East/South key markets, recent entry in west and pursuing entry into central India. The strong Infra push in the East/South will drive incremental volumes from newly added capacities and cost optimization measures to improve the efficiency. We maintained our BUY rating with a TP of Rs2,933, valuing the stock at 15x EV/EBITDA on FY26E.

Result Highlights

The revenue came in-line, registering a growth of +7% y/y mainly aided by +8% y/y volume growth to 6.8MT (v/s YSECe 6.9MT), while NSR dipped marginally by 1% y/y in Q3FY24.

Company dispatched 0.4MT of volume from JPA assets.

Total cost/te declined by 4% y/y as expected led by moderating fuel & power cost/te by 30% y/y, which mitigated the RM/te surge of 57% y/y in Q3FY24.

EBITDA came at Rs1140/te (+12% y/y) v/s YSECe Rs1092/te translating the margin to 21.5% (YSECe 20.8%) in Q3FY24 as compared to 18.7% in Q2FY24.

EBITDA grew by +20% y/y and +31% q/q to Rs7.75bn. PAT came in at Rs2.63bn (v/s YSECe Rs2.32bn) up by +32% y/y and +123% q/q in Q3FY24.

DALBHARA received Rs3.2bn as 2nd installment for the sale of investment in Dalmia Bharat Refractories from Sarvapriya Healthcare Solutions. Also received Rs1.2bn from promoter on account of sale of Hippo Stores.

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